Price cannibalization: When everyone produces at the same time
When solar and wind output is high simultaneously, wholesale electricity prices fall. As a result, renewable energy producers frequently sell their electricity below the average market price due to the concentrated supply in these periods. This is reflected in low 'capture rates', where a project 'captures' a price below the market average. The more capacity is added to the system, the more pronounced this effect becomes. We are also observing an increasing number of periods with very low or even negative prices.
This challenge is particularly acute for solar energy, as sunlight falls across Europe at the same time. Markets become saturated quickly during peak solar hours, driving prices down accordingly. Solar capture rates have declined from 98% in 2019 to 68% in 2025, calculated as an average across the five markets in the analysis.
The picture is somewhat more favorable for wind energy. Wind is a more local and regional phenomenon, and periods of abundant wind generation in one area can often be offset through exports to neighboring regions, helping to cushion price impacts. Wind production is also not confined to daytime hours, which gives electricity markets greater capacity to absorb larger volumes of wind power. Wind capture rates have declined from 94% in 2019 to 82% in 2025 - a smaller drop than for solar, but the direction is the same.
Russia's war has provided renewable energy with a temporary reprieve
The directional trend in capture rates is not surprising. It largely mirrors the conclusions we reached three years ago when we first conducted this price analysis. What has been unexpected, however, is the duration of elevated energy prices across Europe. Although capture rates have declined as anticipated, high energy prices have meant that wind and solar projects have generated stronger revenues in absolute terms than projected. In this sense, Russia's war against Ukraine has inadvertently bought renewable energy producers a period of better-than-expected earnings.
Once natural gas prices normalize and general electricity prices retreat, this tailwind will fade and is likely to leave a noticeable mark on the earnings of renewable energy producers.
We are only halfway there
We are in the first half of the energy transition. Today, electrification accounts for approximately 22% of total energy consumption, but reaching the finish line will require an electrification rate of 60-70%, with the remainder to be addressed through power-to-X, biofuels, and carbon capture and storage (CCS).
From a climate perspective, price cannibalization is an unfortunate by-product of how electricity markets are structured, with prices determined by the interplay of supply and demand at quarter-hour intervals. This dynamic is making investors more cautious at precisely the moment when capital deployment into the second half of the energy transition is most needed.
Declining capture rates present an inconvenient, if not unexpected, challenge for investors in renewable energy. The appropriate response is to anticipate this development and incorporate it into project structuring and through well-designed power purchase agreements (PPAs).
Batteries buy time but do not resolve the underlying challenge
Batteries are attracting considerable attention, and deployment is accelerating rapidly. The analysis confirms that the ability to shift electricity from low-price to high-price hours can make a meaningful difference to project revenues. A 2-hour battery system (assuming a generation-to-storage capacity ratio of 2:1) can lift the capture rate for solar from 68% to 105%, and for wind from 82% to 99%. The difference reflects the fact that a wind farm of, say, 1 MW typically generates a higher volume of electricity than a solar installation of equivalent capacity, meaning that battery storage improves per-unit revenue less markedly for wind than for solar.
Batteries buy time and extend the period of attractive returns, but as renewable and battery penetration increases, the value of flexibility is itself likely to be competed down. The underlying trajectory remains one of declining capture rates, and this is the reality that new projects must be designed to accommodate. Other necessary parts of a longer-term solution for the broader power system are grid expansion and demand-side flexibility.
