Price cannibalization and the bottleneck in the approval of new projects rank as the two biggest hurdles to overcome in order to complete the European energy transition, writes Lucas de Haro
Citizens across the European Union will be called upon in a few days to vote for the members of the tenth legislature parliament, a term that will steer our region through the end of a decade that aims to transform the energy generation profile of a renewed Old Continent.
Nonetheless, the renewable energy sector seems to be holding its breath as it witnesses electricity prices falling across Europe since the end of 2023 and plummeting for weeks in some specific regions such as Iberia, where local media headlines suggest the energy transition may be in jeopardy as new investments could flee elsewhere due to the first historical record of negative prices.
Most market analysts identify some stationary or transitory causes for the current scenario that we are experiencing, such as the excess of hydro resources or the best practices that our countries were able to implement during 2023 to secure gas stock.
However, these same experts also point out that the renewable energy penetration into the generation mix is growing so fast that price cannibalization is not going away any time soon.
Despite a general consensus around a slight recovery of price signals starting in 2026, more and more industry players fear that the current slowdown could put at risk their own business continuity.
On the other hand, the RePowerEU initiative and the Renewable Energy Directive increased the 2030 goals to a mark where member states should collectively ensure that the share of energy from renewable sources in the Union's gross final consumption is at least 42.5% by 2030 and aims to reach 45%.
According to the estimates by Solar Power Europe and Wind Europe, meeting these targets would imply deploying approximately 100GW of new solar and wind projects every single year of this decade in the EU.
The plan sounds as exciting as challenging, and perhaps unachievable, given that all regions are reporting that regulators and local authorities are not able to process the unprecedented number of new project requests they have to analyze and, ultimately approve.
Indeed, environmental planning and the overall permitting process have become a common issue everywhere.
Price cannibalization and the bottleneck in the approval of new projects rank as the two biggest hurdles to overcome in order to complete the European energy transition, not to mention the many other obstacles that can come up along the way.
"The 2030 goals are there to be met and ... some governments have understood that their countries need stronger regulation on battery storage, incentive schemes that are sustainable, [and] processes that favour the approval of quality projects"
Under these circumstances, how can we possibly keep talking about decarbonization and renewable energy penetration? However, if we look at the broader picture, we will find that there is some good news to share.
From my point of view, the renewable energy industry occupies an unchartered spot in the innovation/consolidation diagram; technologically, it is no longer a baby as it was from the second half of the 20th century until just ten years ago.
There is no doubt that onshore solar and wind have reached maturity while coexisting with new entrants and first movers such as floating solutions, flexible demand, and others, which are still going through internal competition stages to define their best technical solutions.
A certain analogy could be applied to market growth: if we refocus our plans, we can see a glimmer of hope on the horizon: our industry will not end in 2030.
The updated Net Zero Roadmap for 2023, issued by the International Energy Agency, estimates that the globally produced energy from solar PV source in 2050 will be 3.9 times its specific generation by 2030, and the same analysis for wind casts a ratio of 3.3.
Personally, I do not recall working for a sector with such extended visibility of global growth plans, whilst reaching a level of technological maturity capable of offering competitive solutions; this is the unexplored area in the innovation/consolidation diagram.
This way of thinking could be interpreted as if those sprouts of hope were only in the distant future, almost as a consolation before a current landscape that deters bullish analysts from providing further forecasts – but nothing could be further from the truth.
The 2030 goals are there to be met and, in order to do so, some governments have understood that their countries need stronger regulation on battery storage, incentive schemes that are sustainable, processes that favour the approval of quality projects, fostering demand-side electrification, promoting cross-border interconnections, etc.
If this global recipe is successful, it means that independent power producers that focus their efforts on developing good and sustainable assets with a long-term vision are called to play an instrumental role in the European energy transition.
Lucas de Haro is CEO of Velto Renewables.
