Negative electricity prices in the spring and summer have even more negative consequences for the RES business (photo: CC0 Public Domain)
In the spring it is not unusual to witness nfew consecutive days of low or even negative electricity prices. This phenomenon may become more frequent in the coming summer, experts from the RES industry believe.
“This year, the higher contribution of photovoltaics [в Европа] will mean that the number of hours with negative prices in the summer will be higher compared to previous years,” said Oriol Salto-y-Bauza, chief data scientist at Spanish energy consultancy AleaSoft.
Negative prices are not unusual in the spring due to the low demand typical of non-extreme temperature periods and the intensive generation of energy from wind and solar as well as hydropower. In addition, this year hydropower systems in Europe are working more because of statistically normal precipitation in winter and spring after several years of drought.
“In the summer, some of these factors are missing. On the one hand, demand is much higher, except for weekends and holidays, and there is much less wind and hydroelectric power,” added Salto and Bauza. “It is true that solar PV is more than in the spring, but that alone is still not able to close the gap enough to go into negative prices every day.”
But not everyone thinks so. According to SolarPower Europe, the negative price trend is likely to continue through the summer. “We can expect the phenomenon of negative prices to intensify this summer, especially in markets with increasing grid penetration of renewable electricity, such as Spain, Germany and the Netherlands,” said Simon Dupont, Policy Advisor at SolarPower Europe.
How much and which regions will be affected? In short, the specifics of each country’s energy system will determine whether the phenomenon of negative prices becomes more or less prevalent in the summer versus the spring. There is also reason to believe that the increasing drive for air conditioning across northern markets may also change consumer profiles in the summer ahead.
OK, what about batteries?
Salto-i-Bauza, who is also head of data analysis and modeling at AleaSoft, says that energy storage systems, green hydrogen production, increasing demand for electricity and the expansion of international interconnection capacity will significantly reduce the phenomenon of negative prices and limiting renewable energy. According to him, bad management and bad energy planning can be cited as real reasons for the phenomenon.
“Most of the efforts of governments are focused on the development of renewable energy, ignoring the fact that demand, storage capacity, green hydrogen must grow along with it,” explains Salto-i-Bauza. “The decline in demand during the energy price crisis of recent years has caused this lack of foresight to manifest itself prematurely.”
Some countries are building large energy storage facilities. But that is not enough. Given the pace of adoption of storage solutions across the continent, the next two years could see the biggest emergence of negative prices. “More than complicated, 2024 and 2025 will be uncertain because it is not clear how each of the key factors will develop, especially the demand recovery,” adds Salto-y-Bauza.
The balance will be decisive. “Negative pricing is not going to go away; the growth of solar and wind power will tend to increase price volatility, while energy storage will tend to reduce it,” explains Salto-i-Bauza. “In the longer term, volatility is expected to ease, but it is highly unlikely that negative prices will disappear completely, although this will happen less often.”
DuPont says that European countries should support the technologies for battery energy storage systems (BESS) and provide incentives for investors, creating conditions for the implementation of the best battery business projects. The expert says governments should also develop support schemes. This is necessary to encourage the addition of so-called flexibility assets in new and existing solar plants.
“Europe desperately needs a more favorable policy framework for energy storage, with less fragmentation around the various technical requirements such as grid connection agreements, permitting rules, asset colocation rules and much more,” says Dupont .
Key implications
Negative prices have a negative impact on the business of solar projects. Salto-i-Bauza says it expects prices to show increased volatility in the short to medium term. It will eventually show a “slight” decrease in the long term.
According to DuPond, negative prices should not be underestimated, as they can affect investment intentions in the field of solar energy. “Less solar revenues risk reducing investor certainty and at the same time make corporate power purchase agreements (CPPAs) less attractive to corporate electricity consumers,” DuPont said. “This leads to less available private financial resources to build new solar plants and automatically slows down the energy transition.”
Again, he said, European authorities should set storage targets, systematically include storage mechanisms in renewable energy auctions and allow battery storage devices to operate in all electricity markets.
