Carbon prices and power markets: understanding the coupling mechanism
The price of energy, whatever the source, is intrinsically linked to carbon prices - if carbon pricing rises, so do operational costs, making one source less economical than alternative sources. This is particularly relevant for fossil fuels, which can make them less competitive than renewable options. Carbon pricing is transmitted directly into wholesale electricity prices, but it can be difficult to work out how carbon costs affect the wider generation stack. Regional differences across Europe can also affect different sources - generation economics tend to change with EUA movements as regions continuously adjust to accommodate localised legislation, policies, and energy generation types.
