Europe

1. woodmac.comTrusted intelligence woodmac.comTrusted intelligence
Meeting the flexibility needs
for a net zero Europe
Outlook for energy storage and system
flexibility

2. woodmac.comTrusted intelligence
Europe is transitioning to a variable renewable
energy (VRE) system
Europe’s big five power markets capacity and flexible resource outlook
87 77 72 59 46
131
136 126 112
91
56
57 57 57
57
139 183 234 268 308
114
182
229 260 28670
83
109 109 109
53
72
96
122 156
0
200
400
600
800
1,000
1,200
2020 2025 2030 2035 2040
CapacityGW
Nuclear Coal Gas
Other Hydro Wind
Solar Interconnectors Flexible plant
70 83
109 109 109
28
28
28 28 28
21
32
41 41 39
3
12
26
53
89
0
50
100
150
200
250
300
2020 2025 2030 2035 2040
CapacityGW
Interconnector Pump storage
Gas peaker Energy storage
Source: Wood Mackenzie

3. woodmac.comTrusted intelligence
-60
-40
-20
0
20
40
60
0% 20% 40% 60% 80% 100%
EUR/MWh(GBP/MWhfor
GB)
Wind and solar as % load
GB
Germany
France
Italy
Spain
2020 has given us a glimpse of increased VRE
Higher penetrations of wind and solar are a substantial influence on power prices in major
markets
Source: Wood Mackenzie, ENTSO-E
Wind and solar supply and hourly average day-ahead wholesale prices, 2020 to-
date
Notes: The chart shows the average of prices for 1% increments in wind and solar % levels (for example, the 40% point is the
average of prices over the hours when wind and solar as a percent of load was greater or equal to 39% and less than or equal
to 40%). Italy and Spain do not yet permit negative pricing in the day-ahead market

4. woodmac.comTrusted intelligence
Spain 2030: 5 days with minimum VRE Spain 2030: 5 days with maximum VRE
Spain 2020: 5 days with minimum VRE Spain 2020: 5 days with maximum VRE
Interconnectors and gas peakers need to be bolstered with new build flexibility
Source: Wood Mackenzie
-10
0
10
20
30
40
50
SystemloadGW
-20
-10
0
10
20
30
40
50
SystemloadGW
Nuclear Coal Gas Hydro Other generation Wind
Energy storage Solar Electric Vehicles Net trade Gross load Net load
Variability, low and negative loads become common

5. woodmac.comTrusted intelligence
Spain 2040: 5 days minimum VRE
System operation and market function requires enormous volumes of energy storage
Source: Wood Mackenzie
Spring 2040: 5 days with maximum VRE
-30
-20
-10
0
10
20
30
40
50
60
SystemloadGW
Nuclear Coal Gas Hydro Other generation Wind
Energy storage Solar Electric Vehicles Net trade Gross load Net load
2040 - system transformation nears completion

6. woodmac.comTrusted intelligence
Storage is now becoming competitive in Europe
As battery and other system costs decrease, storage will be more competitive than gas
peakers in the next decade
*Based on 40 MW of solar, 20 MW of 2- to 5-hour storage; gas peaker plants range from 8% to 21% capacity factor; gas peaker plants range from 8% to 21% utilisation factor
LCOEs quoted in Real 2019
Source: Wood Mackenzie
Germany solar, storage and peaker resource LCOE, 2020 to 2040
0
30
60
90
120
150
180
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
LCOE€/MWh
Solar-plus-storage LCOE Standalone storage LCOE Gas peaker LCOE
Solar PV Gas peaker 13% CF Storage 3 hours

7. woodmac.comTrusted intelligence
Spain gas fleet utilisation and dispatch
This emphasizes the need for capacity markets and other services to replace lost revenue
Source: WoodMackenzie
Gas peaker utilisation and dispatch
0%
5%
10%
15%
20%
25%
30%
35%
0
20
40
60
80
100
2020 2025 2030 2035 2040
Utilisationfactor%
EnergydispatchTWh
50% < UFs <= 100% 40% < UF <= 50% 30% < UF <= 40%
21% < UF <= 30% 13% < UF <= 21% 0% < UF <= 13%
Fleet average UF (%)
0%
2%
4%
6%
8%
10%
0
2
4
6
8
2020 2025 2030 2035 2040
utilisationfactor%
EnergydispatchTWh
0% < UF <= 8% 8% < UF <= 13% 13% < UF <= 17%
17% < UF <= 21% Fleet average UF (%)
VRE and energy storage push gas out of the market

8. woodmac.comTrusted intelligence
Thank You!
Name: Rory McCarthy
Title: Principal Analyst, Energy Storage
Email: Rory.McCarthy@woodmac.com