Search our blog for articles and insights right here, just type your interest and dive into a world of knowledge.
Popular articles
Europe Records Unprecedented Negative Power Prices Due to Solar Surge
Europe has witnessed a historic peak in negative power prices this year, underscoring a disparity between power supply and demand driven primarily by the surge in solar power generation. This unexpected trend could pivot investment towards essential storage solutions, industry experts suggest.
Record Low Prices in Wholesale Power Markets
Across Europe’s key economies, wholesale power markets have reported an unprecedented number of zero or negative price hours during the initial five months of the year, particularly during periods of low demand. In practical terms, this means that power producers often find themselves paying to offload surplus electricity or temporarily halting operations. Markus Hagel, an energy policy expert at German utility Trianel, noted that this phenomenon represents a scenario where success is undercutting itself.
Factors Contributing to Oversupply
Europe's oversupply has been partly fueled by robust hydro and nuclear power generation, alongside a significant increase in solar power. SolarPower Europe data indicates that EU's installed solar capacity more than doubled to 263 GW from 2019 to 2023, which translates to the installation of approximately 306,000 solar panels daily in 2023 alone.
The day-ahead market dynamics have shown that more European markets are experiencing plummeting prices during midday when demand is at its lowest. Trianel, which has invested in 800 MW of photovoltaic capacity and plans for an additional 2,000 MW, now faces the challenge of re-evaluating its power sales strategy due to these reduced prices.
Renewed Interest in Subsidies
The rapid expansion of solar energy has primarily been due to developers finalizing power purchase agreements (PPAs) with fixed-term buyers linkable to wholesale market prices, facilitating a swifter build-out than government-backed schemes. However, dwindling prices are pushing developers to reconsider subsidy arrangements, Hagel said.
Germany is accustomed to negative prices, given its substantial solar and wind power capacity, but this year marks Spain's first experience with such pricing - a consequence of its rapid solar expansion. José María González Moya from renewable lobby APPA Renovables expressed concern about the potential long-term recurrence of these price dips, which are already impacting new PPA contracts and slowing investments.
Market Dynamics and Investment Trends
Germany and Spain currently lead the PPA market, according to Jens Hollstein of Pexapark. Nevertheless, solar producers are increasingly forced to sell at discounts compared to continuous power generators, squeezing profit margins and potentially reducing investment enthusiasm.
Despite these challenges, the widening gap between low and high-priced hours encourages investments in energy storage, Hollstein noted.
Urgent Need for Energy Storage Solutions
The International Energy Agency (IEA) has emphasized the critical need for energy storage in its annual report, warning that projects without co-located storage may see diminished revenues during peak generation periods, thus discouraging further investments. The EU estimates that by 2030, energy storage requirements will need to grow more than threefold to meet anticipated renewable energy shares.
Statkraft, a key player in Europe’s renewable energy sector, has indicated potential divestment in wind and solar projects but intends to retain its battery assets. CEO Birgitte Ringstad Vartdal highlighted the benefits of market volatility and negative prices for battery operations, as they can be charged during low-price periods and discharged when prices rise, making flexible projects particularly appealing.
Consumer Impact and Future Outlook
Alongside battery storage, other solutions involving AI-powered smart grids and meters could optimize electricity consumption, although domestic consumers, especially those bound by long-term contracts, remain insulated from immediate price drops. Only consumers with investments in heat pumps, electric car chargers, or storage systems can fully benefit from negative prices.
In short, while the phenomenon of negative power prices due to solar expansion presents challenges, it also opens avenues for investments in energy storage and flexible energy solutions. The long-term benefits for consumers will depend on broader market adjustments and the integration of advanced technology.
