AleaSoft Energy Forecasting, April 30, 2025. Plummeting prices during solar hours have put the financial viability of many photovoltaic energy projects at risk. Price cannibalisation, falling captured prices, difficulties in closing PPA on favourable terms and the need for structural solutions such as energy storage create a new paradigm for renewable development. Adapting to the new context is no longer an option, but a condition for further progress.
Over the past few years, the growth of photovoltaic energy in Europe has been dizzying. Driven by lower solar module costs, ambitious climate targets and a favourable regulatory framework, the sector has achieved record levels of new installed capacity. However, this success has brought with it a new challenge: the collapse of prices in solar hours and its consequences for the financial viability of new projects.
Low prices and the risk of cannibalisation
In markets such as Spain, the phenomenon known as “price cannibalisation” has become evident. As photovoltaic energy generation is concentrated in the same hours of the day, between 09:00 and 17:00, supply often exceeds demand, which drastically reduces the hourly price in these periods. On extreme occasions, such as last Easter, this situation has led to zero or even negative prices for several consecutive hours.
Source: Prepared by AleaSoft Energy Forecasting using data from OMIE.
Direct impact on captured price and profitability
For developers, the problem is not the average price of the day‑ahead market (pool), but the price captured by the solar technology. In 2024 and so far in 2025, this captured price has been 25‑40% below the average price in some markets. This implies that the actual revenues of a solar farm are significantly lower than predicted by some overly optimistic financial models.
Source: Prepared by AleaSoft Energy Forecasting using data from OMIE and Red Eléctrica.
The role (and limits) of PPA
PPA (Power Purchase Agreements) have been the most common solution to mitigate price risk and facilitate bank financing. However, in the current environment they are also being affected: buyers are more cautious, “pay‑as‑produced” contracts are harder to find, and more technical conditions and guarantees are imposed. Prices, if found, are often too low for developers’ expectations.
The structural solution: storage and hybridisation
In this context, hybridisation with batteries is emerging as one of the most promising alternatives. Incorporating storage allows energy to be shifted from lower‑priced solar hours to higher‑value segments and improves the delivery profile of the project, which makes the project more attractive to offtakers in a PPA and reduces dependence on spot market prices. All this contributes to increasing the bankability of the project.
Other monetisation mechanisms for batteries
In addition to price arbitrage, batteries offer new revenue streams: adjustment and balancing services, participation in capacity markets, reduction of deviation penalties and future participation in local flexibility services.
The CAPEX challenge and the long‑term vision
Battery prices continue to fall and the technological and regulatory evolution favours their deployment. In Spain, capacity auctions are expected to be published at the end of 2025, which could provide an additional revenue source for storage.
Conclusion: adaptation or stagnation
We are at a turning point in renewable development. The traditional photovoltaic model based on “generate and sell on the spot” is no longer sufficient.
The profitability of renewable energy projects increases with hybridisation with batteries. This January started a new five‑year period, the sixth of the century, in which renewable technologies with hybridisation will play a preponderant role in the decarbonisation process, especially photovoltaic energy.
At AleaSoft Energy Forecasting and AleaStorage, we help our clients to simulate realistic revenue scenarios, evaluate the profitability of hybridisation with batteries and define sales strategies adapted to the new environment.
AleaSoft Energy Forecasting’s analysis on the prospects for energy markets in Europe and batteries
On Thursday, May 22, AleaSoft Energy Forecasting will hold the 55th webinar in its monthly webinar series. This time, the webinar will focus on batteries and will feature Javier Adiego Orera, CEO and co‑founder of 7C Energy. The webinar will analyse the importance of demand and secondary band forecasts, the benefits according to the degree of use of batteries and their financial optimisation, as well as regulatory issues of energy storage, including subsidies and capacity payments. Subsequently, the analysis table of the webinar in Spanish will address hybridisation with wind energy and ancillary services, as well as transmission and distribution grids. For this purpose, Kiko Maza, Managing Director at WeMake Consultores, and Luis Atienza Serna, former Minister of the Spanish Government and former President of Red Eléctrica, will also participate in this analysis table. As usual, the webinar will analyse the evolution and prospects of European energy markets.
Source: AleaSoft Energy Forecasting.
