European power pricesChallenges and opportunities for wind
Andreas Gandolfo
November 28, 2018
1 Eneco, R-meeting, November 28, 2018
Introduction
What is BloombergNEF
2 Eneco, R-meeting, November 28, 2018
3 Eneco, R-meeting, November 28, 2018
Power prices in
Europe
The challenge for wind
4 Eneco, R-meeting, November 28, 2018
0
50
100
150
200
250
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
100 = 2007, real 2007
United Kingdom
Nordpool
Spain
Netherlands
France
Germany
Italy
Source: Bloomberg Terminal, Bloomberg NEF.
Ten years of stable power prices
Real 2007 power prices in select European markets, indexed to 2007
Above the red line
real prices are up
Below the red line
real prices are down
5 Eneco, R-meeting, November 28, 2018
Source: BloombergNEF. Note: EU 28 is the 28 countries of the European UnionSource: Bloomberg Terminal, BloombergNEF. Note: TTF hub prices used for gas
Commodity prices in Europe, indexed to 2007Wind and solar as a share of total EU 28
capacity and generation
Why are power prices stable
Coal
Gas
0
20
40
60
80
100
120
140
160
180
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
100 = 2007
Capacity
Generation
0%
5%
10%
15%
20%
25%
30%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
6 Eneco, R-meeting, November 28, 2018
Source: Bloomberg NEFSource: Bloomberg NEF
U.K. power price outlook Germany power price outlook
European power prices unlikely to rise
Outlook
0
10
20
30
40
50
60
2010 2015 2020 2025 2030 2035 2040
GBP/MWh, real 2010
Outlook
0
10
20
30
40
50
60
2010 2015 2020 2025 2030 2035 2040
EUR/MWh, real 2010
7 Eneco, R-meeting, November 28, 2018
Source: BloombergNEFSource: BloombergNEF
Coal and gas price outlooks indexed to 2010
Wind and solar as a share of total European
capacity and generation
What is keeping European power prices from rising
Capacity
Generation
Outlook
0%
10%
20%
30%
40%
50%
60%
70%
80%
2010 2015 2020 2025 2030 2035 2040
Gas
Coal
Outlook
0
20
40
60
80
100
120
140
160
180
200
2010 2015 2020 2025 2030 2035 2040
100 = 2010
8 Eneco, R-meeting, November 28, 2018
Source: BloombergNEF. Note: Other includes biomass, and geothermalSource: BloombergNEF. Note: Other includes biomass, and geothermal
Cumulative installed generating capacity Generation by technology
How much wind and solar do we expect in Europe
0
500
1,000
1,500
2,000
2,500
2015 2020 2025 2030 2035 2040
GW
Flexible capacity Solar Wind Other Hydro Nuclear Fossil fuel
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2015 2020 2025 2030 2035 2040
TWh
Solar Wind Other Hydro Nuclear Fossil fuel
9 Eneco, R-meeting, November 28, 2018
Source: BloombergNEF. Note: O&M stands for operation and maintenance, not all subsidy schemes pay out during negative power prices
Why do wind and solar depress pricesWhat does it cost different technologies to generate a megawatt-hour of electricity
-30
-20
-10
0
10
20
30
40
50
60
Coal Gas Wind Solar
currency per megawatt-hour
Subsidy
Variable O&M
Emissions
Fuel
10 Eneco, R-meeting, November 28, 2018
Source: Bloomberg Terminal, Bloomberg NEF
-100
-80
-60
-40
-20
0
20
40
60
80
0
20
40
60
80
23/10/2017 24/10/2017 25/10/2017 26/10/2017 27/10/2017 28/10/2017 29/10/2017
GW
Solar Wind Other Nuclear Fossil fuel Load Day ahead price
We have already seen wind and solar push prices downGerman electricity generation by fuel type and power price for the week of October 23, 2017
11 Eneco, R-meeting, November 28, 2018
Source: Bloomberg NEFSource: Bloomberg NEF
U.K. historical realized prices by technology German historical realized prices by technology
0
10
20
30
40
50
60
2010 2011 2012 2013 2014 2015 2016 2017
GBP/MWh
Coal Gas Solar Wind Average
0
10
20
30
40
50
60
2010 2011 2012 2013 2014 2015 2016 2017
EUR/MWh
Coal Gas Solar Wind Average
Renewables capture a discounted price
12 Eneco, R-meeting, November 28, 2018
Source: Bloomberg NEFSource: Bloomberg NEF
U.K. outlook on realized power price German outlook on realized power price
0
10
20
30
40
50
60
70
80
90
2015 2020 2025 2030 2035 2040
GBP/MWh, nominal
Gas Wind Solar Average
0
10
20
30
40
50
60
70
80
90
2015 2020 2025 2030 2035 2040
EUR/MWh, nominal
Gas Wind Solar Average
And the discount does not go away
13 Eneco, R-meeting, November 28, 2018
Realized margin
Missing money
O&M costs
Margin needed
0
20
40
60
80
100
120
140
160
2018 2020 2025 2030 2035 2040
GBP/kW, nominal
Source: Bloomberg NEF Note: *O&M stands for operation and maintenance **ROI
stands for return on investment
Source: Bloomberg NEF Note: *O&M stands for operation and maintenance **ROI
stands for return on investment
U.K. wind realized margins in power market and
O&M* costs and margin needed for ROI**
U.K. solar realized margins in power market and
O&M* costs and margin needed for ROI**
What can wind and solar expect to make
Realized margin
O&M costs
Margin needed
0
10
20
30
40
50
60
70
2018 2020 2025 2030 2035 2040
GBP/kW, nominal
14 Eneco, R-meeting, November 28, 2018
Finding the missing
money
Revenue opportunities for renewables
15 Eneco, R-meeting, November 28, 2018
What revenue options are there
Selling energy
Wholesale market
Subsidy auctions
Selling services
Capacity markets
Balancing markets
Revenue options
Power Purchasing
Agreements (PPA)
16 Eneco, R-meeting, November 28, 2018
Selling energy – guaranteeing revenue
Generator
Wholesale power
market
Auctioned subsidy
Power purchasing
agreement
Sell energy through
The market
The
state/government
Consumers of
electricity
Get paid for energy by
High uncertainty,
with both upside and
downside risk
Low uncertainty,
with limits on upside
and downside risk
Medium uncertainty,
potential for upside
and downside
17 Eneco, R-meeting, November 28, 2018
Source: BloombergNEF
Selling energy – Auctions: where in Europe
18 Eneco, R-meeting, November 28, 2018
Source: BloombergNEFSource: BloombergNEF. Note: 2018 is year to date
Capacity clearing in European Union auctions
Average clearing price of European Union
auctions
Selling energy – Auctions: volumes and prices
Wind
1
23
8
4
1
Solar
2
5
0
2
4
6
8
10
12
14
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
GW
Wind
Solar
0
50
100
150
200
250
300
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
EUR/MWh
19 Eneco, R-meeting, November 28, 2018
Source: BloombergNEF
Source: BloombergNEF Note: Other includes Finland, Belgium, Poland, Germany,
Italy, Ireland, Spain, and Iceland
European renewable PPAs by country European renewable PPAs by technology
Selling energy – PPAs: where and what technologies
0
500
1,000
1,500
2,000
2,500
2009
orearlier
2010 2011 2012 2013 2014 2015 2016 2017 2018
MW
Sweden Netherlands Norway United Kingdom Other
0
500
1,000
1,500
2,000
2,500
2009or
earlier
2010 2011 2012 2013 2014 2015 2016 2017 2018
MW
Wind Solar
20 Eneco, R-meeting, November 28, 2018
Source: BloombergNEF. Note: Purely hypothetical scenario, not representing
modelled or observed data, other revenue could include payments for grid services
Source: Bloomberg NEF Note: *O&M stands for operation and maintenance **ROI
stands for return on investment
U.K. wind realized margins in power market and
O&M* costs and margin needed for ROI**
U.K. wind example margins from different
sources
Realized margin
Missing money
O&M costs
Margin needed
0
20
40
60
80
100
120
140
160
2018 2020 2025 2030 2035 2040
GBP/kW, nominal
What to do? Ideas to navigate the future
Subsidy revenues
PPA revenue
Market revenue
Other revenue
O&M costs
Margin needed
0
20
40
60
80
100
120
140
160
2018 2020 2025 2030 2035 2040
GBP/kW, nominal
21 Eneco, R-meeting, November 28, 2018
Instant access to BNEF
Download the BNEF app from
your mobile app store.
Available in the Apple store
and Google Play.
On the Login screen, leave the
username field blank and enter
bnef in the password field and
click “Login”.
You will be prompted
to enter your details.
Click “submit”.
Success! You now have
instant access to BNEF for a 2
week period
22 Eneco, R-meeting, November 28, 2018
The Bloomberg NEF ("BNEF"), service/information is derived from selected public sources. Bloomberg Finance L.P. and its affiliates, in providing
the service/information, believe that the information it uses comes from reliable sources, but do not guarantee the accuracy or completeness of
this information, which is subject to change without notice, and nothing in this document shall be construed as such a guarantee. The statements
in this service/document reflect the current judgment of the authors of the relevant articles or features, and do not necessarily reflect the opinion
of Bloomberg Finance L.P., Bloomberg L.P. or any of their affiliates (“Bloomberg”). Bloomberg disclaims any liability arising from use of this
document, its contents and/or this service. Nothing herein shall constitute or be construed as an offering of financial instruments or as investment
advice or recommendations by Bloomberg of an investment or other strategy (e.g., whether or not to “buy”, “sell”, or “hold” an investment). The
information available through this service is not based on consideration of a subscriber’s individual circumstances and should not be considered
as information sufficient upon which to base an investment decision. You should determine on your own whether you agree with the content. This
service should not be construed as tax or accounting advice or as a service designed to facilitate any subscriber’s compliance with its tax,
accounting or other legal obligations. Employees involved in this service may hold positions in the companies mentioned in the
services/information.
The data included in these materials are for illustrative purposes only. The BLOOMBERG TERMINAL service and Bloomberg data products (the
“Services”) are owned and distributed by Bloomberg Finance L.P. (“BFLP”) except that Bloomberg L.P. and its subsidiaries (“BLP”) distribute
these products in Argentina, Australia and certain jurisdictions in the Pacific islands, Bermuda, China, India, Japan, Korea and New Zealand. BLP
provides BFLP with global marketing and operational support. Certain features, functions, products and services are available only to
sophisticated investors and only where permitted. BFLP, BLP and their affiliates do not guarantee the accuracy of prices or other information in
the Services. Nothing in the Services shall constitute or be construed as an offering of financial instruments by BFLP, BLP or their affiliates, or as
investment advice or recommendations by BFLP, BLP or their affiliates of an investment strategy or whether or not to “buy”, “sell” or “hold” an
investment. Information available via the Services should not be considered as information sufficient upon which to base an investment decision.
The following are trademarks and service marks of BFLP, a Delaware limited partnership, or its subsidiaries: BLOOMBERG, BLOOMBERG
ANYWHERE, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG PROFESSIONAL, BLOOMBERG TERMINAL and
BLOOMBERG.COM. Absence of any trademark or service mark from this list does not waive Bloomberg's intellectual property rights in that that
name, mark or logo. All rights reserved. © 2018 Bloomberg.
Copyright and disclaimer
Coverage.
Clean energy
Advanced transport
Commodities
Digital industry
Bloomberg NEF (BNEF) is a leading
provider of primary research on clean
energy, advanced transport, digital industry,
innovative materials, and commodities.
BNEF’s global team leverages the world’s
most sophisticated data sets to create clear
perspectives and in-depth forecasts that
frame the financial, economic and policy
implications of industry-transforming trends
and technologies.
BNEF research and analysis is accessible
via web and mobile platforms, as well as on
the Bloomberg Terminal.
Client enquiries:
Bloomberg Terminal: press <Help> key twice
Email: [email protected]
Learn more:
about.bnef.com | @BloombergNEF