 HomeNewsSurging electricity prices in Europe have disrupted renewable energy supply chains

Surging electricity prices in Europe have disrupted renewable energy supply chains

2022-10-08

The rising cost of solar and battery manufacturing and record high electricity prices in Europe are hampering Europe's renewable energy supply chain and its decarbonisation process. Research by Energy research firm Rystad Energy suggests that plans for 350 gigawatts of solar photovoltaic capacity and more than 2,000 gigawatt hours of battery capacity could be shelved if normal electricity prices are not restored soon.
Some operators of energy-intensive industries may temporarily close or abandon production facilities due to increased operating costs. Without a timely fall in electricity prices, Europe will struggle to reduce its reliance on imported fossil fuels by increasing renewable power generation capacity and the use of electric vehicles.
Audun Martinsen, head of Energy services research at Rystad Energy, said high electricity prices would not only affect Europe's decarbonisation process, but could also increase its reliance on overseas manufacturing. European governments are trying to get around this. Establishing credible domestic low-carbon supply chains is essential if European countries are to continue decarbonisation and the REPowerEU programme, but as things stand, this is in jeopardy.
Unexpected shutdowns at nuclear and hydroelectric plants, soaring demand in a sweltering summer and reduced gas supplies from Russia have pushed European electricity prices to record highs in recent weeks. Germany, which leads Europe in solar and battery manufacturing capacity, now has an average daily spot electricity price of more than 600 euros/MWH, compared with more than 700 euros/MWH in France. European electricity prices have soared to €1,500 per megawatt hour during peak hours, a price that consumers, including the industrial sector, will not be able to afford for long. Although prices have fallen sharply from their August peak, they are still at €300-400 per megawatt hour, well above the pre-crisis norm.
In recent years Europeans have enjoyed a steady and cheap supply of electricity. Local low-carbon power producers put electricity into production at a stable price of around €50 / MWH. However, European manufacturers are becoming less competitive as power producers in regions such as Asia enjoy lower tariff prices for electricity.
Europe's solar capacity is not dominant globally, accounting for only 2% of total solar capacity, but if any solar project is closed or abandoned, Europe will suffer serious long-term negative impacts. The European Union plans to have 20 gigawatts of solar capacity by 2025. A total of 3,500 gigawatts of capacity is planned, but many of these projects have yet to be funded and could go bust if electricity prices remain high.
The cost of electricity in Norway has risen sixfold, and Solar panel manufacturing is so demanding that it could be shut down. With gas shortages expected to last for years and European electricity prices expected to remain high, financing and investing in solar plants could prove challenging.
Battery manufacturing, which is crucial to the supply chain for electric vehicles and battery storage, uses far more energy than solar manufacturing, and Europe is the world's leading supplier of batteries. The European Union currently has about 550 megawatt hours of battery capacity, accounting for 27% of global operating capacity. European Union countries are ramping up development of battery projects to increase their total capacity to 2.7 terawatt hours, making the EU a global leader in batteries. However, these projects are now at risk, as European-made batteries may struggle to find their way into car manufacturing and energy storage batteries.
British battery startup Britishvolt's landmark gigabit battery plant at the British port of Blyth, which will add 30 megawatt-hours of battery capacity to Europe, has been delayed until mid-2025 due to increasing energy costs and the need for plant financing. European power producers may find it difficult to scale up their production quickly because Chinese producers have much lower energy costs. If European electricity prices continue to rise, the adoption of electric cars in Europe will be hampered.

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 HomeNewsSurging electricity prices in Europe have disrupted renewable energy supply chains