European power prices - R-Meetings · 2018-12-03 · Source: Bloomberg Terminal, Bloomberg NEF. Ten...

European power pricesChallenges and opportunities for wind

Andreas Gandolfo

November 28, 2018

1 Eneco, R-meeting, November 28, 2018

Introduction

What is BloombergNEF


Power prices in

Europe

The challenge for wind


0

50

100

150

200

250

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

100 = 2007, real 2007

United Kingdom

Nordpool

Spain

Netherlands

France

Germany

Italy

Source: Bloomberg Terminal, Bloomberg NEF.

Ten years of stable power prices

Real 2007 power prices in select European markets, indexed to 2007

Above the red line

real prices are up

Below the red line

real prices are down


Source: BloombergNEF. Note: EU 28 is the 28 countries of the European UnionSource: Bloomberg Terminal, BloombergNEF. Note: TTF hub prices used for gas

Commodity prices in Europe, indexed to 2007Wind and solar as a share of total EU 28

capacity and generation

Why are power prices stable

Coal

Gas

0

20

40

60

80

100

120

140

160

180

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

100 = 2007

Capacity

Generation

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Source: Bloomberg NEFSource: Bloomberg NEF

U.K. power price outlook Germany power price outlook

European power prices unlikely to rise

Outlook

0

10

20

30

40

50

60

2010 2015 2020 2025 2030 2035 2040

GBP/MWh, real 2010

Outlook

0

10

20

30

40

50

60

2010 2015 2020 2025 2030 2035 2040

EUR/MWh, real 2010


Source: BloombergNEFSource: BloombergNEF

Coal and gas price outlooks indexed to 2010

Wind and solar as a share of total European

capacity and generation

What is keeping European power prices from rising

Capacity

Generation

Outlook

0%

10%

20%

30%

40%

50%

60%

70%

80%

2010 2015 2020 2025 2030 2035 2040

Gas

Coal

Outlook

0

20

40

60

80

100

120

140

160

180

200

2010 2015 2020 2025 2030 2035 2040

100 = 2010


Source: BloombergNEF. Note: Other includes biomass, and geothermalSource: BloombergNEF. Note: Other includes biomass, and geothermal

Cumulative installed generating capacity Generation by technology

How much wind and solar do we expect in Europe

0

500

1,000

1,500

2,000

2,500

2015 2020 2025 2030 2035 2040

GW

Flexible capacity Solar Wind Other Hydro Nuclear Fossil fuel

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2015 2020 2025 2030 2035 2040

TWh

Solar Wind Other Hydro Nuclear Fossil fuel


Source: BloombergNEF. Note: O&M stands for operation and maintenance, not all subsidy schemes pay out during negative power prices

Why do wind and solar depress pricesWhat does it cost different technologies to generate a megawatt-hour of electricity

-30

-20

-10

0

10

20

30

40

50

60

Coal Gas Wind Solar

currency per megawatt-hour

Subsidy

Variable O&M

Emissions

Fuel


Source: Bloomberg Terminal, Bloomberg NEF

-100

-80

-60

-40

-20

0

20

40

60

80

0

20

40

60

80

23/10/2017 24/10/2017 25/10/2017 26/10/2017 27/10/2017 28/10/2017 29/10/2017

GW

Solar Wind Other Nuclear Fossil fuel Load Day ahead price

We have already seen wind and solar push prices downGerman electricity generation by fuel type and power price for the week of October 23, 2017



U.K. historical realized prices by technology German historical realized prices by technology

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015 2016 2017

GBP/MWh

Coal Gas Solar Wind Average

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015 2016 2017

EUR/MWh

Coal Gas Solar Wind Average

Renewables capture a discounted price



U.K. outlook on realized power price German outlook on realized power price

0

10

20

30

40

50

60

70

80

90

2015 2020 2025 2030 2035 2040

GBP/MWh, nominal

Gas Wind Solar Average

0

10

20

30

40

50

60

70

80

90

2015 2020 2025 2030 2035 2040

EUR/MWh, nominal

Gas Wind Solar Average

And the discount does not go away


Realized margin

Missing money

O&M costs

Margin needed

0

20

40

60

80

100

120

140

160

2018 2020 2025 2030 2035 2040

GBP/kW, nominal

Source: Bloomberg NEF Note: *O&M stands for operation and maintenance **ROI

stands for return on investment



U.K. wind realized margins in power market and

O&M* costs and margin needed for ROI**

U.K. solar realized margins in power market and


What can wind and solar expect to make

Realized margin

O&M costs

Margin needed

0

10

20

30

40

50

60

70

2018 2020 2025 2030 2035 2040

GBP/kW, nominal


Finding the missing

money

Revenue opportunities for renewables


What revenue options are there

Selling energy

Wholesale market

Subsidy auctions

Selling services

Capacity markets

Balancing markets

Revenue options

Power Purchasing

Agreements (PPA)


Selling energy – guaranteeing revenue

Generator

Wholesale power

market

Auctioned subsidy

Power purchasing

agreement

Sell energy through

The market

The

state/government

Consumers of

electricity

Get paid for energy by

High uncertainty,

with both upside and

downside risk

Low uncertainty,

with limits on upside

and downside risk

Medium uncertainty,

potential for upside

and downside


Source: BloombergNEF

Selling energy – Auctions: where in Europe


Source: BloombergNEFSource: BloombergNEF. Note: 2018 is year to date

Capacity clearing in European Union auctions

Average clearing price of European Union

auctions

Selling energy – Auctions: volumes and prices

Wind

1

23

8

4

1

Solar

2

5

0

2

4

6

8

10

12

14

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

GW

Wind

Solar

0

50

100

150

200

250

300

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

EUR/MWh


Source: BloombergNEF

Source: BloombergNEF Note: Other includes Finland, Belgium, Poland, Germany,

Italy, Ireland, Spain, and Iceland

European renewable PPAs by country European renewable PPAs by technology

Selling energy – PPAs: where and what technologies

0

500

1,000

1,500

2,000

2,500

2009

orearlier

2010 2011 2012 2013 2014 2015 2016 2017 2018

MW

Sweden Netherlands Norway United Kingdom Other

0

500

1,000

1,500

2,000

2,500

2009or

earlier

2010 2011 2012 2013 2014 2015 2016 2017 2018

MW

Wind Solar


Source: BloombergNEF. Note: Purely hypothetical scenario, not representing

modelled or observed data, other revenue could include payments for grid services



U.K. wind realized margins in power market and


U.K. wind example margins from different

sources

Realized margin

Missing money

O&M costs

Margin needed

0

20

40

60

80

100

120

140

160

2018 2020 2025 2030 2035 2040

GBP/kW, nominal

What to do? Ideas to navigate the future

Subsidy revenues

PPA revenue

Market revenue

Other revenue

O&M costs

Margin needed

0

20

40

60

80

100

120

140

160

2018 2020 2025 2030 2035 2040

GBP/kW, nominal


Instant access to BNEF

Download the BNEF app from

your mobile app store.

Available in the Apple store

and Google Play.

On the Login screen, leave the

username field blank and enter

bnef in the password field and

click “Login”.

You will be prompted

to enter your details.

Click “submit”.

Success! You now have

instant access to BNEF for a 2

week period


The Bloomberg NEF ("BNEF"), service/information is derived from selected public sources. Bloomberg Finance L.P. and its affiliates, in providing

the service/information, believe that the information it uses comes from reliable sources, but do not guarantee the accuracy or completeness of

this information, which is subject to change without notice, and nothing in this document shall be construed as such a guarantee. The statements

in this service/document reflect the current judgment of the authors of the relevant articles or features, and do not necessarily reflect the opinion

of Bloomberg Finance L.P., Bloomberg L.P. or any of their affiliates (“Bloomberg”). Bloomberg disclaims any liability arising from use of this

document, its contents and/or this service. Nothing herein shall constitute or be construed as an offering of financial instruments or as investment

advice or recommendations by Bloomberg of an investment or other strategy (e.g., whether or not to “buy”, “sell”, or “hold” an investment). The

information available through this service is not based on consideration of a subscriber’s individual circumstances and should not be considered

as information sufficient upon which to base an investment decision. You should determine on your own whether you agree with the content. This

service should not be construed as tax or accounting advice or as a service designed to facilitate any subscriber’s compliance with its tax,

accounting or other legal obligations. Employees involved in this service may hold positions in the companies mentioned in the

services/information.

The data included in these materials are for illustrative purposes only. The BLOOMBERG TERMINAL service and Bloomberg data products (the

“Services”) are owned and distributed by Bloomberg Finance L.P. (“BFLP”) except that Bloomberg L.P. and its subsidiaries (“BLP”) distribute

these products in Argentina, Australia and certain jurisdictions in the Pacific islands, Bermuda, China, India, Japan, Korea and New Zealand. BLP

provides BFLP with global marketing and operational support. Certain features, functions, products and services are available only to

sophisticated investors and only where permitted. BFLP, BLP and their affiliates do not guarantee the accuracy of prices or other information in

the Services. Nothing in the Services shall constitute or be construed as an offering of financial instruments by BFLP, BLP or their affiliates, or as

investment advice or recommendations by BFLP, BLP or their affiliates of an investment strategy or whether or not to “buy”, “sell” or “hold” an

investment. Information available via the Services should not be considered as information sufficient upon which to base an investment decision.

The following are trademarks and service marks of BFLP, a Delaware limited partnership, or its subsidiaries: BLOOMBERG, BLOOMBERG

ANYWHERE, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG PROFESSIONAL, BLOOMBERG TERMINAL and

BLOOMBERG.COM. Absence of any trademark or service mark from this list does not waive Bloomberg's intellectual property rights in that that

name, mark or logo. All rights reserved. © 2018 Bloomberg.

Copyright and disclaimer

Coverage.

Clean energy

Advanced transport

Commodities

Digital industry

Bloomberg NEF (BNEF) is a leading

provider of primary research on clean

energy, advanced transport, digital industry,

innovative materials, and commodities.

BNEF’s global team leverages the world’s

most sophisticated data sets to create clear

perspectives and in-depth forecasts that

frame the financial, economic and policy

implications of industry-transforming trends

and technologies.

BNEF research and analysis is accessible

via web and mobile platforms, as well as on

the Bloomberg Terminal.

Client enquiries:

Bloomberg Terminal: press <Help> key twice

Email: [email protected]

Learn more:

about.bnef.com | @BloombergNEF

https://about.bnef.com/mobile/

https://bloom.bg/29jlB0k

mailto:[email protected]

European power prices - R-Meetings · 2018-12-03 · Source: Bloomberg Terminal, Bloomberg NEF. Ten...

Documents

Transcript of European power prices - R-Meetings · 2018-12-03 · Source: Bloomberg Terminal, Bloomberg NEF. Ten...