Solar parks on Spanish plains and wind turbines above Norwegian fjords were so productive in May that a record share of clean electricity flooded the grid. At times, supply vastly exceeded demand, and producers needed to do something with all that energy.
For more than a million consumers, that meant getting free electricity to heat their homes or charge their vehicles. While good for them, the phenomenon is happening so frequently it’s raising concerns among investors about how much more renewable power they can build into an $800 billion market before returns start to suffer.
“Negative pricing is going to slow down the deployment of renewable capacity for most players,” said Axel Thiemann. “That affects your ability to invest at reasonable levels.” Electricity is traded on wholesale markets in a similar fashion to oil and gas. Negative prices aren’t new, first occurring in Germany in 2008 as the nation ramped up wind and solar production.
There was a twelvefold increase in the occurrence of negative wholesale prices last year, according to the European Union market monitor known as ACER. An agency report from March called it “an explosion,” with the highest number of instances in the Nordic region.
Germany, Europe’s biggest power market, had about 300 hours with prices below zero last year. That may double in 2024, according to energy analytics firm EnAppSys Ltd. In the UK, the number of negative hours will grow fivefold by 2027 to surpass 1,000, industry consultant Modo Energy said.
So what’s the solution for producers and investors? The obvious one is to build more batteries — ranging from freezer-sized installations at someone’s home to rows of freight containers in a field. They would store the excess electricity for distribution at times when the wind isn’t blowing or the sun isn’t shining.
“We need to manage the intermittency in the market,” Birgitte Ringstad Vartdal said in an interview with Bloomberg Television. “Negative prices are also an opportunity to create value.”
The phenomenon is spreading quickly outside Europe, as well.
In Australia, prices across the National Electricity Market fell below zero a record 14% of the time last year, according to BloombergNEF. That percentage has increased steadily since 2018, and capacity issues are projected to worsen with the continued b
