Flexibility Becomes Key as Renewable Energy Faces Pricing and Profit Challenges

According to the Boston Consulting Group (BCG) study, Flexibility, Not Capacity, Will Decide Renewable Energy’s Future, over 500 hours of negative prices in Europe have caused more than $14 billion in losses in 2025: the transition is entering a new phase that will be played out more on flexibility than capacity.

Renewable energy will become the world’s leading source of electricity by the end of 2025, surpassing coal and marking a historic milestone in the energy transition. However, just as the sector celebrates this milestone, new challenges are emerging: over 500 hours of negative prices recorded in Europe and losses exceeding $14 billion in 2025 are putting pressure on the value of green energy.

This is according to the Boston Consulting Group (BCG) report, Flexibility, Not Capacity, Will Decide Renewable Energy’s Future , which finds that the next phase of the transition will be about flexibility rather than installed capacity. The study is based on analyses of global and European energy markets, system modeling, and assessments of flexibility technologies over various time horizons.

The price of overproduction

After decades in which the primary goal of governments and investors has been to reduce the technological costs of wind and solar through the expansion of installed capacity, the market has reached a critical threshold where the very abundance of clean energy risks compromising its financial sustainability.

The accelerated growth of solar and wind power has had an unexpected effect on electricity markets. When large quantities of energy are fed into the grid simultaneously, wholesale prices tend to fall precisely during peak production hours, squeezing operators’ revenues.

This phenomenon is particularly evident in Europe, where hours with negative prices have more than doubled, from around 200 in 2020 to over 500 in 2025. At the same time, the loss of value for producers exceeded $14 billion in the same year.

Even the so-called value factors highlight a significant compression of revenues: in the most exposed European countries, wind power captures between 55% and 65% of the average market price, while solar power stands at between 45% and 65% . In other words, a growing share of renewable energy is sold at below-average prices (capture price factor), with a direct impact on the economic sustainability of investments.

From capacity to systemic flexibility

“The energy transition is evolving from a logic of expanding renewable capacity to one of managing its variability,” explains Laura Alice Villani, Managing Director and Senior Partner at BCG.

“In this context, flexibility becomes the key enabling factor: not only as a set of technical solutions, but as a lever to efficiently orchestrate production, demand, and infrastructure in increasingly complex systems. For Europe, this shift represents both an operational challenge and an industrial opportunity, thanks to widespread networks, technical expertise, and markets already exposed to high renewable penetration.”

The key issue remains the imbalance between production and consumption . Renewable sources, intermittent by nature, generate electricity in a concentrated manner and often out of step with demand. Without tools to shift, store, and modulate this production, the system struggles to absorb it efficiently.

Systemic flexibility, as highlighted in the report, represents the most effective response to this challenge. It’s not a single technology, but an integrated ecosystem that includes batteries, active demand management, thermal storage, and digital platforms.

“Flexibility therefore becomes a lever for efficiently orchestrating production, demand, and infrastructure in increasingly complex systems,” Villani emphasizes. “Declining costs and improving performance will make individual flexibility technologies increasingly accessible and relevant. Those who can identify and adapt the optimal mix over time across different time horizons, based on the characteristics of the system in which they operate, will be able to maximize the integration of renewables and their value.”

In the short term, batteries and Virtual Power Plants (VPPs) play a key role in managing daily variability. In California, for example, storage systems cover a significant share of demand after dark, offsetting the decline in solar. The global VPP market could exceed $58 billion as early as 2026.

In the medium term , the challenge shifts to managing weekly fluctuations , which are set to grow with the increase in the renewable share. Here, the shift in industrial consumption and the integration of electricity and heat become important.

In the long term, questions related to seasonal storage and annual variability remain open , with production differences that can reach 10% between more or less windy years.

The active role of demand and the Finnish case

A concrete example comes from Finland, where wind energy accounted for approximately 27% of national electricity generation in 2025. The increasing share of renewables has led to significant price volatility, pushing the country to invest in flexibility tools.

Of these, approximately 3,000 MW of electric boilers allow energy to be absorbed during periods of overproduction and transformed into heat, improving the overall efficiency of the system.

This scenario highlights how demand can also become a strategic resource. Buildings, data centers, electric vehicles, and heating systems can modulate consumption based on price signals, helping to balance the system and reduce waste. However, this requires advanced digital infrastructure, new pricing models, and a coherent regulatory framework.

Strategic priorities for industry leaders

Finally, the BCG report emphasizes the need for a shift in approach to energy policies and investments . Until now, renewable energy development has been driven primarily by capacity targets and incentives. In the next phase, it will be crucial to plan investments based on systemic value, considering factors such as location, grid integration, and contribution to the overall balance of the system.

In the absence of flexibility mechanisms, the real risk is that investments in the sector could grind to a halt, trapped in a vicious cycle where the greater the decarbonization achieved, the less economic attractiveness of new projects.

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(Featured image by Vidar Nordli Mathisen via Unsplash)

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