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Decarbonization poses risks to Europe’s grid operators says Moody’s

June 20, 2017

By Paul Homewood

I do like contrasting headlines!





Bloomberg would of course like you to believe that “investment” is good. In fact much of it will be money wasted, as replacement for perfectly good existing power capacity.

Meanwhile, it takes the credit risk company, Moody’s, to inject a bit of realism:


Europe’s drive to decarbonize its energy “poses long-term risks to the region’s regulated electricity and gas network operators” according to a new report from credit and risk company Moody’s Investors Service.


And the study states that Europe’s continued transition to renewables, particularly wind and solar, is prompting new business models, developing technology and evolving regulation that could all “potentially undermine the credit quality over time” of those network operators.

"The shift to renewables in Europe has thrown up different challenges for the region’s energy network operators, with the huge uptick in renewables-related investment into electricity networks posing execution risks, while the move to decarbonization casts doubt over the long-term use of natural gas and the networks that distribute it," said Stefanie Voelz, vice-president Senior Credit Officer at Moody’s.

Moody’s report also states that large scale energy network operators “may also be slow to adapt to the changing generation and consumption landscape, with electricity users becoming partially independent from the grid as they increasingly operate their own renewable generation and/or storage units. Furthermore, the growing electrification of transport or heating could significantly change network requirements.”

The report warns that these ongoing developments could lead to sector fragmentation, potentially threatening existing network operators. However, it adds that their role as system operators – whereby they coordinate the efficient use of power generated by widely-distributed, independent sources and ensure supply security on a wider level – may become more important.

Voelz said that the regulatory response to the renewables shift “will be key to the future evolution of the energy network sector, as the change in scope of activities in an environment of significant technological shift, may necessitate changes in the way European networks are remunerated and customers’ tariffs are set, if credit quality is to be maintained.”

Moody’s says that affordability will remain a key focus for network operators, as cost pressures increase on consumers. It also finds that with investment requirements remaining high, leading to growth in companies’ asset base beyond 2020, pressure on customer bills will rise. “As renewable subsidies continue to weigh on bills, affordability concerns could lead to deferral of cost and investment recovery for networks, a credit negative,” said Voelz.


Modern society has been built upon a reliable, secure and affordable energy system.

Obsession with decarbonisation is now putting all of this at risk.

  1. June 20, 2017 11:23 am

    Europe is going to price itself out of many areas of energy-intensive industrial business and it’s already happening.

    • TinyCO2 permalink
      June 20, 2017 11:42 am

      It runs the risk of throwing itself out of any business since ther aren’t many businesses that don’t need copious amounts of stable supply 24/7. As BA found to its cost.

    • Joe Public permalink
      June 20, 2017 12:18 pm

      And that’s the objective. Let other countries increase their emissions, whilst simultaneously we can claim to have reduced ours.

      Double-plus good.

      • Gerry, England permalink
        June 20, 2017 1:02 pm

        Other than the growing balance of payments problem of not exporting much in the way of home produced goods but importing everything else.

  2. AlecM permalink
    June 20, 2017 12:41 pm

    I warned FoE in late 2001 that this would be the consequence of wind investment. A couple of weeks ago the renewables paper proudly claimed that when we had high, consistent wind speed, wind + nuclear energy was >50% demand.

    This was a con. trick because nuclear power, being phased out, is not renewable.

  3. HotScot permalink
    June 20, 2017 1:05 pm

    Is it just me or are there more articles about the renewables disaster gradually sneaking into the media than over the last two or three years? I wonder if there’s a way of tracking that.

    If it is the case, it’ll conform to almost every other reaction to government knee jerk reactions, exposure of the fraud.

    Which will elicit the usual government reaction to that exposure; finger pointing, denials and some very low profiles being kept until the storm blows over.

    • A C Osborn permalink
      June 20, 2017 1:13 pm

      Yes they have some ready made culprits to blame in Bryony Worthington and Ed Milliband.

  4. A C Osborn permalink
    June 20, 2017 1:09 pm

    When the Government either has to pay to keep FF plants open, or legislate to prevent them closing as they have Germany, you just know that the industry is in trouble.

  5. markl permalink
    June 20, 2017 3:38 pm

    Do they/MSM really believe that repeating and overblown future of renewables ad nauseum will make it happen? Kind of like the climate “models”? EVs make up about 1% of new car sales where the claim was 20% by now. Wind and solar also were going to provide 20% of usable electricity by now and it’s not even 5%. And doubters are called skeptics and conspiracy theorists? The reality check isn’t working.

  6. Anciet Scouse permalink
    June 20, 2017 3:52 pm

    It seems to me that while you can’t fool all the people all the time you can fool most of the people most of the time and the net result is AGW. This translates into “cash cow” in climate change speak and the losers are……………..well look in the mirror. We all contribute in coin to this propaganda and its not as if we can ask, ” if you are going to fuck us….will you give us a kiss first?”.

  7. nzrobin permalink
    June 21, 2017 7:05 pm

    Hi Paul and friends, as most of you know power system stability is based on grid energy balance. I have been concerned for some time that not enough people understand how the grid achieves that. In a few words it is about managing energy balance. We know renewables don’t do that, being at the whim of clouds and breezes. They instead create energy imbalance for others to fix up. Grid stability is managed through the synchronised inertia of governor controlled generators. I’ve had a go at writing this up in a series of articles at which some of you might find interesting. I’ve tried to keep it descriptive and not too mathematical, however, some concepts are best described by maths, but nothing more complex than a simple differential equation. Cheers from NZ.

    • Jack Broughton permalink
      June 22, 2017 3:19 pm

      Like the articles.
      You mention frequency dips, which in a large grid do allow some control by slowing motors thus reducing their power usage. The other main “storage” in large grids is voltage range: you don’t seem to mention that, but it is the only real storage in the grid. I’m not sure how much storage effect it gives, but a dip can reduce demand by over 10%, and demand reduction links nicely with storage in overcoming peaks.

      Another good reason for using asynchronous generators is cost, especially at small sizes.

  8. davidrussell22 permalink
    June 22, 2017 1:37 pm

    This article missing the point, namely that renewables are parasitic on base-load providers (those responsible from 24/7 electricity — the electric utility industry). As wind doesn’t blow all the time nor the sun shine all the time, back-up or stand-by power must be maintained. But the ugly truth is that it’s not just the capacity utilization factor that determines back up needs, which is say 25% for wind. But rather the critical factor is “peak power capacity” which is more like 8%.

    While renewables are a tiny fraction of the total power production this is not a big deal, but as renewables reach a critical percentage of the mix, then for every KW of additional capacity in renewable generation, 92% of a KW of back-up capacity is needed, but of course this back-up capacity can’t generate revenues except for 92% of that small percentage of total power consumption at peak demand. This is not economically stable.

    The consequence is that almost 2X the power generation will need to be created to “go renewables” with the base-power providers investing dollars they will never get back much less get a return on. It will all collapse.

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