LVEA Executive Director U. Daškevičiūtė: wind energy is the only way to secure lower electricity prices in the future
As the energy crisis hits the Old Continent, solutions are being sought to stop the price rises, but at the same time experts and commentators are concerned that similar energy crises are likely to happen again in the future. According to Urtė Daškevičiūtė, Executive Director of the Lithuanian Wind Power Association (LVEA), perhaps the only way to secure lower electricity prices and stability in the future is to accelerate the development of wind energy, thereby increasing the production of electricity from renewable sources and creating a legislative framework that would provide end-users with a more favourable environment for the consumption of clean electricity.
“With energy consumption set to increase by 60% by 2050, according to BloombergNEF, we must first reduce our dependence on imported fossil fuels and their volatile prices in order to avoid similar crises in the future. The European Union’s Green Deal already shows that we are moving in the right direction. However, the development of renewable energy sources must be accelerated. New wind farms are much cheaper than existing coal and gas. The more we have, the lower our electricity bills will be. We also need to create a legislative framework to facilitate the consumption of clean electricity by end-users,” says LVEA Executive Director U. Daškevičiūtė.
Energy resources in many European countries have risen in price, sometimes to unprecedented heights. In Europe, natural gas has recently become around 130% more expensive than at the beginning of September and 8 times more expensive than at the same time last year, according to data from Independent Commodity Intelligence Services. The price of natural gas in Lithuania in mid-October was around €66/MWh, a threefold increase since May.
Wind energy has already saved millions
Wind energy is distinguished by the fact that the essential cost of a wind power plant is in the construction phase, while the cost of running it is relatively low. Such plants can last reliably for at least several decades without significant additional investment, offering the market environmentally friendly and relatively cheap electricity. For example, it costs up to €45 to produce 1 MWh of electricity in an onshore wind farm, up to €80 in an offshore wind farm, €50-70 in a solar farm and up to €100 in a fossil fuel power plant, at current gas and emission allowance prices.
According to the wind energy expert, because wind power is the cheapest electricity, it is probably the only way to keep electricity prices down in the future.
“The almost zero extra cost of generating electricity from wind farms makes it very cheap to buy on the power exchange. The price of electricity offered by renewable energy producers undercuts the price of wholesale electricity sold on the market, including electricity produced from fossil fuels and gas. The lower price on the power exchange also lowers the price for end users – businesses and households”, points out U. Daškevičiūtė.
According to LVEA’s calculations, the average daily hourly price of electricity in Lithuania has decreased to EUR 11.45 per MWh in 2018, to EUR 11 per MWh in 2019 and to EUR 16.39 per MWh in 2020 due to the production of electricity from wind power plants. In 2018, the electricity produced by wind power saved over EUR 38 million for consumers, in 2019 – over EUR 49 million, and in 2020 – even more than EUR 74 million.
In 2020, Lithuania’s wind farms generated 1.54 TWh of electricity, an increase of 6.2% compared to 2019, representing 14% of Lithuania’s final electricity consumption.
“As we can see, wind power generation is growing, but so far too slowly. Lithuania has a real chance to reach its ambitious renewable energy targets – 100% of the country’s electricity needs from renewable sources by 2050 – ahead of schedule. Therefore, it is crucial to create the conditions for the rapid development of wind energy, while at the same time creating the most favourable conditions for the public to consume this electricity,” said U. Daškevičiūtė.
In addition, cost and energy independence aside, renewable energy is also a way to slow down climate change, which is being driven by fossil fuel (oil, gas, coal) electricity production.
“I understand that the main driver for turning to renewable energy is the attractive price of electricity and its impact on the overall market. But let’s not forget that by switching to green electricity we are ensuring that tomorrow’s generation does not have to live in an apocalyptic world. Moreover, the development of renewable energy projects ensures our independence from unfriendly countries,” the expert says.
Renewable energy purchase and sale agreements are required
U. Daškevičiūtė points out that Renewable Energy Power Purchase Agreements (PPAs) play a key role in stabilising the market, and have recently received a lot of attention from the European Commission, which adopted a set of measures to help EU Member States decide how to cope with high gas and electricity prices.
The European Commission’s toolkit identifies the PPAs as an important tool to protect European businesses from market developments. Such contracts are usually signed for a long period of time and guarantee businesses a fixed electricity price, thus protecting them from unwanted risks.
“It is clear that the current price spike will only increase the demand for PPAs as businesses will want to protect themselves against unwanted fluctuations. With just a few months to go before the end of the year, the volume of contracts signed in Europe this year has already surpassed 3.5GW for 2020, the eighth consecutive record year. We need to be ready for the increased demand for PPAs and to create a clear regulatory environment for this. The Commission also encourages Member States to facilitate and widen access to the PPAs, not only to the largest companies, but also to medium and small businesses and the public sector,” the LVEA Executive Director points out.
Wind Europe, an organisation of wind energy players in Europe, proposes, as additional measures to tackle rising electricity prices, a reduction in the taxation of electricity, which is higher than other forms of energy in many EU countries, as well as the implementation of the provisions of the Clean Energy Package (CEP) in order to ensure more flexible energy consumption. This is a package that encourages consumers to become part of the production and supply of electricity.
