Mercuria CSR Report 2020 - Flipbook - Page 34
POWER
The view of a trader in the
context of renewable sources
in the energy mix
Mercuria has been active in the European power
Renewable energy continues to see rapid growth
markets since 2010 and has a significant presence
of installed capacity throughout Europe. Every
on all major European hubs, trading on our own
year we are seeing more energy produced from
account as well as providing market access
such sources and as wholesale market prices rise
services to clients.
it allows more projects to come online without the
need for government subsidies.
European power markets are in the midst of a
huge energy transition. We have a broad two-
This rapid growth of intermittent generation
pronged approach to achieve this. First, the
sources coupled with the reduction in the installed
decommissioning of thermal generation, most
capacity
notably lignite and hard coal as well as the
challenges on many levels.
of
dispatchable
generation
poses
retirement of nuclear generation. Second, the
integration of large amounts of renewable energy,
Grid operators need to ensure sufficient balancing
primarily from wind and solar installations.
energy is available to deal with these fluctuations
Carbon pricing through the EU ETS, has turned
in real time. More market actions are required
the selection of the energy sources on its head.
by grid operators to balance the grid and overall
Formally cheaper generation units burning lignite
costs of keeping the grids balanced increases.
and coal now have the majority of their marginal
Bottlenecks in the transmission grid are also
cost component made up of the cost of emissions
exposed by the large swings in power flows
certificates. This has priced them above CCGTs
caused by intermittent generation. This requires
(used for power generation) in the merit order
continued and significant grid investment in order
and thus reduced profitability and limited running
to keep pace with the growth in installed capacity
hours. With poor economics for coal and lignite
of renewables.
plants we have seen many older less efficient units
decommissioned in recent years driven by market
As a result, the intraday and day ahead markets
price signals, whilst some countries like Germany
see increasing volatility as renewables output
have gone one stage further offering payments to
forms an ever-growing portion of generated
generators to retire plants early.
electricity and therefore imparts more volatility on
the daily prices.
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