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Energy prices across Europe fell below zero for a record number of hours in 2024. An accelerated buildout of large-scale wind and solar farms has flooded European grids at peak production hours, causing surplus energy to be sold at a loss at increasingly frequent increments, for a grand total of 7,841 hours during the first eight months of this year. At their worst, prices have fallen below -€20 per megawatt hour, according to the consultancy ICIS.
While rapidly expanding solar capacity is the main culprit for the price inversions, a decades-long boom in wind power is also a major contributor. This reality was underscored earlier this month in Denmark when an offshore wind auction failed to receive a single bid. The government-run event was the biggest-ever auction for offshore wind farms in Denmark.
This is a relatively clear sign that the market for wind power is pretty much saturated in Denmark and in other European countries, like Sweden, that started renewable buildout early and aggressively. Last year, Denmark generated 58% of its electricity from offshore wind, setting a world record. But it looks like that number is set to plateau.
“The expansion of thousands of wind turbines over the past two decades is discouraging investors from backing new renewable developments in the country as rock-bottom power prices offer little return,” gCaptain reported earlier this month. “Doubts are also growing over what demand will be in the future as a number of energy-hungry green industrial mega-projects in the north get delayed or canceled altogether,” the article continued.
The offshore wind industry has been in trouble at a global level for several years now as supply chain snags and rising operational costs have caused no small number of offshore projects to stall out. In the United States, project costs increased by a whopping 57% in the years since the Covid-19 pandemic, creating a huge disincentive for would-be investors. What’s more, a little over a year before this month’s auction flop in Denmark, an offshore wind auction in the United Kingdom similarly failed to attract a single bid from offshore wind developers.
In Europe, the continent-wide rapid buildout of clean energy is good news for the climate, but ultimately destabilizing for European energy markets and a potential driver of punished price shocks. Already, a cottage industry has sprouted up around trading on renewable energy price volatility. Across Denmark, companies are employing automated trading desks (computers that run trades based on complex algorithms) ato buy and sell gargantuan volumes of energy contracts based on forecasted weather conditions, which impact electricity consumption on one end and renewable energy production on the other. And these trading firms are getting filthy rich.
However, such trading could ultimately helpt to smooth out energy markets and better balance supply and demand, mitigating the current market saturation and potentially making new investment in offshore wind attractive again. “In layman’s terms, these energy trading firms are performing an important service in the markets in which they operate by helping to balance out supply and demand on the grid,” Oilprice reported earlier this year. “This means that those traders in Denmark are helping to keep the lights on for Europeans.”
The search for commercial-scale, long-term energy storage solutions is also heating up. Energy storage technologies capable of capturing and storing excess renewable energy until demand outstrips supply will be critical to achieving a 100% renewable power grid. But technology is not quite there yet. For now, “we cannot have an electricity system that’s based solely on wind and solar,” Brian Vad Mathiesen, a professor at Aalborg University in Denmark, told gCaptain. “There are stark technical and economic limits to how much we can integrate into the grid.”
