The biggest wind and solar construction company in Europe, Statkraft, has revised its plans for the future, now expecting to build fewer new wind and solar installations than before.
The reasons for the revision are higher costs and lower electricity prices that are compromising the profitability of these projects.
“The transition from fossil to renewable energy is happening at an increasing pace in Europe and the rest of the world. However, the market conditions for the entire renewable energy industry have become more challenging,” the chief executive of the Norwegian company said, as quoted by the Financial Times.
European states have been on a building spree in wind and solar but this has had one impact on electricity prices that many apparently did not foresee. It has brought prices lower during the hours where there is abundant wind and/or solar generation, even plunging them below zero.
Over the past year, European wholesale electricity markets have seen increasingly frequent negative prices, which has become a problem for generators that cannot adjust their output to match demand.
In addition to the negative electricity price trend, production costs for wind and solar are still high as interest rates remain high, making borrowing costlier for industries that rely heavily on borrowed capital to build their installations. Coupled with the lower profit margins eaten away by negative electricity prices, this has made for quite a challenging environment in wind and solar.
As a result, Statkraft now plans to build between 2 and 2.5 GW of onshore wind, solar, and battery storage per year from 2026, down from an annual target range of between 2.5 and 3 GW previously. Offshore wind targets were also revised, from 10 GW in total by 2040 to between 6 and 8 GW.
Virtually all major players in the wind and solar space have tweaked their growth targets in recent months as a reaction to the market trends in their industry.
By Irina Slav for Oilprice.com
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