Integration of Renewable Energy in the European Energy Market
As part of the European energy transition, renewable energy is becoming the dominant form of energy in the market. The benefits of renewable energy sources are breathtaking, and while we may not quite be in a position to fully switch over to renewable energy sources just quite yet, it is imperative that we look ahead to the future.
3E presented last month, at the yearly workshop organised by ODE Vlaanderen, its vision on the integration of renewable energy in the European energy market.
Impact of 2020 objectives
In this context, one of the most tremendous developments in recent years was the significantly increasing share of variable RES-E penetration in the electricity market. This has also increased, furthermore, the volatility of wholesale electricity prices on the different European power exchanges.
On basis of our work in the EU funded project Market 4RES, we have evaluated the impact of renewable energy on the energy markets with a focus on data analysis of day-ahead and future markets. Out of this analysis we can conclude that increase in renewable energy and interconnection will lead to lower and more stable prices which is illustrated below.
Interconnection: The missing link
The importance of interconnection on the energy markets should be highlighted. Interconnection is key for stability of the energy markets. However what we can conclude from the EU funded project NorthSeaGrid, is that the policy framework in the different countries need to be streamligned to make it happen.
Cross-border projects may be beneficial overall but their benefits are likely to be distributed asymmetrically between the affected countries. This raises the question of suitable cross-border cost-benefit allocation mechanisms to bring all participating countries on board.
Therefore additional compensation mechanisms could be set up between the affected countries to ensure that the electricity produced is counted towards the national target of the country that funds the support. The figure below illustrates the impact of the Benelux interconnection to the UK on the different countries involved.