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14 Jun 2018

Our physico-economical model for the future of the pan-European electric sector

The paradox of the energy transition is that the low marginal costs of new renewable energy sources drag electricity prices down. Doing so, they discourage investments in flexible productions that are needed to compensate for the lack of dispatchability of the new RES. The energy transition thus discourages the investments that are required for its own harmonious expansion. To investigate how this paradox can be overcome, we have constructed a physico-economical model that give simple predictions of future electricity prices based on the law of supply-and-demand and planned evolutions of future productions. And we are happy to announce that the paper has just been published in “Energy” !

Our results ? Well, have a look at our manuscript (see the link below) ! But in a nutshell, things will get better (remember : a price increase is an improvment when it comes to being able to safely develop a fleet of flexible productions) relatively soon, and we seem to have hit rock bottom few years ago. The validity of our approach is illustrated in the figure below by direct comparison between hydro-revenues with our synthetic, effective price (green curve) and the true price (violet curve).

Our article in Energy :