Prices will be higher and more erratic, but with less seasonal fluctuations.
It is difficult to know what will happen next year, but despite the great advances in the development of renewable capacities in Europe, external dependence remains high. Otovo, a Norwegian company specialized in residential self-consumption, has analyzed the future of the energy sector and proposes 10 trends for 2022.
1. Energy prices will go upIf in 2021 energy prices have been extraordinarily high, in 2022 they will follow the same path. To a large extent, consumer prices for 2022 are already set across Europe, through long-term contracts and price regulations.
Why are they going up? Electrification of homes and cars will lead to increased demand for electrical energy. At the same time, the cost of pollution in the European carbon emissions market will increase. Added to this is the fact that gas and coal prices are at cyclical highs. In addition, planned investments in the energy network will be transferred to consumers through regulated tariffs.
2. Greater volatility in the price of electricityPrice differences from hour to hour and from day to day (intraday and interannual volatility) will be greater and more frequent. There will be more weather-dependent energy production (solar and wind power) and less thermal capacity available when nuclear and coal plants are shut down.
3. The seasons of the year are changingElectricity prices will suffer seasonal changes that no longer follow the traditional image of “low price in summer, high price in winter”. With a higher level of electrical interconnections between countries, all will be increasingly influenced by climate and production levels in other parts of Europe.
4. Charging for congestion will be more commonMore and more countries will begin to introduce congestion pricing in consumer agreements, such as freight rates or time-of-use pricing, to drive changes in consumer behavior. In essence, this means there will be rewards for showering earlier in the morning and penalties for cooking dinner at the same time as everyone else.
The joke of ironing at midnight to save will not be without its point of realism.
5. ‘Boom’ of solar energyLocal, renewable electricity generation will make sense and be competitive with grid power in more markets, and for more users. Residential and commercial solar energy will expand as more and more users become aware of the opportunity to save with solar energy.
In Europe, the forecast for 2022 is that 1.2 million homes will add solar panels to their roofs (IEA and Otovo). This represents a growth of 20% compared to 2021.
6. More tax-based incentivesEurope will start to put aside incentive systems related to the use of solar panels and energy batteries, such as starting to establish more tax systems, such as tax deductions or lower VAT rates on green energy devices.
In early December, the European Commission paved the way for the 0% VAT on solar panels, electric bicycles and other green energy products and services.
7. Electric vehicles and solar energyWe will see more electric cars charged with energy obtained from the roof of the garage or house. There is a clear correlation between electric vehicle ownership, awareness of electricity use, and interest in solar energy.
8. Smart energy consumptionMore and more consumers will realize the importance of consuming energy wisely, which translates into optimizing usage time and reducing peak loads. Delaying the start of the water boiler after the morning shower for a few hours can, for example, save several euros.
9. Batteries will become popularCommercialization of residential and commercial batteries will improve dramatically, with increased electricity price volatility, congestion pricing, and elimination of power rates. 2022 will be the year that batteries will become a household item.
10. Solar prices will stabilize2021 has been the post-pandemic year that has led to an increase in solar energy prices in 2021. This will stabilize in 2022.
Energy sovereignty in the EU?
These Otovo predictions confirm the analysis carried out by Aquila Capital, international fund manager with investments in Spain in real estate, logistics and renewable energies (more than 3GW). According to your report Energy Security – Europe‘S Green Sovereignty?, the real solutions that would reduce the EU’s dependence on energy imports involve rethinking the long-term strategy. “The current crisis in energy prices reveals the vulnerability of Europe,” the report notes.
A regional and technologically diversified approach by the EU points to a path focused on the production and distribution of renewable energy dependent on climate and resources.
In this way, it would also be possible smooth generation fluctuations, which would considerably increase the security of supply.
The integration of the European energy markets makes it possible to guarantee the security of supply through renewable energies. Simultaneous expansion of renewables and grids increases system efficiency, reduces costs for storage solutions, and reduces grid-related outages.
Triple gas peaks
The report also notes that “the capacity of gas-fired power plants to cover load peaks (‘gas peak’), that is, to compensate for too low renewable production, is expected to triple in the same period.”
Forecasts for gas power plant capacity development in Europe illustrate the expected continued importance of gas as a bridge technology. They are expected to increase by more than 50% by 2050.
“Demand could be considerably higher in the event of significant changes in wind and temperature conditions.”
A final point in the report is the danger facing the European energy system: cyber threats. Aquila Capital points out that “protecting the energy sector from external dangers, in the era of cyber operations, also requires the development of European solutions.”