Negative Electricity Prices: Causes and Effects

An analysis of recent developments and a proposal for a flexibility law

  • Analysis

In the past year, electricity prices on the electricity market have repeatedly dipped into the negatives. This means that for these time periods, electricity producers have paid money for consumers to purchase their electricity. This occurred for a total of exactly 97 hours between December 2012 and December 2013, with an average negative price of negative 41.00 euros per megawatt hour. In the first months of 2014, negative prices once again occurred numerous times, especially during daylight hours.

The accepted consensus is that negative electricity prices are a result of a surplus of electricity from renewable sources. Looking back at 2013, however, it is clear that the percentage of electricity generation from renewables never exceeded the 65 per cent limit – therefore, renewable energies never produced more power than was used at any given time.

This raises the question of which other factors could explain the negative prices. We therefore tasked Energy Brainpool with investigating this question further. The answers they found are currently in your hands. A number of interesting and surprising results came to light as a result of their work. In short: the negative prices are caused by the lack of flexibility of the electricity system. Because this lack of flexibility burdens consumers in the form of an increased renewables surcharge, regulators must also act in order to insist on more flexibility.

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Core results

  1. 1

    Negative electricity prices are not necessarily a bad thing, but they do greatly burden the renewables surcharge.

    Even during hours when electricity prices are negative, electricity from renewable sources is still
    sold on the spot market. Between December 2012 and December 2013, this resulted in a burden of nearly 90 million euros on the renewables surcharge account.

  2. 2

    Negative electricity prices are a result of the lack of flexibility of the conventional generation system.

    During periods of increased wind and solar energy production, nuclear power plants, lignite power plants and combined heat and power (CHP) plants only partially reduced their output. This resulted in excess electricity, despite the fact that renewable sources never produced more than 65 per cent of the available electricity, even in peak hours.

  3. 3

    Without a significant increase in the flexibility of power plants and large consumers, the hours with negative electricity prices will increase drastically.

    If 20 to 25 GW conventional power plants continue to produce electricity around the clock, the number of hours when electricity prices are negative will grow from 64 hours in 2013 to over 1,000 hours by 2022.

  4. 4

    A flexibility law would quickly remove the current obstacles to flexibility.

    Various regulations regarding system services as well as a number of energy laws restrict the flexibility of both conventional generation systems and the electricity demand side.

Bibliographical Data

  • Authors

    Philipp Götz, Dr. Johannes Henkel, Thorsten Lenck, Dr. Konstantin Lenz

  • Publication number

    049/07-A-2014/EN

  • Release date

    08/2014

  • Number of pages

    14

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