Soaring Electricity Prices in Europe’s Electricity Market
COP26 will be held in Glasgow, UK from October 31 (Sunday) to November 12 (Friday). At such a time, electricity prices in the European and British electricity markets are currently skyrocketing to record levels, causing serious instability in the British and European grids.
In recent weeks, there has not been enough wind blowing across much of Europe, reducing the output from wind power and leading to a shortage of power to the grid. This has led to a sharp increase in electricity prices.
Weaknesses of renewable energy
This phenomenon tends to occur in winter, when demand is high. The output of wind power is determined by the cube of the wind speed. In winter, the temperature is much lower than in summer, so the actual wind speed is (273/(273+20)) to the 3 power, or about 80% of the output. In the case of solar power, the sunlight itself is weaker in the winter than in the summer, resulting in a similar reduction in output.
This means that power generation from renewable energy sources has basic weaknesses in addition to discontinuity, low efficiency, and low energy density. This is an issue that has been building up for a long time in the UK and Europe. In the UK, wholesale electricity prices are reported to have doubled since this time last year.
Surge in gas prices
There are also a number of factors at play, including the rising demand for natural gas in Asian countries due to building their economic growth. Normally, these would lead to a push for natural gas production, but there is currently a decarbonization movement not only in Europe and but the United States, leading to a failure to promote gas production worldwide.
In other words, we can say that most of the problems in the electricity market are hurting themselves. This is because EU is currently intending to double the EU carbon price in an effort to drive fossil fuels out of the energy mix in favor of renewable energy.
Coal emits larger number of CO2, so a push to switch from coal to gas power generation increases demand for natural gas, which is already in short supply. Coal and gas power producers have to pay this carbon price, which drives up their costs and thus the price of electricity even higher.
Add on top of that the £12 billion a year in renewable subsidies, and the price of electricity in the UK has now soared to £440 per household.
UK and Europe Return to Coal
So, how are they going to deal with this crisis in the UK, the host of COP26?
The low winter wind speed has exacerbated the continent’s energy crisis, and utilities are turning to coal to fill the shortfall. The severity of the energy crisis is what is happening at a time when Western governments are trying to push emerging and developing countries to agree to net-zero targets at COP26.
The reality is that Europe has had to go back to coal, which could make any attempt by UK or European politicians to push net zero to other countries impossible. This is because they will first have to deal with the voter backlash triggered by the cost of achieving net zero and the increase in electricity prices.
How will Boris Johnson get through this?