Self- and Cross-Cannibalization in Europe on the Path to Net Zero

This study introduces the concepts of self-cannibalization and cross-cannibalization to analyze at a deeper level the co-evolution of the profit cannibalization dynamics for renewable energy sources (RES) and battery energy storage systems (BESS) while progressing toward net zero. We developed a high-resolution electricity market model comprising thirty-three European countries for 2030 and 2040, considering climate variability, outages, and different RES and BESS deployment levels. The results show that RES face severe self-cannibalization challenges, with a 10 percent capacity increase reducing RES profits by 19 percent in 2030 (23 percent in 2040), while BESS experiences only an 8 percent profit reduction. Notably, the cross-cannibalization effect of RES on BESS is beneficial, as 10 percent RES growth increases BESS profits by 15 percent in 2030. This can create a strategic incentive for pairing RES investment with BESS in the near term, as the beneficial cross-cannibalization can act as a financial “hedge” against RES profit erosion, even though this effect fades by 2040. Finally, we show that a 20 percent increase in RES capacity reduces market prices by 18 percent (2030) and 32 percent (2040) in Europe, on average, while BESS primarily reduces price volatility.