(Bloomberg) — Profits at Europe’s solar parks have sunk to record lows, raising concerns that the more the industry expands, the farther prices will fall.
The figures are most stark in Spain, where the so-called capture rate, a key measure of profitability for renewable energy assets, has averaged just 7% so far this month, according to data from London Stock Exchange Group Plc. That’s down from 43% a year ago.
Europe’s solar season is getting longer and more intense, exacerbated by a swath of new capacity that’s flooding the grid with power. That’s eating into generators’ returns and scaring off investors, particularly in Spain and France, where this spring has seen weeks of clear skies.
“The biggest risk factor for the expansion of renewables is the declining profitability in the solar sector,” said Nathalie Gerl, lead power analyst at LSEG. “Lower capture rates undermine the business case for solar energy, putting political solar targets at risk.”
Spain has seen its solar capacity surge above 50 gigawatts, six times higher than a decade ago, according to BloombergNEF. The rapid growth mirrors a broader European trend, driven in part by a sharp decline in the cost of panels.
In France, where the capture rate is at a record-low 13%, capacity has jumped almost fivefold in the period.
When power generation exceeds demand, it’s a problem because the volume of batteries plugged into the region’s grids has yet to catch up with the boom in renewables. Since the burgeoning output can’t be stored, the oversupply sends power prices tumbling — sometimes even below zero.
The capture rate, which compares the electricity price a solar farm receives with the average price in the wholesale market, is lower in Spain and France than in Germany, where prices are higher and the rate is above 30%.
Spain’s capture rate is the lowest in Europe, and would be even lower if it weren’t for a move by solar farms to slash output this month. That shift coincided with a ramp-up in gas-fired power to steady the grid in the wake of a nationwide blackout in April.
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