Zero electricity prices harm RES investors

Renewable energy developers have underestimated the effects of production cuts and low wholesale prices. And this leads to the danger of bankruptcies in countries like Spain, writes BalkanGreenEnergyNews.

In April, the average wholesale price in the Iberian country hit a record low of just over €5 per MWh, while Greece recorded negative prices for the first time, as well as zero for many consecutive hours. This has seriously affected renewable energy producers.

Prices are increasingly zero

According to a recent presentation to Dr. Stelios Loumakis, head of the Hellenic Photovoltaic Energy Producers Association (SPEF), on days of high renewable energy production there are offers of about 3 GW with prices just above zero.

They are supplied to the Day-ahead market (DAM), mostly by producers trying to keep the clearing price above zero in order to receive government support through their Contracts for Difference (CfD).

When the price is zero or negative for at least two hours, payments are cancelled, according to the regulatory framework.

The phenomenon affects renewable energy projects implemented after 2019, with a total capacity of around 6 GW, which also do not enjoy distribution priority in the system.

The situation is even worse if regional electricity trading is taken into account. In Bulgaria, the clearing price regularly becomes zero or negative during peak production at midday, making Greece a net importer during these hours if its own price is even slightly higher.

Loumakis added that prices at or below zero make producers indifferent to production cuts because they are not paid anything anyway. In turn, this will undermine interest in investing in Greece, which has been high until now. That is why Loumakis demanded a complete suspension of the licensing of new projects.

He also added that under these circumstances, Greece’s goal of becoming a green energy exporter to the region cannot be achieved.

Sales and bankruptcies are possible

The Greek government has introduced a new bill that abolishes the so-called 5% rule for cuts. Until now, a renewable electricity plant that produced 100 MWh per year was subject to a total cap of 5 MWh. The rule will now be lifted and grid operators will be able to reduce generation as they see fit.

Spain is also facing problems due to low prices and layoffs. The average price for April was only 5 euros per MWh. Energy services provider Our New Energy told the Montel publication that bankruptcies are an expected possibility as market players are already looking for an opportunity to sell.

The issues will need to be addressed in order for renewable energy penetration to reach the 2030 target, which for Greece is 80%, compared to the current 55%.