Moody’s rating agency in New York said this week that wind and solar power are having a “profound negative impact” on Europe‘s gas and coal generators
The agency’s statement is a fresh indicator of the transformative effect green power is having on the energy landscape.
“What were once considered stable companies have seen their business models severely disrupted,” Moody’s said in a report published on Tuesday.
“Given that further increases in renewables are expected, these negative pressures will continue to erode the credit quality of thermal-based utilities in the near to medium term.”
The Financial Times reports that green power now accounts for more than a third of Europe’s total installed capacity base, a proportion set to rise to 50 per cent by 2020.
Because wind and solar plants have very low marginal costs, they can displace traditional gas and coal generators, and push down wholesale power prices.
That means the conventional plants face both lower market prices and fewer running hours. This can make them less profitable even though it is critical for them to stay online to make up for the intermittent nature of renewables.
As a result, several European countries, including Germany, the UK and France, are looking at bringing in so-called capacity payments for conventional generators to encourage them to stay online.
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