Negative electricity prices: This is how absurd the German energy transition looks

The original article can be read as “Schlumpfs graphic 131” in the online Nebelspalter of 11 November 2024.

Negative electricity market prices occur when sellers on the short-term electricity exchange are prepared to pay a price for their electricity to be purchased by a buyer. This absurd situation – the buyer not only receives the goods but also money for them – occurs when electricity suppliers have to get rid of a lot of surplus electricity for which there is no demand. But who is so clumsy as to produce surplus electricity? It is Germany (and similar electricity economies) with a large number of uncontrollable wind and solar plants.

What is important:

– Wind or solar power that is not needed by consumers leads to low and sometimes even negative exchange electricity prices.
– As a result, Germany’s electricity system recorded a loss of 1.9 billion euros in July 2024 alone.
– With the strong expansion of wind and solar power plants, the number of hours with electricity prices below zero is increasing in Germany.

First of all, we need to understand the factors that influence prices in Germany’s short-term electricity market. This can be seen in the next chart, which shows the electricity consumption, electricity generation and electricity market prices of a sunny week in July 2024 in near-real-time resolution. The chart comes from the website “Energy-Charts” (see here):

The graph shows the electricity consumption (load, black line at the top) and the electricity generation of the individual energy sources in megawatts per quarter of an hour (scale on the left-hand side of the graph) for the seven days of the week from July 8 to 14, 2024. The various energy sources are shown cumulatively as colored bands from run-of-river (blue at the bottom) to solar (yellow at the top).  

The red jagged line represents the price development every half hour in day-ahead trading: this is where the price for electricity deliveries is negotiated on the exchange 24 hours in advance. The right-hand side of the graph shows the corresponding price scale in euros per megawatt hour, ranging from minus 100 to plus 300 euros.

Negative prices for nine hours on a Sunday

In terms of prices, Sunday, July 14, the last day of the week, stands out: In the nine hours from 9 a.m. to 6 p.m., prices are in negative territory. The lowest value of minus 74 euros per megawatt hour applies from 1 pm to 3 pm. The graph shows how the value of electricity fell during this period: During the entire period with negative prices, the electricity system has a surplus. This arises because overall consumption is lower at the weekend and the solar input, which shoots up and then quickly drops again, therefore exceeds the electricity demand at times.

Although all controllable power plants operate at minimum output at this time (they cannot be shut down completely), this is not enough to compensate for this surplus. However, because this threatens a blackout due to grid overload, the electricity has to be exported. And because this export electricity is obviously not needed by neighboring countries at this time, Germany even has to pay the customers for it.

Expensive fossil fuel power plants as stopgaps

Exactly the opposite happens in terms of prices on the evening of Monday, July 8, 2024 (first day of the week): After another sunny day with corresponding price reductions over midday, the price rises from €103 to €257 per megawatt hour between 6pm and 8pm. Why? Because large amounts of solar power then disappear quickly and consumption increases slightly, coal and gas-fired power plants (light brown, dark brown and orange) and pumped storage (light blue) have to fill the gaps. Given the high gas prices that are charged, this costs a lot.

Producers of renewable electricity receive feed-in tariffs

In addition to the stock market price, the total bill for German electricity generation also includes the remuneration that owners of wind and solar power plants must be paid under the Renewable Energy Sources Act (EEG, see here). This law, which has been in force since 2000, stipulates that electricity from renewable sources is prioritized in the grid and that producers of this electricity receive a fixed feed-in tariff for a certain number of years.

The next chart shows the balance between the EEG feed-in tariff and the market electricity value in near-real-time resolution for July 2024. The chart was created by Rolf Schuster from Vernunftkraft Odenwald (see here):

For Germany in July 2024, the graph shows the expenses for the EEG feed-in tariffs paid to operators of solar and wind power plants (green area outlined in blue) on the one hand and the income generated from sales on the EEX electricity exchange (blue area) on the other. All values are given in millions of euros per quarter of an hour. The red area represents the balance of these two items: Exchange revenue (blue) minus feed-in tariff (green).

In July, 2.64 billion euros went to the operators of wind and solar power plants

The feed-in tariffs show how much solar power, which is compensated with a higher tariff, has an impact: with the significant peaks in solar power this summer month, the levies paid to operators during the day have risen sharply. In contrast, the expenses for wind power at night are low. In July 2024, Germany paid out a total of 2.64 billion euros in compensation to wind and, above all, solar operators.

In contrast, the income (blue area) is only 0.75 billion euros. And because there are only occasional times at night when income is higher than expenditure, the overall financial balance (red) is very often negative – especially during the day, of course, due to the high solar tariffs. The most extreme case was on Sunday, July 14, as already discussed: because negative market prices act like additional costs, this led to peak expenditure of 12 million euros per quarter of an hour. And calculated over the whole month, Germany has to cope with a loss of 1.9 billion euros.

In July 2024, there were 85 hours with negative market prices

With such a cannibalization of the market price system due to too much solar power in summer and a tendency towards too much wind power in winter, periods with negative electricity prices (blue peaks below the zero line) are just the tip of the iceberg: they indicate a larger, harmful development. In the month of July 2024 under review, there were a total of 85 hours of exchange prices below zero – a record: in every eighth hour of the month, the absurd situation arose in which Germany even had to pay the buyers of its surplus electricity.

Twice as many hours with negative electricity prices in 2024 as in 2023

In general, the hours with negative electricity market prices in Germany are increasing: from 64 hours in 2014 to 325 hours in 2023. This trend was interrupted in 2022 with only 75 hours, but this is due to the enormous short-term increase in gas prices. The steep upward trend continues in 2024: Negative hours have already doubled by at the end of October compared to 2023.

Conclusion: When Germany’s many wind and solar power plants are producing at full capacity, this quickly becomes problematic for the energy system. This is because there is often more electricity than is consumed, which leads to falling prices. Increasingly, Germans even have to pay their neighbors to buy their worthless electricity – it could hardly be more absurd.