The Looming Revolution: How Photovoltaics Will Change Electricity Markets in Europe Fundamentally

The increase in PV capacities mainly in Germany had in 2011 on some days significant impacts on spot market prices at the German electricity exchange. The core objective of this paper is to investigate the possible effects of a further uptake of PV on the prices in the EU-4 (German-French-Austrian-Swiss) electricity market. We analyse two major effects: (i) the direct impact of PV at specific times of the year when PV shifts the supply curve of conventional electricity virtually out of the market, leading to temporarily very low market prices close to Zero; (ii) the indirect impact of PV (and wind) on the costs at which fossil capacities are offered. The major effects of these developments on the electricity markets will be: (i) a much higher price volatility from hour-to-hour and day-to-day; (ii) higher costs and prices for fossil capacities mainly based on gas turbines; (iii) increasing importance of flexible balancing power plants.