Quick Take: The respected Economist magazine is out with a story documenting the “existential threat” to Europe’s electric power utilities titled “How to lose half a trillion euros.” It is valuable reading for anyone in Europe, of course. But important for the rest of the world, especially North America, which seems to be heading down Europe’s path but roughly 5-10 years behind.– By Jesse Berst

Germany’s recent “renewables oversupply” issues are a microcosm of the changes affecting the rest of Europe as renewable energy becomes plentiful. In June, the wholesale price of electricity fell to -100 euros per MWh. That’s right, generating companies had to pay grid managers to take their energy. Total generation was 6 GW  more than the grid could handle, so prices went negative to encourage cutbacks.

Environmentalists are thrilled with the changes because renewables account for an ever-higher percentage of the total. But for established utilities, says the Economist, “this is a disaster.”

“Their gas plants are being shouldered aside by renewable-energy sources. They are losing money on electricity generation. They worry that the growth of solar and wind power is destabilizing the grid, and may lead to blackouts or brownouts. And they point out that you cannot run a normal business, in which customers pay for services according to how much they consume, if prices go negative. In short, they argue, the growth of renewable energy is undermining established utilities and replacing them with something less reliable and much more expensive.”

Plunging prices

In 2008, Europe’s top 20 utilities were worth roughly 1 trillion euros (about $1.3 trillion). Five years later they are worth half that — more than European banks lost during the same recessionary period. “The rot has gone furthest in Germany, where electricity from renewable sources has grown fastest,” the Economist reports. It cites E.ON, Germany’s biggest utility, whose income from generation has dropped by a third since 2010 and its share price by three-quarters.

The coal, natural gas and nuclear parts of the business were in trouble already, making the growth of renewables all that more problematic. Wholesale electricity prices have dropped to less than have what they were in 2008. (Despite the low wholesale prices, German retail prices are some of the highest in the world because of massive subsidies for renewables.)

One problem (and one lesson for utilities in other parts of the world) — European utilities were slow to invest in solar. Thus, the newfound solar profits are going to others.

“The decline in utilities’ fortunes raises disturbing questions about the future of Europe’s electricity system,” the magazine says. And since many countries are heading down the same road, those disturbing questions apply to utilities in other parts of the world as well.