Power mix and Load - 2019-2024 trends and insights

When will renewable generation have a significative impact on power prices?

I was asking my self this (very simple!) question and what was planned as a short Linkedin posts became - during the extenuant US election night - a long - but hopefully enjoyable - article.

Given the well-known operation of day-ahead marginal prices, it makes no sense to analyse EU countries "Generation Mix" without assessing together power load trends, preferably on a multi-year basis. In the three charts below, you will find a short summary of the average daily 2019-2024 power mix and load of the three main EU manufacturing countries (namely France, Germany and Italy) with some personal insights on future spot price determination of the most liquid day-ahead market.

Methodological note: while assessing average daily values might seem misleading (hourly consideration would provide a far more comprehensive effort), I think it provides a useful insight on 'baseload' missing capacity of EU countries and looks to me as the simplest and most accessible way for the purpose of this post.

France (Figure 1)

While power load has always been strongly dependant on weather conditions, swinging from 40 GW (Q2 and Q3) to 70 GW (Q4 and Q1, peaking at 80 GW), supply generation has been mostly in 'oversupply' , relying on fossil fuels (mainly natural gas) only in limited timeframes.

On a daily basis, with the notable exeption of 2022-2023, nuclear and renewable power (mainly baseload hydro and intermittent wind) covered internal demand most of the days (95% in 2024 so far), with strong interconnection and market coupling eastwards market coupling keeping upward pressure on DA prices.

EDF/Government pricing policies on nuclear will determine France spot power price for long time, while consistent renewable deployment (currently far behind EU competitors) will help keeping France spot prices at current low levels and avoiding the already limited amount of fossil fuel used for power generation becoming again marginal price as evident for 2022-H1 2023.

Needless to say: Nuclear maintenance issues will be a key aspect to monitor.

Germany (Figure 2).

Largest EU economy power load ranges on average from 50 to 60 GW (peaking at 70 GW), with internal generation mix covering most of the internal demand for Q1 and Q4, with market opportunities allowing limited amounts of power imports during Q2 and Q3, also due to the seasonal reduction on the extremely high wind capacity installed, only partly compensated by daily PV production.

Even before 2022, nuclear, renewables and cheap/internal fossil from coal/lignite have been able to supplyinternal demand for only 1/3 of the days, with the 2022 'perfect' energy storm, combined with the decision on nuclear power dismissal deteriorating the already high reliance on direct power import (currently little less than 10 GW, curiously equalling nuclear capacity dismissed) and indirect fossil gas generation of natural gas peakers (5 GW), for marginal price determination.

Reaching the last mile for having a consistent renewable impact on power prices will require at least 20-25 GW of added baseload capacity, with PV/WIND + BESS that looks as the only technology being assessed. How long will the country take to deploy such huge (and costly) new capacity will be key, needing almost to double the already major effort deployed for renewable generation, by far the highest in EU on both absolute and relative terms (70 + 95 GW of peak and wind and solar capacity insofar).

at last, Italy (Figure 3)

The third EU manufacturing country presents itself on a very similar situation of its German collegues, although on a lower scale (35-40 GW, peaking at 55 GW during summer haze) mostly covered by natural-gas CCGT, presenting this very notable country-specific peculiarity of using of natural gas as the baseload fuel. As a result, natural gas is by far the most-frequent price-maker in the DA market, with very few hourly exemption througout the whole year.

A consistent quota of power import is recently having a rapid increase due to increasingly high DA spreads developing expecially towards France and Switzerland, mainly due to marginal-gas prices and its associated costs (EUAs).

Considering that about half of the renewable generation is generated by a mature hydro plants, consistent impact of new renewable generation on DA power prices is far to be expceted in the next 5 to 7 years, needing to at least to triple the current peak capacity PV+WIND capacity, to be associated with BESS storage, in order to overcome this enormous burden.

I didnt have a conclusion while writing this article, but hopefully discussion and confrontation with you all will bring some of them.

Ciao!