Self- and cross-cannibalization in Europe on the path to net zero

Abstract
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 towards net zero. We developed a high-resolution electricity market model comprising 33 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% capacity increase reducing RES profits by 19% in 2030 (23% in 2040), while BESS experiences only an 8% profit reduction. Notably, the cross-cannibalization effect of RES on BESS is beneficial, as a 10% RES growth increases BESS profits by 15% 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% increase in RES capacity reduces market prices by 18% (2030) and 32% (2040) in Europe, on average, while BESS primarily reduces price volatility.