Energy Market Insights

Solar created the duck curve. Batteries are now flattening it. This chart shows average wholesale electricity prices in Victoria during the first quarter of each year. A few years ago, growing solar generation was pushing midday electricity prices deep into negative territory while evening prices remained extremely high. This year, the shape of the curve is noticeably flatter. Compared to 2024 and 2025: ✅ Midday prices are higher, and no longer negative ✅ Morning and evening peak prices are much lower ✅ Overall price volatility has fallen significantly The main reason is battery storage. By charging during the middle of the day and discharging during the evening peak, batteries are creating demand when prices are low and boosting supply when prices are high. And what's interesting is that this impact has largely been achieved using today's fleet of relatively short-duration batteries, typically providing 2-4 hours of storage. According to the Victoria's State Electricity Commission, this is a "great proof point" of the role batteries can play in intraday firming and reshaping electricity markets. The benefits extend beyond lower evening peaks. By absorbing surplus solar generation, batteries can also reduce curtailment risk and improve the value of renewable electricity during the middle of the day. And the story isn't over. Encouraged by the success of shorter-duration batteries, the SEC is now exploring investments in 8-12 hour storage to help manage longer periods of low solar and wind output. Solar changed the shape of electricity markets. Now batteries are changing it again. H/t Rebecca Tilbrook, SEC Victoria

During my time serving in government, I saw firsthand how geopolitics can impact energy production and flows, with cascading impacts on market and macroeconomic trends.   We're already seeing this play out following the last few days in the Middle East. U.S. and Israeli strikes on Iran triggered retaliatory action across the region that has disrupted energy production and transit.   The market reaction is changing quickly. Since I recorded this video on Monday, oil and gas prices have jumped further, and equities have shifted toward a risk-off move as investors price in continued escalation. Bonds sold off further, reflecting inflation fears in developed markets. Due to the segmented nature of natural gas markets, the impact of higher prices will hit regions differently, with Europe more exposed than the U.S. to elevated LNG prices.   The central question: will this remain a short-term volatility spike or evolve into a broader supply shock? The duration of the disruption and the severity of transit impacts are the core variables I'm watching.   ⬇️ Watch the full video for my latest take on what this could mean for markets.

Picture of the Week: European power prices are now lower than pre-Ukrainian times! The significant reduction in #European wholesale power prices in 2024 compared to 2021, especially in countries like #Spain and #Portugal, can be attributed to several key factors: 1. Expansion of Renewable Energy: Spain and Portugal have made substantial investments in #renewable energy, particularly #solar and #wind power. Since the onset of the Ukrainian crisis, these two countries have added nearly 20 GW of solar and wind capacity, which now represents about 15% of their total installed electricity capacity. This massive build-out of renewables has played a crucial role in reducing reliance on fossil fuels and lowering electricity prices. As a result, Spain has seen a dramatic increase in the share of #electricity generated from #renewables, rising from 51% in 2021 to 65% in 2024. This shift has significantly contributed to reducing wholesale power prices by half compared to 2021 levels. 2. Diversification Away from Russian Gas: The European Union, along with individual countries, has made concerted efforts to reduce dependence on #Russian #naturalgas, which was a major factor driving high energy prices during the 2022/2023 period. These efforts included securing alternative gas supplies, increasing LNG imports, and enhancing gas storage capacities. The shift away from Russian gas, coupled with a mild winter and lower overall demand for gas, has eased pressure on gas prices, which in turn has lowered electricity prices across much of Europe. 3. Energy Efficiency Measures: Governments across Europe have implemented #energyefficiency programs aimed at reducing overall energy consumption. These measures, along with public campaigns promoting energy savings, have contributed to reducing electricity demand, helping to stabilize or lower prices. 4. Government and Industry Cooperation: There has been close cooperation between governments and energy companies to stabilize the energy market.

NEW RESEARCH - WHY THE ENERGY TRANSITION IS DISRUPTIVE & COULD BE MUCH FASTER THAN WE THINK: The clean energy transition isn’t just about swapping out old tech for new—it’s a complex, non-linear process full of feedback loops, tipping points, and unexpected consequences. Our new “Systems Archetypes of the Energy Transition” brief is a must-read for anyone shaping policy, investing, or innovating in this space. Key takeaways: 1) Feedback loops drive change: Reinforcing loops (like learning-by-doing and economies of scale) have made solar, wind, and batteries cheaper and more widespread, often outpacing even the boldest forecasts. 2) Path dependence is real: Early advantages for a technology (think BEVs vs. hydrogen cars) can snowball into market dominance, making policy choices and timing critical. 3) Limits and synergies: As renewables grow, market dynamics like “cannibalisation” can dampen investment—unless we design markets and storage solutions to keep the momentum going. 4) Policy design is everything: Well-intentioned fixes (like price caps or broad subsidies) can backfire, while smart, targeted interventions can unlock positive feedbacks across sectors. 5) Tipping points and decline: The decline of fossil fuels isn’t just a mirror image of clean tech growth—it comes with its own feedbacks, risks, and opportunities for a just transition. The brief also offers practical guidance on using causal loop diagrams and participatory systems mapping—powerful tools for understanding and managing the complexity of the transition. If you’re working on energy, climate, or innovation policy, I highly recommend giving this a read. Let’s move beyond linear thinking and embrace the systems view—because the future will be shaped by those who understand the dynamics beneath the surface. This briefing was led by Simon Sharpe at S-Curve Economics CIC, Max Collett 柯墨, Pete Barbrook-Johnson, me at Environmental Change Institute (ECI), University of Oxford & Oriel College, Oxford & the Regulatory Assistance Project (RAP) and Michael Grubb at UCL Institute for Sustainable Resources.

This has been a difficult winter for European electricity. The rise in wholesale prices has been sharp and widespread—it is not restricted to a few hours, or to one corner of the Continent, or to days when something unusual happens. The weighted average price across the EU exceeded 100 €/MWh in both November and December, returning to levels not seen since early 2023. January 2025 does not look much better so far. The primary driver of European electricity prices on a day-to-day basis is the volatility of wind. But wind exerts this influence because of broader shifts in the system. Nuclear remains far below its peak, and coal has declined sharply. Output from hydro is low, in some places acutely so. Solar delivers very little during the winter, and even less on cloudy and rainy days. In other words, the European system is short. It is very short when the wind does not blow, it is mostly short in the evening no matter what, and it is mildly short during other times (it is rare to see negative or zero prices outside a few key countries). We then use gas to close the gap, triggering a vicious cycle between tight gas markets and tight electricity markets. The result is high electricity prices during most hours and extreme prices during some hours. This is hardly a stable equilibrium. We talk a lot about flexibility—and rightly so. But flexibility is often defined in short intervals—a few hours or maybe a few days, leading us to emphasize solutions like storage or demand response. We rarely test scenarios based on the data in this chart, and we rarely model the interactions among systems that are making decisions quite independently from one another. Extreme prices are distress signals. They are telling us capacity is missing. And they are telling us that whatever governance system we are using to oversee this complex, EU-wide system is not enough. The path to lower prices lies not just with deploying more renewables and more storage, but also in solving this complex governance puzzle. It is the only way to guarantee resource adequacy without resorting to a steady stream of exorbitant prices.

Would you invest in energy storage if your annual profits from trading in wholesale power markets vary by a factor of 10x? 🔋 This graph shows the variation of profits for storage systems from power price trading in day-ahead markets (for Europe and the US) and spot markets (for Australia and Japan). It models 12 key global markets across the years 2019-2023, using prefect foresight and a round-trip efficiency of 85% (typical for lithium-ion batteries). There is a similar pattern across European markets with very high profits in 2022 due to extreme power price volatility following the gas price crisis. An 8-hour system in the Netherlands could have earned more than 300 USD/kW/year. In 2019, however, the same system would have earned only 10% of that. In contrast, selected Australian and US markets offered consistently high profits above 150 USD/kW/year. This is the result of limited interconnection and relatively high shares of variable renewables. It is also the reason why Great Britain and Ireland will continue to be among the most attractive markets in Europe as they were already in 2019/20. So, while short-term price distortions benefit the profits for energy storage systems trading in wholesale power markets, the key driver is increasing renewables penetration. That’s why you should focus on markets with high renewables targets. In addition, you should make sure that your business case covers additional revenue streams and does not focus on wholesale power markets alone. #batteries #energystorage #alternativeenergy #sustainability #energy #energytransition #data #trading

Energy policy today is security policy.  In a phase of growing geopolitical fragmentation, hybrid threats and targeted attacks on critical infrastructure, the power grid has long become part of the security domain. Cross-border grids are the backbone of the energy transition – and at the same time potential targets. The exchange with security policymakers and experts at the Munich Security Conference once again made clear: security of supply is now inseparable from strategic capacity to act. The stronger the European grid, the more resilient Europe becomes. At the same time, resilient and trustworthy supply chains are moving to the center of the security debate. Supply chains are the Achilles’ heel of the energy transition. Trade conflicts, wars, sanctions, export controls and tariffs are fundamentally reshaping global value chains. Security of supply is no longer just a question of energy flows, but of industrial availability. Dependencies on individual regions, technologies or manufacturers pose a strategic risk – particularly in the geopolitical context of the US, China and Europe. What follows from this? First: Supply chains must be treated as part of our security architecture. Critical grid components are security-relevant – not merely an industrial policy issue. Second: Resilience does not come from isolation, but from smart diversification and risk management. International sourcing remains economically and systemically sensible for many hardware components. However, the more security-critical a component, the higher the requirements for control, transparency and trust must be. Openness where it strengthens resilience. Strategic caution where security is at stake. Third: Technical harmonization is Europe’s underestimated superpower. Standardized technologies, scalable system solutions and long-term framework agreements create scale, speed, cost efficiency and industrial planning certainty. Europe does not win through size, but through system competence. In a nutshell: Grid expansion is security architecture and decisive for sovereignty, resilience and economic strength. Without resilient grids, no security of supply.  Without security of supply, no strategic capacity to act for Europe. #LightingTheWayAheadTogether #MSC  

🌍 The 2025 World Energy Outlook from the International Energy Agency (IEA) is out! This is always one of my favorite big reports of the year as it really shows the status of the energy sector, key trends and developments, and the implications for the transition and net zero as well as security and investment. Here are my five takeaways from this year’s edition: 1. The transition continues even amid policy divergence Despite the U.S. quitting the Paris Agreement, clean energy momentum remains strong. Renewables set deployment records for the 23rd consecutive year, with solar and wind now meeting most new global demand growth. China, India, and emerging economies continue to drive expansion, while investment in renewables and electrification now accounts for half of global energy investment. 2. The future is electric and bigger than data centers Electricity demand is rising 40–50% by 2035 in all IEA scenarios. Electrification of transport, heating, and industry dwarfs the growth from AI and data centers, which account for less than 10% of new demand. The real challenge is grids: generation investment has surged 70% since 2015, but grid spending lags far behind, creating congestion and slowing connections. 3. Critical minerals are the new oil- to China’s benefit China now refines 19 of 20 strategic energy minerals, averaging 70% global market share, and over half face export controls. The IEA warns that supply concentration, not just fuel dependency, is the next major energy security risk. Diversification and resilience are imperatives for clean energy supply chains. 4. The fossil fuel peak is near, but not near enough Coal and oil demand likely peak before 2030, yet gas continues to rise into the 2030s. Without a rapid and sustained fall in fossil fuel use, global emissions stay far above Paris goals. The IEA projects around 2.5°C of warming under current policies, and overshoot of 1.5°C is now inevitable, even in the Net Zero scenario. 5. If policies stay strong, we will see rapid decarbonization Achieving climate goals depends not just on scaling renewables but on phasing out fossil fuels. Efficiency improvements, faster permitting, stronger grid investment, and transition finance for emerging markets remain essential. The IEA underscores that the tools are known, we just need the market certainty that good policy provides. More to come on the financial and investor implications of the report’s trends for Newsletter subscribers next week! ➡️ Full report here: https://lnkd.in/eRgf45-P #energy #transition #climate #iea #netzero #renewables #electricity #fossilfuels #criticalminerals #electrification #batteries #policy

Texas is building 6.5 GW of data center capacity right now. ERCOT is tracking 233 GW of interconnection requests — a 300% jump from last year. The demand is real. The delivery timeline is not. Gas turbine lead times have stretched to 5–7 years. GE Vernova's backlog hit 80 GW — slots sold out through 2029. Siemens Energy doubled turbine sales from 100 to 194 units last year. Still not enough. In September, Engie pulled its 930 MW Perseus gas project from the Texas Energy Fund. $5 billion in state-backed loans on the table — and they couldn't secure the equipment. Modo Energy estimates ~6 GW of annual turbine capacity available for Texas data centers. ERCOT's own forecast calls for 35 GW of data center peak demand by 2035. At current delivery rates, that math doesn't close until the mid-2030s. So hyperscalers are going behind the meter — building their own gas plants on site. But SB 6, signed last June, requires data centers above 75 MW to accept curtailment during grid emergencies. ERCOT wants access to that same behind-the-meter capacity during system stress. Same megawatts can't guarantee 99.999% uptime for the data center AND serve as grid reliability reserves. That tension is unresolved. Texas will become the largest data center market. The land is there. The capital is there. The turbines aren't. And the regulatory framework for who controls the power that does exist is still being written. At current delivery rates — when does Texas actually hit critical mass? #ERCOT #EnergyInfrastructure #AIinfrastructure #Texas