Littleton, Colorado — A boom in clean power electricity generation has helped push Europe’s forward power prices to their lowest levels since before Russia’s invasion of Ukraine in 2022 severed natural gas pipeline flows and sent the region’s power prices surging.
Base wholesale fair value power prices in Germany and France, the region’s two largest economies, currently average around 102 and 105 euros per megawatt hour (MWh) respectively for the first quarter of 2024, according to LSEG.
While subject to change as market conditions evolve, those relatively low forward price curves should provide a boost to energy-intensive consumers who had been forced to cut back on power use due to high prices in recent years.
A major driver behind the subdued power price outlook has been the sharp rise in clean power capacity development across Europe in recent years, and widespread confidence that much further clean power development will emerge in the years ahead.
Clean power sources have generated a record 59.3% of Europe’s electricity through the first 10 months of 2023, and could surpass the 60% mark by year-end if wind generation picks up as usual in December, data from Ember shows.
Over the same period, electricity generation from coal and natural gas have declined by 18.2% and 9.3% respectively, further tilting the electricity mix in clean power’s favour.
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Europe’s clean power share ranks second behind Latin America (65%) among major regions, and sharply exceeds the clean power share in North America (47%), Asia (33%) and Africa (25%).
Clean power supply expansions are planned throughout every region, but strong government and societal support for an accelerated energy transition means Europe will likely be the largest clean power developer outside China for the remainder of this decade, according to the International Energy Agency (IEA).
Between 2022 and 2027, the European Union alone may add between 340 gigawatts and 450 gigawatts of renewable energy capacity, easily surpassing planned capacity expansions in the United States, the Middle East, Sub-Saharan Africa and South East Asia, IEA data shows.
If those expected clean power expansions materialise, Europe’s power prices may decline further and could help the region fulfil its ambitions of becoming a major clean energy hub to rival China.
Reporting by Gavin Maguire; Editing by Miral Fahmy – Reuters
