Grid expansion and flexibility could reduce European electricity prices – report
Clean Energy Wire
The expansion of European electricity grid infrastructure and measures to increase demand flexibility could lead to a significant reduction in power prices, according to a report by Allianz Research. Transforming the EU’s electricity sector to a climate-friendly system could lower electricity prices in the mid to long-run: by 11 percent by 2035 and by 30 percent in 2040 in a net-zero scenario, the report stated.
However, this would require huge investments in grid infrastructure, while interconnector and storage capacity must double by 2030, the authors noted. Differences in European electricity infrastructure and market design have become major obstacles to the energy transition, according to the report. A lack of grid infrastructure has prevented the connection of over 800 gigawatts (GW) of wind and solar capacity. Persistently high electricity prices are likewise undermining industrial competitiveness and burdening consumers, it pointed out.
Measures that hold great potential to reduce electricity prices, in addition to expanding grid infrastructure, include increasing the use of smart meters. These would reduce peak loads (when electricity demand is at its highest) and storage requirements, while simultaneously lowering household energy consumption by two to ten percent, the report noted. Other measures that could provide relief would be the use of electric cars to improve grid stability, with their batteries serving as storage in the grid via bidirectional charging.
"Some difficulties need to be managed to ensure that the overall gains of further integration through additional interconnector capacities are distributed fairly," the authors wrote. Challenges include energy autonomy, market competition and regional price disparities. Still, cross border interconnectors could generate annual savings that vastly outweigh investment costs, they added, while tailored pricing mechanisms and better market coordination could maximise benefits while addressing distributional concerns.
