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Energy Studies | 13th Oct, 2023

Understanding the recent surge of zero and negative prices in Europe


The European wholesale electricity market has seen a rise in negative prices in several countries as they boost their production of renewable energy to meet sustainability goals. 

Reading time : 3 min

Written by

Tomás Oliveira

Negative prices occur when there's excess electricity due to oversupply and decreased demand (Figure 1). This can happen when renewable generation surpasses current demand and cannot be stored for later use. Generators offer negative prices to the wholesale market to ease the grid from surplus electricity and prevent potential overloads.

Supply and Demand movements - Negative Prices

We aim to comprehend the dynamics of negative price occurrences in Europe by analyzing day-ahead price quotations over the past 12 months (June 2022 to June 2023) and understand which factors contribute to their impact on the market. This study will consider both negative and zero prices in its analysis.
 

Zero and negative prices in European countries

- The Netherlands has topped the group with 295 occurrences.
- Greece registered only 25 occurrences. 

Zero and negative prices in European countries


Negative prices are influenced by various factors such as peaks in solar and wind energy production joined by a low electricity demand during such periods. 

 

Analysing the Minimum, Maximum, and Mean

- On the 2nd of July 2023, Germany, Hungary, and the Netherlands featured an extremely low negative price (- 500€/MWh). 
- Italy, Greece, Spain, and Portugal have only registered prices on the zero axis.
- The observed metrics tend to show minor variations on a general level.

Analyzing the MInimum, Maximum and Mean

Apart from further research showing us that solar production in Germany, Hungary, and the Netherlands has been increasing from Sept. 2022 to Sept. 2023 (ENTSO-E), we noticed that the -500 €/MWh outlier happened on a Sunday, around noon. 

How are negative price dips distributed through the days of the week and hours? 
Figures 4 and 5 might provide the answer.
 


Daily distribution of negative prices

- Sunday registered the highest number of negative prices, with 530 occurrences.
- Weekends are more prone to negative price occurrences.

Daily distribution of zero and negative prices in Europe

On weekends and holidays, reduced industrial production leads to decreased electricity demand and lower wholesale prices. Meanwhile, renewable energy generators continue producing electricity due to varying sunlight and wind patterns, resulting in an oversupply that further drives wholesale price reductions, occasionally reaching negative levels.


Hourly distribution of negative prices and solar generation in Europe

- Between Sept. 2022 and Sept. 2023, the peak of the solar profile curve coincides with the highest number of negative price occurrences, which happened at noon.

Hourly distribution of zero and negative prices in Europe


Given the established relationship between solar profile peaks and solar generation peaks, wholesale prices were expected to decrease during those periods.
 

Final thoughts

Negative prices may serve as a strong motivation for generators to adopt real-time grid management systems that enable curtailment of generation, leading to both cost savings and revenue optimization. With the volatile nature of renewables at play, negative prices serve as a market indicator for the increasing importance of storage solutions to manage overproduction.

 

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