How negative electricity prices turn from a curse to a blessing for consumers

On Thursday around 10 a.m. it happened again.

The wholesale electricity price on the stock exchange slipped into negative territory, plummeting to minus 28 euros per megawatt hour (2.8 cents per kilowatt hour/kWh). According to data from the online platform Energy Charts, it climbed back into positive territory after 4 p.m.

Negative electricity prices – that sounds strange. But these phenomena are becoming increasingly common. The cause is photovoltaic and wind power plants. Their constant expansion is leading to more and more renewable energy being fed into the grids, especially around midday, when the sun's rays are at their most intense. In addition, there's currently a lot of wind.

This leads to a bright breeze—another oddity that's the opposite of the dark doldrums. The bright breeze has been in place in Germany all week, with renewables accounting for between 71 and 86 percent of the electricity mix.

Already in May, a new record for the fifth month was reached with a total of 112 hours below zero. And in June, the trend continued seamlessly. "We will probably set a record for negative electricity prices this year," Bruno Burger of the Fraunhofer Institute for Solar Energy Systems (ISE) told the RedaktionsNetzwerk Deutschland (RND). The ISE operates the Energy Charts platform.

Abundant energy—normally a welcome development—can, however, bring with it serious problems. Amprion, an operator of electricity highways (transmission grids), warns of "bottlenecks," meaning that the line capacities are insufficient to transport the energy. If grids become overloaded, the frequency rises. This can lead to blackouts, since physics requires the frequency to be kept constant at 50 hertz.

To achieve this, grid operators can draw on a comprehensive toolbox. But prevention is better. Hence negative electricity prices. They were introduced a good decade and a half ago as a kind of disciplinary measure. They mean that producers have to pay a kind of fee before anyone will even buy their excess energy.

There are several reasons why negative prices are increasingly occurring in bright brisen. For example, shutting down and then restarting coal-fired power plants in particular is so complex and expensive that it's ultimately cheaper for operators to endure six hours of electricity prices below zero on the stock exchange, as happened on Thursday.

In addition, a large number of older solar parks in particular receive government-guaranteed remuneration due to the regulations in the Renewable Energy Sources Act (EEG), which is 6 cents per kWh or more and is thus, for example, higher than Thursday's negative price of 2.8 cents - solar power companies still earn money in such a situation.

What's striking about the price chart for May and June is that, although the price often approaches zero around midday, it only slips slightly into the red. ISE expert Burger emphasizes that while new records will be set in terms of the number of hours, they will not be in terms of price depth. "There are now various mechanisms in place to prevent a sharp decline," Burger says.

Pumped storage facilities in Switzerland and Austria primarily absorb excess electricity. Electrical energy is also exported to other neighboring countries. "The curtailment of solar systems is also helpful, as is the growing number of battery storage systems."

The grid operators take care of the curtailment by simply disconnecting lines that pump solar power into the grid, for example. The battery aspect points to opportunities. Burger emphasizes: "Both high positive electricity prices and negative electricity prices are the result of free European electricity trading. They provide incentives for the expansion of cross-border power lines and battery storage."

A study commissioned by the green energy cooperative Green Energy Planet also aims in this direction: By significantly increasing the number of heat pumps and electric vehicles, and especially by enabling flexible energy procurement, the number of hours with negative electricity prices could be significantly reduced. Electricity lost due to outages could be reduced by 6 billion kilowatt hours annually.

The use of expensive and climate-damaging gas-fired power plants will be reduced, and wholesale electricity prices will fall – a benefit that will be passed on to consumers, albeit with a delay. Smart meters are a prerequisite for this. "The new federal government must prioritize the smart meter rollout," says Carolin Dähling of Green Energy Planet. The approximately 900 meter operators responsible for this must be held more accountable.