L R AS Published on Monday 13 September 2021 - n° 373 - Categories:Private contract
The price of a megawatt-hour could stabilise at around €100
Megawatt-hour price could stabilise at around €100, says Cavriani, head of Italy's EGO Energy
Rising gas and electricity prices could open up new opportunities for short-term power purchase agreements in the European renewable energy market.
During the first phase of the pandemic in early 2020, the spot price of electricity had fallen to between €20 and €30 per MWh and is now well over €100 per MWh. This is the average daily price observed over several weeks. This increase is due to the revival of energy demand and also to the rise in the price of gas when spot prices were around €55 per MWh. In February 2021, pressure began to build up on gas supplies in Europe, when the price of gas a year earlier had fallen back to a low of €5 per MWh.
Last year it was particularly cold in Europe. Gas for heating was needed in many countries until the end of May. In addition,CO2 prices, which are now around €60/tonne, have also risen in recent months. At the moment, every piece of news about the supply of gas and electricity triggers an upward trend in prices. The scenario of stabilised high prices is not expected to change at least until the end of winter 2022, according to the executive.
"In the next winter (2021), gas supply could also face some shortages, as gas storage in European countries is at lower levels than usual," he said. "Gas prices for the end of the year and the beginning of 2022 are expected to be extremely high, at around €48/MWh, which, added to currentCO2 prices, means an electricity price well over €100/MWh.»
"With this average price, any type of unsubsidised PV project can be competitive on the energy market in the short term. Even a two-year PPA would guarantee a very high level of profitability. Decarbonisation targets will drive upCO2 prices. This will completely change the way we see the electricity market.
"The electrification of European economies will increase the demand for electricity. EGO Energy estimates that the increase in PV prices in Western Europe has determined an increase in PPA prices of €3-5/MWh, which means that average PPA offer prices in Italy could currently be around €50/MWh. This is still well below current spot prices.
At the moment, large energy consumers can find short-term PPAs extremely attractive. What may be missing are ready-to-go projects that have obtained all the necessary approvals, at least in the Italian market, where large-scale PV projects are facing increasing opposition from communities and local administrations.
PV Magazine, 8 September 2021
Editor's note: Nothing like a good constraint from the market to change habits! The high level of electricity and gas prices will encourage customers to look for stable and cheaper prices than the market. They will therefore have an incentive to enter into power purchase agreements. If energy prices remain high, the number of such contracts is likely to increase. However, the prospect of high market prices must still be evident.