Better together: Europe needs coordination to resolve power paradoxes

Wherever you travel these days, it’s the same story: the climate is changing. I saw it myself this summer in Borneo, where locals said the season felt drier and warmer than before. The Malaysian island is often called the “lungs of the world” for its rainforests and peat swamp forests. Borneo is also playing its part in the energy transition, with significant hydropower capacity and Malaysia’s largest floating solar plant. Coming face to face with wildlife such as the orangutan – and sharing the moment with my two sons (see photo below) – really drove home the urgency of the shift to renewables. 

The lesson is obvious – meeting our climate goals is not optional.  

The energy transition is real, measurable and accelerating. Although Europe has made advances in renewables buildout and cutting gas and coal consumption, progress is still too slow for what the climate demands.  

We know the direction we want to go – electrify demand and phase out fossil fuels – but saying it is far easier than doing it. The energy market today feels caught between extremes, and without a clear pan-European plan, I fear we may drift into a patchwork of suboptimal solutions. 

Failing economics 

Take solar. When the sun shines, production floods the grid and prices collapse to zero or below. Developers see the irony – the more they produce, the less their power is worth. 

Curtailment has become routine not because the technology fails but because the economics do. Protecting subsidies often means switching off wind turbines and solar panels. Unsurprisingly, pipelines of new projects slow down as merchant risk rises. 

Gas-fired power shows the other side of the paradox. Margins are weak and running hours fall but the sector remains indispensable.  

In periods of either dunkelflaute, when solar and wind power generation sink at the same time, or hitzeflaute, a heatwave with low wind output, gas keeps the lights on. With older plants retiring, new ones will be needed but they won’t be built without support. Capacity markets provide the bridge. 

Flexibility is the recurring theme. Batteries lead the conversation – charge cheaply during the day, discharge profitably in the evening. Incentives are clear and pipelines are large. Demand, by contrast, looks fragile.  

Electrification is the official path to decarbonisation and the EU’s clean industrial deal released in February promises lower power prices for households and industry. Yet, electricity remains far more expensive than gas for many industries and alternatives such as hydrogen and carbon capture and storage need huge infrastructure investment that is not flowing quickly.  

Demand has been flat for 15 years, with only a small uptick recently as seen in the following chart. 

Put these observations together and the paradoxes sharpen. More renewables will push fossil fuels down the merit order. Capture prices for renewables will fall, curtailment will rise and negative prices will become more common, as shown in the chart below.

Wind pushes up the whole fuel mix and lowers average prices, while solar pushes prices down during daylight and shoulder hours. As curtailment grows, negative price hours increase.

System overload

On windy or stormy days, the system can be overloaded with renewables, driving prices down across the day – even in peak hours.

For gas, fewer running hours mean value concentrates in morning and evening spikes, as seen in the next chart. Start‑up costs must be recovered in fewer hours, increasing volatility.

This creates opportunity for batteries – long periods of very low prices balanced by sharp evening peaks. Yet batteries face limits – when wind overwhelms the system for a whole day, prices flatten and batteries cannot profitably arbitrage everything.  

That is the point: renewables still need fossil fuels in the mix to remain profitable – ideally with high gas and carbon prices. Demand growth is necessary to absorb surpluses. A forecast by the European Resource Adequacy Assessment (ERAA) envisaged around 3% annual growth in European electricity demand last year, dropping to only about 1.2% in 2025. If the higher growth arrives, it would support prices and help rebalance the system. 

Daily paradoxes 

In my work, I see these paradoxes daily. Supporting battery developers with due diligence is one way to advance the transition. Yet the bigger challenge remains – investment in renewables and flexibility still depends on gas prices, while high gas prices undermine the case for electrification. Markets alone cannot square that circle. 

That leaves politics. Europe needs a clear plan – coherent rules, coordinated infrastructure investment and incentives that favour flexibility as well as capacity. Without it, we risk a losing game for producers, consumers and the climate. Let’s hope that energy becomes a top political priority across the continent in the years ahead. My Borneo visit reminded me of what’s at stake – markets and technology alone won’t save distant forests or secure a low‑carbon future for the next generation. We will keep watching, analysing and reporting as this unfolds. 

This article originally appeared as a column on montelnews.com