Grid flexibility to decide renewable energy returns: report

BCG warns inflexibility threatens green investment.

Grid flexibility, rather than additional capacity alone, will determine whether renewable energy can sustain returns as wind and solar penetration rise, according to a Boston Consulting Group (BCG) report.

Renewable energy has become so abundant in some markets that it is depressing its own value, with simultaneous output driving down prices when demand is low and cutting producer revenues when generation is highest.

BCG said that dynamic risks are slowing fresh investment in clean power despite the global push to decarbonise electricity systems.

The pressure is already visible in Europe, where wind producers in the worst-hit markets are earning only 55% to 60% of average annual power prices, whilst solar value factors have fallen to 45% to 65%. Negative price hours in some European countries have risen from about 200 in 2020 to more than 500 in 2025, helping reduce producer revenues in the European Union by more than $14b last year.

BCG said the biggest gains will come from improving daily and weekly flexibility rather than simply building more generation.

Batteries and virtual power plants can help balance short-term swings and absorb surplus electricity. Still, scalable storage for periods of several days to one or two weeks remains limited outside pumped hydro, leaving a major gap as weekly volatility increases.

Finland offers one example of how markets are responding. With wind accounting for about 27% of electricity generation in 2025, the country has faced sharp price volatility. Still, it has added new balancing tools, including batteries, ancillary service markets, and almost 3,000 MW of electric boiler capacity, equivalent to 25% of peak load, to convert heat demand into flexible electricity consumption.

The report said governments, utilities, and developers should plan renewable and battery investments around system value rather than volume, expand demand-side flexibility, and redesign market rules to reward storage, demand response, and other flexible assets.

It said the winners in the energy transition will be the markets that extract the most value from renewable generation, not those that add the most capacity.