Photo: The development of “green energy” has led to the phenomenon of negative prices (Getty Images) Author: Danila Kramarenko
Electricity prices in Europe have recently reached negative values. A drop below zero was recorded in a number of countries against the backdrop of maximum output from solar power plants.
RBC-Ukraine explains what negative prices are, why they are even possible in Europe, and whether they affect electricity bills.
Content
- Electricity Prices Below Zero? What's Happening in Europe
- What Causes Negative Prices and Where Is It Common?
- Which countries are suffering from negative electricity prices
- What's wrong with negative pricing and does it affect electricity bills?
Electricity Prices Below Zero? What's Happening in Europe
High solar power generation in Germany has pushed prices into negative territory in several countries. According to the European exchange Epex Spot SE, prices in Germany fell to -17.73 euros/MWh between 13:00 and 14:00 on March 3. Prices in the Netherlands and Belgium also fell below zero.
Negative prices are becoming increasingly common in Europe as renewables flood the grid and supply outstrips demand. On the consumer side, the price cuts are felt mostly in northern Europe. However, this is worrying for investors in solar and wind power, as negative prices reduce returns.
Germany's peak solar power output reached 39.9 GW on March 3, the highest since September 2024. In the UK, it reached a record 9 GW on Saturday and in France 15.6 GW on Sunday.
Renewable power generation is expected to remain high this week, peaking at around 35 GW each day in Germany, according to Bloomberg calculations. And seasonal increases are likely to have the biggest impact on wholesale prices.
It is noteworthy that this is not the first time that such a situation has occurred. For example, in May 2023, the cost of 1 megawatt fell to -41 euro cents in Germany, Austria, France, Norway, Sweden, Finland, Lithuania, Latvia and Estonia. And this year, Europe will probably see a record number of hours with electricity prices below zero.
What Causes Negative Prices and Where Is It Common?
Like oil and natural gas, electricity is sold on wholesale markets. The difference is that oil and gas can be stored, while electricity is produced and consumed instantly. And if the power generated exceeds demand and cannot be stored for future use (due to the limited amount of batteries connected to the grid for storage), then prices fall below zero.
When this happens, producers are effectively forced to pay consumers to take away the excess energy.
Negative prices are becoming increasingly common in Europe as renewables increase their share in an effort to reduce carbon emissions. Wind power, for example, can spike or fall sharply in a matter of hours, while increased solar power creates excess supply during the day when generation peaks.
Europe's largest solar market, Germany, is expected to exceed 100 GW of installed capacity in 2025. That's more than double the level of five years ago. Solar generation is projected to reach almost 20% of Germany's total annual electricity production, and 15% in some other parts of Europe.
Which countries are suffering from negative electricity prices
Negative prices were first recorded in Germany in 2008. And in recent years they have become increasingly common around the world – from Europe to Australia and the USA.
According to UK think tank Aurora Energy Research, Finland outpaced all other European markets in 2024, with the country recording 725 hours with negative prices, compared to just five hours in 2021. Limited export capacity meant Finland could not sell any more of its excess energy. Overall, the Nordic countries have the highest frequency of prices below zero.
The real test for Australia has been the rapid transition away from coal and the massive adoption of solar power. The grid has struggled to cope with the spikes, with stock prices falling below zero for 23% of the fourth quarter of last year and some utilities offering free electricity at lunchtime.
Due to the growth of wind and solar generation, as well as the lack of grid storage capacity, negative prices are increasingly observed in the United States. For example, in Texas, they are recorded even during peak demand hours from 06:00 to 22:00 on weekdays. At the end of last October, the average exchange price was negative for two days, reaching a record -$7.37/MWh.
What's wrong with negative pricing and does it affect electricity bills?
The risks are that negative prices reduce the average wholesale price of electricity, which reduces the profits from green energy. And if renewable projects look less economically attractive, this could slow the transition to a zero-emission system.
For example, solar power is so widespread in Spain that it leads to long periods with prices near zero. In an attempt to protect projects from negative prices, renewable developers enter into long-term power sales contracts, typically for periods of more than 10 years. And this can make the problem worse by creating even less incentive for renewable energy producers to reduce generation during periods of excess.
For the vast majority of consumers, negative prices do not mean lower electricity bills. That's because they get their electricity under fixed-price contracts that do not reflect fluctuations in wholesale markets.
That is, if wholesale prices for electricity fell below zero, for example, in Ukraine, then for the same household consumers this would not be reflected in the bills. Since tariffs for electricity are set by government decision. Note that at least until the end of April 2025, the country has a fixed tariff of 4.32 UAH / kWh, regardless of consumption volumes (adjusted for a 50% discount at night for those who have dual-zone meters and consumers with electric heating systems).
However, more than 1 million users in Northern Europe have contracts linked to wholesale prices. And when the price for a given hour drops below zero, they are credited for that particular time. The idea is to encourage the habit of charging electric cars and using energy-intensive devices during periods of peak production and low electricity costs. But even if consumers are paid for their use, their bills are not zero. Firstly, it may only last for a few hours, and secondly, the bills include network charges, taxes, etc.
In preparing the text, the following were used: Bloomberg publications and data from the British analytical center Aurora Energy Research.
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