It’s been several months since the Russian invasion of Ukraine began. Which has brought an economic crisis in different sectors and markets. Specifically, in the regional and global energy.
European countries have had to prepare to eliminate the energy dependency they have with Russian supplies. On the one hand, the drive for greater energy security is amplified. On the other hand, energy markets are seen with a negative price.
The latest report from the Boston Consulting Group, Will Electricity Be Free? Not When You Really Need It, shows that there are aspirations for the growth of variable renewable energy (VRE) through solar panels and wind turbines. According to the company, these developments will drive the price volatility of the electricity markets, as is the case in Australia and California.
According to Xavier Genis, Managing Director & Partner of BCG, “As markets and policymakers introduce more renewable capacity to meet climate change goals, driving out conventional generators, we also expect much greater volatility in energy prices to prevail.”.
According to the company, while most markets have escaped higher levels of price volatility despite integrating higher levels of VRE sources, the volatility increase as renewable energy generation grows and conventional plants are no longer needed.
It is important, then, that governments are aware that increased VRE penetration will make their national power systems more impacted by natural gas price increases and electricity price volatility.
In South Australia, for example, the share of solar and wind power in the generation mix increased from around 24% to 50% between 2011 and 2019. During the same period, the annual average intraday price volatility increased about 180%.
“Unless designers and operators in all markets take steps to mitigate volatility, energy users could face an environment where electricity is free except when it is really needed. There will be a higher risk of atypical events with very high electricity prices, and electrical systems will be more exposed to natural gas costs”, assures Genis.