Listening to some incumbent players in the electricity sector, PV should be responsible of all financial problems of the electricity markets. The effects of variable renewable energy generation on electricity markets’ prices have indeed been used mostly by opponents to PV in recent years. But what is the real impact of PV on the electricity prices? Analyzing the evolution of market prices in the last seven years in key European countries, it appears that PV contributed to significantly lower electricity prices. According to the study executed by Becquerel Institute and Green Giraffe Energy bankers, without any PV production, the electricity market price in key European countries would have been on average 3% higher.

The countries taken into account in the study, Germany, Italy, Austria, Switzerland and France experienced a massive growth of installed PV capacity over the past years. Representing together 73% of the European market in 2013, the assessed Merit Order Effect has been estimated to almost € 20 Bn in the five countries considered and were worth about 100 EUR per MWh of PV electricity fed into the grid. Compared to the cost of feed-in tariffs borne by electricity consumers, the merit order of already existing PV installations should have decreased the cost of feed-in tariffs by 10 cents. And this is the order of magnitude of the lowest feed-in tariffs today. In order words, the merit order could theoretically compensate today the cost of new PV installations.

The impact of PV on electricity prices introduces many questions on the future profitability of utilities under existing framework conditions, and even more the question of the future competitiveness of PV installations selling on the electricity markets. The conclusions of this study should be carefully analyzed: They show that the cost of PV electricity for the community could be reduced but also that the question of ensuring the profitability of most players during the energy transition will be the key of further PV development in Europe.

Considering solar PV energy only, this analysis does not embrace and quantify the total real effect, on a given electricity market, of introducing additional renewable electricity – mainly PV and Wind – in the generation mix of that market.

However this should be considered as an initial step towards understanding the concrete benefits of renewable energy, not only from an environmental point of view, but also from a genuine economic perspective, both at the State and at the consumer levels.

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In collaboration with Green Giraffe Energy Bankers and data provided by GeoModel Solar