Challenges are facing the solar energy industry

Fuelled by the surging prices and the emergency measures enacted by Brussels, the expansion of photovoltaic energy is setting unprecedented records in Europe. This growth has raised concerns about its side effects, including the increased occurrence of negative energy prices and some nations considering rationing their production.

Amid a scorching heatwave in southern France, solar power production is once again nearing historic highs. On August 20, between 1 p.m. and 2 p.m., solar panels in France generated 12.1 GW of electricity, close to the peak of 13.1 GW achieved on June 24. This trend is reflective of the continuous proliferation of photovoltaic installations not only in France but across Europe.

The surge in photovoltaics can be attributed to the European Commission’s urgent measures to reduce reliance on Russian gas and persistently high electricity prices. According to SolarPower Europe, an industry association, European electricity grids connected a total of 41.4 GW of new photovoltaic capacity in 2022, marking a 47% increase compared to 2021.

Leading the way in this growth are Germany and Spain, with 7.9 GW and 7.5 GW of installed capacity, respectively. Notably, Poland and the Netherlands have also made significant strides, with 4.9 GW and 4 GW, respectively, representing a 30% increase for Poland compared to 2021.

This upward trajectory appears to be ongoing, with nearly 6 GW of new capacity already connected in Germany since the start of 2023. The SolarPower Europe association forecasts a 29% growth in installed capacity across Europe in 2023.

However, this growth is accompanied by side effects that are beginning to pose challenges. In a letter to the European Commissioner for Energy, Kadri Simson, sent in early August, 19 photovoltaic industry associations highlighted the increasing occurrence of abrupt negative price fluctuations. As solar-generated electrons are injected into the grid as a priority, they often coincide with abundant sunlight but low electricity demand, especially during peak production times on Sundays or holidays. Consequently, prices can plummet to extremely low levels, particularly in countries with record solar penetration rates. For example, in mid-April, electricity markets in the Netherlands reached a low of -739.96 euros per MWh. Faced with similar situations in the spring, Poland and the Czech Republic instructed their renewable energy producers to curtail production to prevent price collapses.

While Europe is entering an era of abundant solar energy, there’s a risk of production capacity rationing during summer months if action isn’t taken to address these challenges. These negative price occurrences, though limited in the past, are exacerbated by the expansion of solar production capacity. In essence, as solar power grows in Europe, prices can drop even further during periods of peak sunshine and low demand.

The industry’s associations warn that if this issue is not resolved, it could undermine the economic viability of solar developers. Although these negative prices don’t directly impact the profits of producers with state-guaranteed income, they do affect the anticipated profitability of solar parks once their public purchase contracts expire.

To address this situation, the associations are advocating for accelerated action in two areas: the expansion of network infrastructure and the development of energy storage or consumption management tools. The association emphasizes that the regulatory tools provided in the European Commission’s 2018 green energy package to address these challenges have not been sufficiently deployed in various EU member states.