Column-Plunging solar capture rates to test nerve of Europe’s policymakers: Maguire


By Gavin Maguire

LITTLETON, Colorado (Reuters) – Wholesale power prices coming under pressure from surging solar output is not a new concept in power markets, but looks set to become a potentially divisive issue across Europe as rampant expansions in solar output upend market pricing patterns.

Power generated by solar panels is the cheapest source of electricity in several regions, and tends to drive down the price of wholesale power during peak solar output periods, eroding margins for power producers.

The phenomenon, known as the renewables cannibalization effect, is particularly acute in Europe’s electricity system which prioritizes clean electricity supplies and where politicians have set ambitious decarbonization goals designed to reduce reliance on imported fossil fuels.

Renewables-driven price disruptions have gained widespread attention in the United States due to the creation of a so-called ‘Duck Curve’ in Californian power prices, where massive volumes of solar output during the middle of the day flood the market just as overall power demand is at a lull.

To accommodate that surplus power load, power prices tend to plunge in a way that is similar to the shape of a duck’s belly, before rising again later as solar output declines.

Europe’s integrated power markets must brace for similar periods of price disruption, following rapid expansions in solar capacity across the continent.

These disruptions have the potential to temporarily undermine the economics of power production from all sources, and may therefore deter investments in further regional generation capacity at a critical time.

For policymakers who support a rapid transition of energy systems away from fossil fuels while ensuring continued power sector stability, bouts of potentially loss-making power prices due to surplus solar output may be unnerving.

But authorities can take heart from the fact that energy consumers are already seeing the benefits of greater renewables output in the form of lower prices.

And in the longer term, consumers will also be better protected from future fuel price shocks once the build out of home-grown renewable power capacity is complete.

But over the nearer term, policymakers, energy consumers and power producers alike must prepare for further swings in power costs as the generation mix in Europe continues to evolve from primarily fossil fuel-based to being overwhelmingly run on clean fuels.


After Asia, Europe has been the fastest growing market for new solar capacity for the past decade, adding 172 gigawatts (GW) of capacity between 2012 and 2022, according to energy think tank Ember.

That compares to nearly 600 GW of capacity additions across Asia, and around 110 GW of capacity growth in North America over the same period.

Capacity data for 2023 has yet to be confirmed, but renewable industry analysts and consultants estimate that Europe will have set a new installation record again last year.

That rapid growth pace has allowed for solar power to grab a growing share of Europe’s total electricity generation mix, which has doubled from around 5% during the summer of 2019 to just under 11% last summer, and the highest of all regions.

In contrast, solar’s share of electricity generation in Asia topped out below 7% last summer, while in North America peaked at around 6.37%, Ember data shows.


The impact of such a rapid climb in solar output has already distorted Europe’s power markets, and has resulted in utilities earning shrinking revenues from renewables.

As additional solar capacity has been brought online in several countries, regional power prices responded by trending broadly lower, especially during high solar output periods.

Price forecasting models have also had to be updated to account for the growing share of renewable power in generation systems, with so-called capture prices and capture rates being used to measure the impact of renewable cannibalization.

The capture price is a weighted average price during which the power generation asset produces electricity, and is expressed relative to the baseload contract price paid to fossil fuel-based power producers.

The capture rate is a measure of the capture price divided by market price available for the power produced, expressed as a percentage.

In the case of a plant that only produces power during peak demand periods, the typical capture rate can be 100%, as the plant can despatch maximum volumes to fulfil demand needs at peak prices, and then reduce or stop output when demand and prices decline.

For renewables assets, the capture rate is typically less than 100%, and can be far lower for solar assets that only produce electricity when the sun shines and often hit peak output just when demand and prices may be near their lowest during a typical day.


Power price models in Germany and Spain clearly show the impact of declining capture prices and rates due to expanding solar output.

Due in part to rapidly rising electricity from solar farms, the wholesale power price from solar assets in Germany declined to the lowest in nearly four years this month, according to pricing models compiled by LSEG.

In turn, the lower solar-driven prices have dragged the overall German wholesale price lower.

The capture rate for German solar assets has also declined this month, plunging to as low as 50% of the baseload power contracts, LSEG data shows.

The capture rate is even lower in Spain, where abundant sunshine results in a surge in solar output that can often far exceed system demand needs during the day.

Spain’s solar capture rates are expected to average around 85% for the rest of 2024, but decline steadily over the coming years to around 60% by 2030 and 45% by 2035.

Power developers concerned about the profit impact of such capture rate erosion could slow their development pace, and thereby potentially threaten national or regional energy transition momentum.

© Reuters. FILE PHOTO: Two workers install a bifacial 540 W solar panel at a solar panels park by energy supplier Enel Green Power, in Trino Italy, March 5, 2024. REUTERS/Claudia Greco/File Photo

But if policymakers keep a long-term view in mind of the benefits from a fully developed renewable energy system, appropriate incentives for power developers could be created to ensure the pace of the region’s energy transition is maintained.