Markets & Investments
The cost of solar PV has fallen by 90% since 2009, making it a very attractive investment, competitive with fossil fuels. Further, solar combined with storage now outperforms gas peaker electricity.
Reaching 1 TW of solar by 2030 will require massive investments in new solar capacity. Unlocking these investments will require tailoring the regulatory frameworks accordingly. These frameworks must provide the right economic signals to attract long term investments in the right solar technologies for the system, and for electricity consumers.
EU electricity and carbon markets create the central electricity price signal, and are the basis of the investment signal. The design of the EU electricity market must provide the right demand and supply signals to encourage flexibility, both from the generation and from the demand. Long-term electricity markets, such as capacity markets or forward markets, must be developed to allow for investments in the required clean technologies for a 100% renewable energy system. Preserving this central, market-based functioning is critical, and interventions on its mechanisms must be avoided.
State Aid has been instrumental in deploying solar PV and driving down costs, and will likely play a key role in the coming years for meeting the increased solar objectives set out by the European Commission in their EU Solar Strategy. As solar projects are CAPEX-intensive projects, it provides necessary remuneration insurance for project developers, allowing them to minimise market uncertainty and make their investments with confidence. This is the model of two-way Contracts for Difference, which complement the market price where the latter does not reach the strike price.
In parallel, market-based and subsidy-free projects are being developed. Power Purchase Agreements - long-term renewable energy sourcing contracts agreed on directly between the renewable energy producer and a consumer or a supplier - have been thriving in Europe. They provide a necessary hedging solution for energy intensive consumers, and allow corporates to meet their ESG goals.
The financial sector will equally need to be ready to provide the right financing solutions to project developers and companies to meet the pace of development. This will require strong cooperation with public and private banks or investors, alongside the development and implementation of strong, sustainable finance standards.
Utility-scale solar PV LCOE is at 35 €/MWh against 58 €/MWh for CCGT before the energy crisis (source: Lazard Bank 2021).
In Germany, solar+storage LCOE is nearly a third of the household electricity price, at 9.2 c€/kWh against 31.7 c€/kWh (EUPD Research 2021)
2021 was another record year with more than 110 deals signed equating to more than 6.5 GW (source: Pexapark).
The majority of solar projects are under administratively set remuneration schemes and do not benefit from the high prices: we estimate that it is the case in 2/3 of solar projects in Germany.
The Markets & Investments workstream
Join the Markets & Investments workstream
The Markets & Investments Workstream will provide guidance on the needs of investors to make the solar TW-era happen at lowest costs for society.
The Workstream develops SolarPower Europe’s position on the required design for future electricity markets, from long-term to short-term, ensuring they are fit for 100% renewable energy systems. It provides guidance on the solar industry’s needs in terms of public support and inputs from the EU Competition authority when designing its State Aid Frameworks, in particular the Climate, Energy and Environmental protection Aid Guidelines (CEEAG).
It assesses the regulatory barriers to the development of Power Purchase Agreements, including the design of Guarantees of Origins. It provides input on the relevant financial standards, in particular the Sustainable Finance Framework.
The Workstream will be the interface between the public and private finance and banking industries, in particular with the European Investment Bank. It will also coordinate with the related EU expert groups.
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Interview with Zosia Riesner, chair of the Markets and Investments Workstream
I am delighted to have the opportunity to support the solar industry in Europe as Chair of the Markets and Investments Workstream. At such a critical time in the energy markets, I view this as an opportunity to serve the industry that I have enjoyed working in for many years and leverage both my personal experience and the leadership of Lightsource bp in the industry.Read the interview