Posted on: 29/05/2018
A study has warned that rapid growth in renewables capacity could potentially push wholesale power prices down and deter future investment in the sector.
The report from Cornwall Insight said the growth in renewables capacity could increasingly have a "cannibalisation effect" on wholesale electricity prices.
It warned that ultra low or negative wholesale prices could present a major challenge for future subsidy-free solar and wind projects, which would be increasingly dependent on revenue from wholesale markets for income.
Gareth Miller, Cornwall Insight's CEO, said the potential issues needed serious consideration by policymakers.
‘Under the radar’
"As the government moves to review its Electricity Market Reform framework, the potential of this effect has largely gone under the radar and merits serious consideration as it could reshape the economics of the sector," Miller said.
The Cornwall report - Wholesale Power Price Cannibalisation - shows that for a representative 10MW onshore wind project, the combination of lower wholesale prices and higher output could cut revenues from the wholesale market by as much as 34 per cent by 2033 compared to 2018.