How warm will our swimming pools be?

A few months ago, I had a discussion with a family member that has recently installed photovoltaics at his house. He has a smart meter, measuring in real-time the bidirectional flows and a swimming pool. As electricity injection is not remunerated where he lives (maybe wrong currently, but it might be aligned with future electricity prices on the spot market), his main interrogation was what will he do with the large electricity surplus on a sunny day. The answer was simple: a warmer swim.

This might only be anecdotal but I believe that it reveals something more fundamental. We are going to have an abundance of “free” energy at some moments of the day, and this is particularly true with solar as its expansion is going to be massive in Europe. And with everything in abundance, we are probably going to spill it.

1.????Massive deployment of RES, especially solar

The growth rate of the installed capacity for solar would be very important in the coming years. Based on projections from SolarPower Europe, the graph below presents the ratio between the installed capacity to the average consumption load (i.e. the average power consumed throughout the year). Notably, the Netherlands and Denmark are expected to breach the 200% threshold and Germany will be close to reaching it.?

We can also add the wind energy to be installed by 2026 according to WindEurope.

2.????Impact on the market prices

Such penetration will have a great impact on the electricity prices on the market as already observed during sunny summer days. With an ever-increasing share of PV, these prices will inevitably decrease further for an extended period of time. With a penetration of 200%, it only requires a capacity factor of 50% to cover the full demand. We should also not forget that other zero marginal cost sources exist, most notably wind power or run-of-river hydropower, as well as inflexible power, such as nuclear energy.?

Such high variation of prices, from negative prices to above 300 EUR/MWh in a few hours, is only the reflection of the power sources present in the system: from an abundance of cheap energy to a scarcity. In addition, some must-run and inflexible power plants, notably nuclear energy, are even leading to negative prices. This might be well the case in highly nuclearized countries such as France. Furthermore, the limited capacity of the grid interconnections might lead some parts of the European grids to experience this phenomenon more than others, most notably the Iberian Peninsula.??

3.????LCOE vs LVOE

The concept of Levelized Cost of Electricity (LCOE) is a concept used extensively and is used by many as a proxy to determine which is the cheapest source of electricity generation. Nevertheless, as clearly expressed by the electricity market, one MWh of energy does not have the same intrinsic value throughout the day. The market value of an additional MWh in the afternoon of July 16th in the Netherlands was actually negative. Therefore, alongside LCOE, we should also define the Levelized Value of Electricity (LVOE). Of course, LVOE is much more complex to determine as it is dependent on many factors, including the penetration of a similar source of electricity into the power grid.

What is certain is that LVOE of solar is decreasing with the penetration level. The more MW of solar is installed, the less value per MW is solar producing. On a sunny day, what would be the market value, as reflected by the market, produced by a PV plant in a grid with twice as much installed capacity than the power consumption? Ironically, the PV plant might only start making money when its generation output is dropping.

This loss of value, sometimes called the cannibalization effect, might lead to a decrease in the deployment of renewables, or actually a need for further subsidies to support such deployment. Electric batteries would help alleviate the loss of value but it is unlikely that they will store and shift the energy more than for a few hours while adding a substantial cost component to the LCOE, as shown in the graph below from Fraunhofer Institute.

4.????Hydrogen or wasteful use?

Of course, we could harness all this energy productively and an agreed vision is the production of green hydrogen. The European Commission's REPowerEU program envisaged the installation of 80 GW of electrolysis. Such a target will be already a great achievement allowing the creation of value for the electricity surplus generated by renewables. Nevertheless, this would only be a fraction of the power available according to REPowerEU 2030 targets of 510 GW wind and 592 GW solar. Furthermore, it is expected that, until March 2028, hydrogen would be labeled green without demonstrating the temporal link with renewables on an hourly basis, but only on a quarterly basis.

So, as in the anecdote, we might actually have a boost of wasteful use when energy is abundant. This behavior has been observed with many other technology developments. Are we not putting LED lighting everywhere now? Have we not counterbalanced efficiency gains in combustion engines by increasing the weight of our cars? With a surplus of abundant energy, we might well end up increasing the temperature of our swimming pools, lowering the indoor temperature, or using more our electric cars in summer. We might also simply spill this abundant energy by shutting off this source.

Solar energy will provide us with cheaper electricity but how are we going to use such abundant energy? In a useful or wasteful way?