Chapter 5 - The Growing Impact of Renewable Energy in European Electricity Markets

Abstract

In recent years, remarkable increases in renewable generation are taking place in several European countries, notably in Germany. In this chapter, the historical growth, the current situation, and the future prospects for renewable resources for electricity generation in Europe are analyzed. The core objective is to investigate the likely effects of a further uptake of electricity from renewables on the prices in European electricity markets and on their integration into the grid. The major effects of these developments on electricity markets will be: (i) a much higher price volatility from hour to hour and day to day; (ii) an increasing relevance of intraday markets; (iii) higher costs for fossil plants due to higher shares of investment depreciation costs; (iv) increasing relevance of storages and “smart” grids, (v) higher shares for balancing markets; and (vi) the increased complexity in balancing supply and demand over time.