A boom in clean power electricity generation has led to a significant drop in forward power prices in Europe, reaching their lowest levels since before Russia’s invasion of Ukraine in 2022. Wholesale power prices in Germany and France, the region’s largest economies, are now averaging around 102 and 105 euros per megawatt hour (MWh) respectively for the first quarter of 2024. This is less than half the average wholesale power price seen in both countries in 2022. Furthermore, forward markets indicate that prices are likely to remain below 105 Euros/MWH in both countries until the end of 2025.
The decrease in power prices is expected to benefit energy-intensive consumers who had been forced to reduce their power usage due to high prices in recent years. The main reason behind the decline in power prices is the significant increase in clean power capacity across Europe over the past few years, with further development expected in the years to come. Clean power sources have generated a record 59.3% of Europe’s electricity in the first 10 months of 2023, and this figure could surpass the 60% mark by the end of the year if wind generation continues its usual growth in December. The increase in clean power generation has been driven by significant growth in solar and wind generation, which have expanded by 85% and 32% respectively since 2019. In contrast, electricity generation from coal and natural gas has declined by 18.2% and 9.3% respectively, further shifting the electricity mix in favor of clean power.
Europe’s clean power share currently ranks second globally, only behind Latin America. It significantly exceeds the clean power shares in North America, Asia, and Africa. Clean power supply expansions are planned throughout every region, but the European Union is expected to be the largest clean power developer outside China in the upcoming years. According to the International Energy Agency (IEA), the EU alone may add between 340 gigawatts and 450 gigawatts of renewable energy capacity between 2022 and 2027. These expected expansions in clean power capacity could further drive down power prices in Europe and help the region achieve its goal of becoming a major clean energy hub that can rival China.
The decline in power prices and the expansion of clean power capacity are positive developments for Europe’s energy landscape. As the region continues to prioritize the energy transition, consumers can expect more affordable power prices and increased reliance on clean energy sources. With the potential for further advancements in clean power technology, Europe is well-positioned to lead the way in the global clean energy revolution.
