Nice! This is the first time i see anyone providing a quantitative answer to this. When the effect becomes more pronounced, it will hopefully remove political barriers for renewable electricity.
A widening gap between electricity cost and gas cost (and fuel cost) will be THE main driver of electrification! Installing a heat pump will be a no-brainer, driving an electric car will be a no brainer.
This can only happen once electricity decouples from gas prices - but that requires lots of renewables in the mix!
In a commodity market, the price is always set by the most expensive producer that is still able to sell. That's natural - why would I sell my apples cheaper than the other farmer if you need so many apples that you have to by from both of us?
This marginal price is only for the spot market right? So the key question is more what % of the mix is spot vs longer term. And thus what the overall impact is on total blended price.
But ultimately, due to arbitrage, PPA prices will converge towards expected spot market prices.
Essentially it's not an isolated market, but part of a bigger whole.
As an example imagine a village that constituted 1% of the population of a country. The village was 100% renewable, and the country was 0% renewable. If the village disconnected its grid, in isolation its prices would be dictated by its renewables. But if its connected, its renewables just get traded on a market with marginal prices. If a person elsewhere in the country has more expensive generation, they'll but your cheap renewables at their price level. Thus the village will experience high prices like everyone else.
Now suppose Germany is that village in an interconnected EU market. Of course the numbers from my example are exaggerated, but the point remains: Germany's renewables aren't enough, if pricing is set at a much larger market, with fewer renewables.
Today about 20% of Germany's electricity was exported. While only about 6% of its demand came from gas. In other words if Germany was disconnected, it'd have needed no gas, and thus prices would've been lower.
Of course disconnecting isn't a good idea for other reasons, as on other days Germany imports. And Germany's ability to export its renewable excess generates significant revenues, creates incentives to build more renewables, and offsets emissions and pollution in other countries, too.
But long story short, it'll take more for one part of the whole to go renewable. As the EU is generally transitioning towards renewables we see a decoupling happen.
High gas prices + gap is small -> Big opportunity to undercut via cheaper methods like solar -> attractive investment -> more new builds
High gas prices + gap is wide and widening -> Smaller and smaller opportunity to invest in solar, as the market is already dominated by solar prices -> less attractive investment -> less new builds
Am I missing something here?
Occasional negative prices -> Invest in intermittent consuming applications.
Have the costs dropped for that as well?
Even at zero electricity host (I have rooftop solar), the investment didn't make a lot of sense at the time, assuming the costs would be falling in the next few years.