The winter in Europe is affecting renewable energy production and electricity prices in general. This is what some Scandinavian countries claim. Since companies cannot yet store huge amounts of electricity, it must be used at the moment it is produced. In the past, production in fossil fuel-fired or nuclear power plants ensured stability in the European energy market.
"Dark calm"
The entry of renewable energy sources has increased the energy system's dependence on the sun and wind. Without the sun, solar panels remain “dry“, and the lack of wind prevents wind turbines from turning. In Europe, this phenomenon usually occurs in winter, just when we need more energy for heating and lighting.
The Germans have a special concept for the period of time when almost no energy can be produced, because both wind and sunlight are limited: “Dunkelflaute“ (dark calm). With lower electricity production from renewable sources, it is necessary to use other sources or import electricity from other countries, which can lead to a short-term increase in the price of electricity.
The simultaneous lack of light and wind – the so-called “dark calm“ is most pronounced in the months from December to March and has a certain impact on prices, but has almost no effect on their annual average values, Matthias Mihr, an economist at the Center for Energy, Climate and Resources at the ifo economic institute, told DW.
Long-term electricity contracts protect most consumers
Most private electricity consumers in Germany have long-term contracts with guaranteed prices, but other consumers are more sensitive, such as industrial companies, for which prices are not fixed.
In general, electricity prices are determined by the type of supply, the costs of maintenance and investment in the network, taxes and the costs of clean and backup technologies, says Konal Hüssaf, an analyst at the Brussels think tank “Brugel“. He studies energy prices and the structure of the electricity market and assures that high peaks, the so-called spot prices on the free market, are only evident for a short time.
Angry reactions from Norway and Sweden
There have been several short periods of “Dunkelflaute“ in Germany this year. But only one of them led to a short period of higher prices at home and abroad, as electricity goes where demand and price are highest. Although prices quickly normalized, reactions from Scandinavia were immediate: Norway's Energy Minister Terje Aasland said he was considering cutting energy-sharing ties with Denmark, but there were also voices that existing commitments with Germany and the United Kingdom should be renegotiated, the “Financial Times“ reported.
Sweden's Energy Minister Ebba Busch said she was ready for a new undersea cable connection with Germany, but only if Germany changes its electricity market to protect Swedish consumers and their access to cheap domestic energy. Such protectionist calls are in direct contradiction to the European Union's goal of an integrated electricity market. If countries guarantee low prices at home but sell more expensive electricity abroad, this will damage the system and make it harder to achieve climate goals.
How connected is the European electricity market?
“Overall, the European electricity market is highly connected and institutionally harmonised, especially considering that it is a collection of very different nation-states“, says Hüssaf. Europe's is the second largest synchronized electricity grid on the planet after China.
Matthias Mür agrees that the European market is well connected: “Almost every seventh unit of electricity is traded across borders”, he says. The European Commission has made building cross-border energy infrastructure a priority, as it will reduce dependence on imports. It will also provide better access to energy and help achieve the Green Deal's goals of reducing greenhouse gas emissions by 55% by 2030 compared to 1990 levels. And this could make Europe the first climate-neutral continent by 2050.
In 2023, renewables became the leading source of electricity in the EU - they accounted for 44.7% of the electricity generation mix, up 12% from 2022, according to Eurostat data. Nuclear power accounted for nearly 23% of electricity generation, while fossil fuels accounted for another 32%.
At the same time, the European Commission warns that electricity consumption is expected to increase by around 60% by 2030. Even more worryingly, 40% of distribution networks are more than 40 years old, making it difficult to meet rising demand and expand the network with renewable energy sources - for example through more solar panels on rooftops.
How can the European electricity market be improved?
For Matthias Mir, the biggest challenge to improving the market is creating opportunities for rapid response to shortages in demand or supply.
His colleague Konal Hüssaf sees three ways to improve the situation: greater flexibility in responding to changing conditions, better European coordination of cross-border investments and more physical connections between countries to share energy resources.
Author: Timothy Rooks