Decoding the Duck Curve: Managing Risk Amid Evolving Hourly Price Shapes
Decoding the Duck Curve: Managing Risk Amid Evolving Hourly Price Shapes
By cQuant.io
European electricity markets are changing—fast. One of the most striking developments is the rapid evolution of hourly power price shapes, particularly in regions with high levels of solar penetration. Grid-scale solar has introduced a predictable but economically disruptive pattern: as the sun rises and solar generation ramps up, power prices drop—sometimes dramatically. Then, as the sun sets and solar output fades, prices spike sharply. This means that the hours with the most solar generation tend to be the least valuable and that solar is generally unable to participate during the highest priced hours of the day.
This phenomenon has become colloquially known as the “Duck Curve”, a term that grew out of a curiously duck-shaped forecast of system load net of renewables published by the California Independent System Operator in 2013, and it has become more pronounced each year. Mid-day prices have collapsed in markets across Europe, cutting revenue opportunities for solar generators and introducing complex new dynamics for utilities, traders, and offtakers. And this isn’t a localized effect: the interconnected nature of Europe’s power system means solar output in one country can depress prices across borders, exposing market participants to the Duck Curve even in locations with only a modest degree of solar penetration.
In this article, we explore how these hourly price shape transformations have altered the economics of power markets—and how analytics and precise portfolio planning can help participants adapt.
Understanding Hourly Price Shapes
Power prices vary throughout the day based on expected demand and supply. In a grid trending rapidly toward decarbonization, solar generation plays a major role in shaping these fluctuations. During peak solar hours, electricity supply can surge beyond local demand, leading grid operators to provide economic signals that disincentivize further generation: namely, sharp drops in wholesale electricity prices.
Renewable generation asset owners and offtakers often track a financial performance metric called the capture price, which is the average price received by a generator for the electricity it produces. This average is taken over all hours of production and the price in each hour is weighted by the amount of production in that hour. When mid-day prices fall, capture prices for solar assets decline, particularly when generation volumes remain high. For investors, utilities, and offtakers with long-term exposure to solar, this erosion of capture price resulting from changes in the hourly price shapes can have significant financial consequences.
The Shape of Things to Come
The price shape transformation has occurred with astonishing speed. In markets like the Netherlands, mid-day prices have fallen by up to 80% in just the last five years (see image below), while prices in the hours just after sunset (e.g., 18:00–21:00) have climbed. The result is a wider spread between low- and high-value hours—and more volatility.
Figure 1. Hourly price shape factors for the Netherlands in August for select years from 2016 through 2024. The shape factor for each hour represents the expected multiple of the flat average monthly price for that hour. That is, a shape factor of 0.1 means the price in that hour is expected to be just 10% of the average monthly price. Hourly price shapes in the Netherlands have transformed dramatically since 2016, with the most notable change occurring in just the last five years.
FIGURE 1. HOURLY PRICE SHAPE FACTORS FOR THE NETHERLANDS IN AUGUST FOR SELECT YEARS FROM 2016 THROUGH 2024. THE SHAPE FACTOR FOR EACH HOUR REPRESENTS THE EXPECTED MULTIPLE OF THE FLAT AVERAGE MONTHLY PRICE FOR THAT HOUR. THAT IS, A SHAPE FACTOR OF 0.1 MEANS THE PRICE IN THAT HOUR IS EXPECTED TO BE JUST 10% OF THE AVERAGE MONTHLY PRICE. HOURLY PRICE SHAPES IN THE NETHERLANDS HAVE TRANSFORMED DRAMATICALLY SINCE 2016, WITH THE MOST NOTABLE CHANGE OCCURRING IN JUST THE LAST FIVE YEARS.
This has several implications:
- Solar generators and PPAs face reduced revenues, particularly for merchant assets and as-produced delivery contracts tied to spot prices.
- Other generators are indirectly affected, as they must ramp down or up around solar production, complicating operational planning.
- Curtailment events are more frequent, during which solar plants disconnect from the grid to avoid generating at negative prices. When this happens, not only is revenue lost—but so is the value of renewable attributes (like guarantees of origin, or GOs).
The trend is not unique to Europe. Similar shape evolution is occurring in the U.S., Australia, and other regions pushing toward high solar penetration. It reflects a fundamental supply-demand mismatch: solar is abundant when it's least needed, and absent when it’s most valuable.
Strategic Responses to Price Shape Evolution
While solar’s physical output is inherently tied to sunlight, there are ways to adapt financially and operationally that can add resilience:
- Pairing with Storage. Batteries offer a natural hedge against solar value erosion. They can charge during low-priced solar hours and discharge during evening peaks—capturing the value spread created by the duck curve. The worse the solar capture price, the better the arbitrage opportunity for batteries. When co-optimized, solar + storage portfolios are significantly more resilient to price shape risk than the intermittent generation alone.
- Targeted Hedging. Products like top-bottom swaps or other structured hedge contracts can mitigate risk by paying out when hourly prices hit the lowest levels, offsetting losses incurred simultaneously by solar assets or offtake agreements. These instruments come at a premium but are particularly valuable in markets where post-solar price spikes mirror mid-day troughs.
- Innovative Contracting. New forms of renewable PPAs now include embedded risk mitigation tools such as price floors, volume firming structures, or shaped delivery guarantees. These contractual stipulations allow buyers and sellers to share risk in a more balanced way. Used strategically and within the right portfolio-level context, they can offer downside protection without eliminating upside opportunity.
How cQuant Helps Navigate Hourly Shape Risks
cQuant’s SaaS analytics platform gives energy market participants the clarity and foresight needed to respond to price shape risk by providing:
- Capture price modeling at hourly and sub-hourly granularity
- Scenario simulations to forecast and stress-test price shapes
- Portfolio optimization for solar, storage, hedge contracts, thermal generation, and more
- Asset and PPA valuation under evolving price curves
Our tools help quantify how shifts in market price shapes will affect asset performance, contract value, and portfolio risk—empowering better decisions across the enterprise.
cQuant’s capability is further amplified through our recent integration into Zema Global, whose advanced data management solutions and experienced market data team play vital roles in empowering decision-ready data. Backed by deep industry knowledge and rigorous quality control, Zema Global delivers timely and accurate data to support business critical applications across the energy industry. Zema Global’s software solutions and service teams work hand-in-hand with data providers to seamlessly onboard and integrate data across the global electricity markets and supporting data points like weather, ensuring this data is available to drive portfolio-level insights like those enabled by cQuant’s analytics.
Conclusion: Precision in a Time of Change
The erosion of mid-day power prices is a natural economic signal from the grid: energy is most valuable when it aligns with demand, not just production. While this shift poses financial and operational challenges, it also opens the door to strategic innovation.
Market participants who leverage flexible assets, advanced hedging, and detailed analytics will be best positioned to adapt—not only to today’s duck curve, but to whatever shape the future takes.
In our next Portfolio Precision article, we’ll explore the emergence of hybrid PPAs and battery storage contracts as core instruments for managing risk in a flexible, 24x7 energy environment.
*Ready to Optimize Your Portfolio Strategy? Discover how cQuant can help you navigate the evolving dynamics of hourly power price shapes.
