Solar capture rates in 2024

Looking back at the 2024 solar season and comparing it with the German forecasts from previous years

As we transition into the winter months, the solar season in Europe has ended. The year 2024 witnessed an impressive surge in solar capacity and an increasing prevalence of Duck Curves¹. In this post, I will share some insights regarding the solar capture rate, which measures the market value of solar energy.

The solar capture rates

The solar capture rate is the percentage of the solar capture price relative to the average price of the day-ahead market. The solar capture price is the weighted average price, with weights based on solar production. Essentially, this rate indicates the market value of solar energy if sold directly on the day-ahead market.

This year, it has become evident that the 2024 capture rate for solar has declined across nearly all European countries. Below are the graphs illustrating the monthly capture rates for four countries: Germany, France, Spain, and Greece.

Hereunder is the same information but in a heatmap.

• In 2021 and 2022, all solar monthly capture rates in these four countries were above 80% (except in May 2021 in Germany with 79%).

• In 2023, we started to observe some months with lower capture rates: 66% and 68% in Germany respectively for May and July. Furthermore, it was 65% in April in Spain. Besides that, all months above 70%.

• In 2024, these capture rates were much lower. Virtually, the whole solar season in Germany was under 60% (May to September), with the lowest month under 50% in May. France is following closely (April to September below 65%). Spain experienced the lowest point with 41% in April.

• Greece has also experienced an impressive drop. In 2023, the lowest month was 76%. This year, 8 months have been lower than 76%, with the lowest point in April at 55%.

On an annual basis (January to October), we have had the following data:

• Germany: 73% in 2023 (76% for the full year) and 60% in 2024.

• France: 83% in 2023 (86% for the full year) and 67% in 2024.

• Spain: 82% (84% for the full year) and 68% in 2024.

• Greece: 78% (79% for the full year) and 71% in 2024.

Capture rate is a key factor for evaluating the needed financial support

Recently, news coverage has focused on the EEG², Germany's support mechanism for renewable energy. Amid the energy crisis, the German federal government decided to remove the so-called "EEG surcharge" from electricity bills and finance it directly through the federal budget.

The 2025 budget needs for EEG has recently be estimated to be 17 B€. If we assume the same consumption as in 2023 (525.5 TWh, see graph below on the consumption and production per year), we arrive at a cost of 32 € per MWh consumed.

Source

In the presentation concerning the calculation of the budget needs³, we have the following information

• The solar capacity was 73.4 GW at the end of 2023. It will be 93.2 GW at the end of 2024 and 110.8 GW at the end of 2025. In comparison, the load in the afternoon in Germany is around 60 GW.

• It is expected that 95 TWh will be produced by solar in 2025 (corresponding to a capacity factor of 9.8%).

• The solar capture rate is estimated at 66% for 2025 (see orange rectangle), much lower than the ones for wind (onshore at 90% and offshore at 92%).

• The considered baseload price is 92.73 €/MWh for 2025.

Let’s assume the capture rate drops to 56% instead of 66%. Practically, this would mean that instead of collecting 66% of €92.73/MWh (€61.20/MWh), solar would collect only €51.93/MWh. This difference, when multiplied by 95 TWh, results in a shortfall of €881 million⁴.

Currently, in 2024, the capture rate stands at 60% (until November 7, 2024) and is expected to improve slightly by the end of the year. However, with the increased solar capacity in Germany and Europe, I suspect that the capture rate in 2025 will be lower than that of 2024.

It should also be noted that the main risk for the financing needs is the baseload price. If the baseload price falls below €92.73/MWh, all supported technologies will require increased payments, as described in a previous post.

Forecast errors

In October 2024, a study on the financing needs for the coming years was published, which includes the evolution of the market capture rate for solar. The black line represents the most-likely scenario, while the dashed lines indicate the upper and lower trend scenarios. As shown, the solar capture rate is expected to decline continuously.

Interestingly, a similar study was done in 2023. In this one, the solar market rates were expected to remain much higher. In this one, the trend scenario remains above 60% in 2028, while in the updated one, it si below 40%.

Finally, if we look at the study made in 2022, we can observe that the solar market rate was even higher. In 2027, it was expected to be above 70%, while the study of 2023 presents it below 70%, and the updated one presents it at below 60%. More interestingly, the 2022 study presents a capture rate of close to 90% in 2023 and around 85% in 2024, while the reality is 76% in 2023 and slightly more than 60% in 2024.

The fact that all three studies, conducted by different organizations, underestimated the impact of solar on market prices underscores the difficulty of forecasting this factor and highlights how the impact on market prices by the rapid growth of solar energy has been significantly underestimated.

Other reasons for the declining solar market rate

Hereunder is the monthly capture rate in function of the average generation. It is striking to see that 2024 was much lower, even though the solar generation was not so high compared to the previous years.

Here are other explanations for why the red bullets are lower, even though the production was not so different:

• While Germany was a leader in solar, solar capacity has grown everywhere in Europe making it more difficult for Germany to export solar power at a decent price. Neighboring countries such as Poland have experienced a massive rise in solar capacity.

• French generation, both nuclear and hydro, was very low in 2022, recovered in 2023, and has been a major exporter in 2024. This reversal lowered the value of German solar production (the impossibility of exporting solar production at a reasonable price).

• Compared to 2021 and 2022, the load has been reduced due to the energy crisis, increasing the impact of solar for a given generation.

It is also interesting to note that, even with an important capacity increase (around +20%), the month with the most solar production in 2024 was only slightly better than in 2023. The best performing month was July 2024 with an average load of 12.5 GW.

What to expect in 2025?

Predicting prices and market developments is always challenging. However, given the significant increase in solar installations across Europe this year, it is apparent (to me at least) that we are heading towards an even lower capture rate. SolarPower Europe⁵ estimates that 62 GW will be installed in 2024, an increase of 11% compared to 2023. The total solar capacity was estimated at 263 GW at the end of 2023, the additional 62 GW represents a 23.5% increase of total capacity. The trend is set to continue further into 2025.

Similarly, European electricity consumption is unlikely to see significant increases; if there is any growth, it will likely be minimal. Additionally, the weather remains a critical variable that could impact future outcomes.

In any case, it will be interesting to observe developments in the coming season. The key risk is that solar capture rates could drop too low, potentially jeopardizing the financing of new capacity, whether through private investment or government subsidies, as discussed in my earlier post (Limit to Growth - Solar Edition). This situation might lead to an increasing number of perspectives similar to that of the Acciona CEO (Iberian solar power “a useless product”).

Of course, there are potential solutions to mitigate these challenges, such as increasing storage capacity and enhancing demand flexibility. However, it's not sufficient to simply have demand; solar power will also need consumers who are willing to pay.

1. See my previous post on duck curves. .

2. You can google “EEG Deutschland”.

3. Available here.

4. This is an approximate calculation. Some solar installations will react to negative market prices and therefore, not be impacted the same way. Nevertheless, the majority of solar installations in Germany are not responding to market signals, so this calculation is relatively accurate.

5. See this link. An updated report should be published in December 2024.