The lessons of Covid-19 pandemic for the European electricity market

The lessons of Covid-19 pandemic for the European electricity market
7 July 2020

Wärtsilä’s Energy Transition Lab has brought together data from European electricity markets during the pandemic and laid bare the improvements needed to ensure a smooth transition to a renewable energy future for national electricity systems.

In the middle of the Covid-19 crisis, Wärtsilä had a brainwave. Experts at the company began to notice that the impact of the shutdown on the electricity market was creating conditions that replicated its vision of the electricity market in the coming three to ten years.

That vision is all about an electricity market with a higher relative share of renewables in the mix than today. The global pandemic and lockdown was creating less demand for electricity than usual, so the percentage of renewable energy was suddenly greater than ever. The pandemic was therefore creating a golden opportunity for “a glimpse of the future” and find out how the electricity market copes in such conditions.

Wärtsilä has an interest in this. The company specialises in the technologies that are helping the global energy transition – flexible gas-based engine power plants, batteries for renewable energy storage – and as a company it seeks to explain to the industry how and why its technologies are so vital for a smooth transition to an electricity market making increasingly greater use of renewables.

Flexibility is the key. If you want to increase the amount of renewable energy used, you need to increase the flexibility of the overall system so it can adapt, hour by hour to fluctuating levels of renewably sourced electricity generation. Experts at Wärtsilä quickly realised that the future was fast arriving in the form of the Covid-19 pandemic, and the opportunity to see how European electricity systems performed in a real-time, real life high-renewable situation could not be missed. And so, on 17 April, the Energy Transition Lab (ETL) was born. The idea was to take all the data on electricity prices, markets and systems from across the continent, digest it and present it in an easily accessible and understandable way. The tool was launched, providing detailed data on electricity generation, demand and pricing for all 27 EU countries and the UK, combining Entso-E data in a single, easy-to-use platform.

And the platform took off. It attracted the attention of high-profile media outlets such as Reuters, Bloomberg Green and the Financial Times and sparked conversations within global energy organisations. For the first time, industry and policymakers could see clearly what was happening, and the tool was highlighting problem areas where the focus needs to be put in order to ensure countries do not get into difficulties when fulfilling their renewable ambitions.

So, what did the tool show? Ville Rimali, Wärtsilä Energy Business’ Director of Growth & Development Africa & Europe, says the most startling takeaways come from the UK and Germany.

In the UK, coal-based electricity generation halted completely for almost two months. Although the country has been progressively switching to gas over the last 30 years, this was nonetheless unprecedented. Day prices for electricity halved, affecting the country’s other baseload staple, nuclear. On some days, the UK regulator even paid utility EDF to ramp down production at the Sizewell B nuclear power plant, idling reactor no. 2. This could be a concern as the UK is building more nuclear power plants and another EDF nuclear plant is awaiting approval.

With no coal and reduced nuclear, the country overcame its difficulties, but is this sustainable in the future?

“How much did the UK pay for this solution? It would be better if the money that was spent on the short-term fix during this period could be spent on solving the issue permanently,” said Mr Rimali. He also added that a quick look into the ETL data shows that at this time owners of energy storage systems were doing well.

The ETL data reveals that Germany, a country that has invested massively in wind and solar, has also experienced some difficulties over the past couple of months. As well as having considerable renewable resources, the country also possesses sizeable nuclear and coal baseload generation. Unable to shut down those baseload plants on days of strong renewable generation – of which there were many – the country took advantage of its strong interconnectedness with its near neighbours to export the excess electricity. Unfortunately, when the sun shines or the wind blows in Germany, the same conditions apply in neighbouring countries. The end result was that Germany paid €1m per hour to neighbours to take the energy away.

“This shows that while the country has invested in renewables, it has not taken care of flexibility, “ said Mr Rimali, adding that while this makes for an uncomfortable public discussion in the country, the payment of such huge sums of money poses the inevitable question of who, ultimately, is paying for the inflexibility in the system.

The achievement of the ETL is that it has raised the question of flexibility in electricity systems and presented real data, in an accessible way, on which to base those much-needed discussions.

“The data shows that the UK and Germany could have done their homework better. While there has been a drive to promote and expand renewables, few countries have looked at the step-by-step actions needed to ensure a smooth transition to the future,” concluded Mr Rimali.

To access Wärtsilä’s Energy Transition Lab, click here.

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Author

Ville Rimali

Ville Rimali

Director, Growth & Development
Wärtsilä Energy


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