Insight’s market and asset-level power price modelling service ‘Benchmark power curve’, predicts that up to ~46GW of new build renewable technology ̶ ~11GW onshore wind, ~10GW solar, and ~25GW offshore wind may need to be developed by 2030 as to keep in line with the 2050 net-zero targets.
The service also estimates that the large-scale deployment of very low and zero marginal cost wind and solar technologies, along with increasing interconnection in the 2020s, are likely to have a negative impact on wholesale power prices up until 2030.
The company’s research shows that with an increase in high intermittent generation levels, the market will see a corresponding rise in price volatility. The volatility in the power price in 2019 was valued at £13/MWh, but between 2020-24 modelling suggests an increase in volatility in all scenarios to between £18.2/MWh and £23.1/MWh. They warn that this could rise to over £50/MWh by the 2030s.
Cornwall Insight wholesale manager James Brabben said: “The net zero target is defining the shape of the future power market in terms of absolute value and volatility. This is certainly true in the period to the 2030s before we see material changes in power demand from widespread electrification in heat and transport.
“We have been given a glimpse of what the future may hold during the Covid-19 lockdown. High renewable generation, caused by low demand over lockdown, created up to 15% discount rates for solar and wind technologies against average day-ahead prices over April and May 2020.
“Our forecast shows similar discount levels could be the norm in the 2020s, especially as more offshore wind comes onto the system, and before we see power demand climb significantly from the electrification of heat and transport.
To avoid such issues, Brabben says that reform may well be needed.
“One potential solution to the cannibalisation issue in a net zero world is reform to the wholesale markets, so short-run costs no longer set prices. This would be a courageous initiative, but nothing should be off the table given the scale of the net zero challenge,” Brabben said.
The news comes after renewable energy overtook fossil fuels for the first time in Britain’s history, generating more than 40% in the first three months of the year, as found by the ‘Drax Electric Insights Report’ in May.