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Negative European electricity prices- analysis & outlook

The oversupply of renewable energy has led to negative electricity prices. Grid operators must adapt to these imbalances. Solutions like curtailment and other forms of flexible energy consumption or production can help manage the situation.

Oversupply of renewable energy

Many European countries are experiencing a surplus of wind and solar energy. This abundance often leads to negative market electricity prices during daylight hours. At these times, the generation of clean energy exceeds demand, with limited options for exporting the excess electricity to neighboring countries.

Understanding the imbalance market

The imbalance market addresses real-time fluctuations in electricity supply and demand. Imbalance refers to the difference between predicted and actual supply and demand on the electricity grid.

Factors contributing to imbalance include unexpected weather changes, power plant disruptions, and sudden shifts in renewable energy production or consumption.

Role of grid operators

The grid operators must swiftly correct imbalances to maintain grid stability. Electricity prices in this market can fluctuate significantly based on electricity shortages or surpluses.

As renewable energy capacity grows and electrification expands, imbalances are expected to increase over the next decade.

Outlook Europe negative prices 2026

The number of negative hours will continue to rise due to further growth in renewable energy, increased electricity demand from electrification, and the phasing out of more flexible power plants.

By 2026, negative hours may triple compared to 2023. During peak hours, this increase is primarily driven by abundant solar generation, while during off-peak hours, wind generation and reduced demand play a role.

Negative prices will lead to greater volatility, affecting day-ahead, intraday, and imbalance markets. The growing demand resulting from electrification, combined with increased use of battery energy storage and electrolysis, will mitigate the impact of negative hours. Both technologies can be flexibly deployed precisely during periods of wind and solar oversupply.

Below the main causes of the negative prices in 2023.

European developments

The energy surplus results from significant investments in green infrastructure, such as solar panels and wind turbines. In 2023, Europe installed a record number of new solar panels with the goal of reducing dependence on natural gas. This move followed a surge in natural gas prices when supply was disrupted by Russia.

Negative power prices will have a massive impact on the value of renewables in the years to come.

From 2025, the prices for the European EPEX SPOT markets will be changed to a 15-minute interval. This adjustment modifies the current intervals of 30 minutes or 60 minutes for day-ahead and intraday trading, aiming to enable a more precise and flexible response to electricity supply and demand. More about this topic.

Overloaded European power grids

Power grids are becoming overloaded in more and more European countries. Grid operators struggle to connect wind and solar parks to the grid, and companies applying for connections often end up on long waiting lists. Read more.

 

Super grid

The synchronous electricity network of continental Europe is the largest in the world. It serves over 400 million customers across 24 countries. The European Commission aims to create an integrated European electricity grid that incorporates renewable energy sources, supports electrification, and enhances energy security. A regulatory framework will be established to prepare the European electricity grid for this purpose. All cross-border bottlenecks, from planning to legal issues, will be addressed. The European Investment Bank will allocate additional financial resources to support this resilient energy system, the EU supergrid.

This development toward a more interconnected and sustainable energy grid is crucial for Europe’s energy transition. Across many European countries, we observe a rise in negative electricity prices due to large-scale incentives for green energy. This shift is fueled by an abundance of supply.

Below is an overview of electricity flows between European countries in 2023.

Potential solutions to mitigate negative prices

Here are some solutions to help optimize energy usage and mitigate the impact of negative prices.

1. Direct consumption or conversion

One solution is to directly consume or convert the generated electricity behind the meter. Adjust if possible your energy consumption based on renewable energy availability. For instance, electric vehicles can charge at night when overall electricity demand is lower.

2.Smart sharing with others

Another approach involves sharing the surplus electricity generated behind the meter with other companies. This can be achieved through cable pooling, where multiple legal entities share a single connection.

3.Temporary storage 

Storing excess electricity temporarily, such as in batteries, allows for better management of supply and demand fluctuations. Store excess energy during high production periods (e.g., sunny or windy days) and consume it during low-demand times.

4. Energy control solutions: steering algorithms/control box

An intelligent control box can be connected to the solar-or wind installation inverters. When an energy surplus is detected in the market, the control box receives a signal to automatically dim the energy generation. Once conditions allow for power generation again, the energy production is reactivated.

Our advise

If you’re considering investing in solar or wind energy, ensure that the expected generation aligns as closely as possible with your anticipated annual consumption in the years to come. Remember that renewable energy investment offers potential but also involves risks due to new technologies and unexpected changes in the energy markets. Make informed decisions. We can help you with that.

The energy market remains complex, but we remain committed to ensuring that our customers can rely on affordable energy with the appropiate energy products and services.

If you have any more questions or need further assistance, feel free to ask!

 

Sources: Bloomberg, Change.inc, Engie, EEX, ICIS Analytics, Medium, Montel.