The Commission sees an increasingly volatile wholesale market as the solution to what is known in energy policy circles as the “missing money problem”. In other words, how to pay for wind farms, solar arrays and back-up generation when the leaves are still and the sun is obscured by cloud.
Oliver Koch, deputy head of the internal market unit in the EU’s energy directorate, was talking about “scarcity pricing” – where the cost electricity traded on exchanges is allowed to leap when demand outstrips supply – at an event hosted by the electricity utilities’ lobby Eurelectric.
Europe’s renewable energy sector is in a sense a victim of its own success: as its share of power generation has risen – to 28.8% in 2015 – it has pushed wholesale prices down, even below zero on occasion.
The theory is that by removing price caps, subsidies and other market interventions, short bursts of potentially very high prices will enable investors to recoup the money they plough into new generation assets.