Platts: European gas-fired generation in crisis
Gas-fired generation in Europe is in crisis. With the energy-only market undercut by renewables, European utilities are mothballing thermal generation capacity. An essential element of system flexibility is being lost.
Renewable Energy Sources have introduced an entirely new type of generation source into the European energy mix -- must-run variable power. Since the fuel cost is zero, once built, RES need to generate whenever they can in order to repay their capital cost. RES are highly price insensitive.
As the long-run marginal price in energy-only markets reflects average variable costs, the introduction of zero fuel cost RES lowers that price, reducing the amount of time that it is profitable to run gas plant.