Due to a mismatch between supply and demand brought on by a spike in solar power output, Europe has seen a record number of hours of negative power prices this year. This might encourage investment in much-needed storage options.

In the first five months of this year, during periods of low demand, wholesale electricity markets in the majority of Europe’s major economies put out zero or negative prices for a record number of hours. This implies that producers will often have to pay to shut down their facilities or unload power.

“It’s safe to say that success is currently eating its own children,” German utility Trianel’s energy policy specialist Markus Hagel said.

The overabundance has been partially caused by robust nuclear and hydropower output, but solar power has also grown significantly in Europe.

According to data from SolarPower Europe, installed solar power in the EU more than quadrupled to 263 GW between 2019 and 2023. According to the organisation, that equates to an additional 306,000 solar panels being deployed every day in 2023 alone.

More European markets have experienced price reductions in the day-ahead market during the midday period when demand is at its lowest.

According to Trianel, the business has invested in 800 MW of solar capacity and has 2,000 MW of projects in the works, but the reduced pricing are causing it to reevaluate how it sells the power.

One reason for the surge in solar power is that developers reached power purchase agreements (PPAs) with purchasers at set terms that were based on wholesale power market rates, eliminating the need for subsidies.

In comparison with earlier capped volume auctions for government-backed payments, this enabled a quicker and larger build-out.

However, developers are increasingly returning to subsidy schemes when prices decline, according to Hagel.

For Germany, the country with the largest capacity for erratic solar and wind power generation in Europe, negative prices are nothing new; however, Spain will experience them for the first time in 2024 following many years of rapid expansion in solar power.

“At this time, we are not concerned about it. The director general of renewable lobby APPA Renovables, José María González Moya, stated that new PPA contracts are already dropping and that “what does worry us is that it will be repeated or can be repeated over time.”

“Yes, there is a noticeable slowdown in investment. Slowing down, not stopping,” Moya said.

According to Jens Hollstein, head of advising at PPA pricing platform Pexapark, Germany and Spain continue to lead the PPA industry. But solar energy producers were compelled to sell their electricity to 24/7 generators at ever-increasing discounts.

According to Hollstein, “the margin is getting thinner.”

If the current trend persisted, he anticipated a reduction in investment activity.

Conversely, he said, there is now more of a difference between low- and high-priced hours in the electricity market, which makes storage investments more appealing.

In a yearly study, the International Energy Agency (IEA) emphasised how urgently energy storage is needed.

“Developers who choose not to co-locate their wind and solar PV power parks alongside battery storage or other sources of flexibility may see a drop in potential revenues during peak generation – hampering profits and discouraging investment,” the International Energy Agency (IEA) stated.

The European Union calculated that in order to meet forecasts of a 69% proportion of renewable energy in its power grid by 2030, energy storage in the union would need to increase by more than three times between 2022 and 2030.

The European renewable energy company Statkraft, based in Norway, has indicated that it may sell off a portion of its wind and solar projects but would probably keep its battery assets.

CEO Birgitte Ringstad Vartdal stated, “It will be beneficial for batteries to have more volatility and negative prices.” This is because batteries may be charged during periods of low price while their output can be sold during periods of high price.

Ringstad Vartdal continued, “That is one of the reasons flexible projects will be attractive.”

In addition to storing energy in batteries for times when there is an excess supply, customers may also be able to maximise their consumption of electricity with the use of AI-powered smart grids and metres.

Because they are frequently bound by long-term contracts, domestic end users who have been negatively impacted by the spike in energy costs following the conflict in Ukraine have not yet experienced decreased rates.

Negative rates are only available to customers who have purchased a storage system, an electric vehicle charger, or a heat pump, according to a spokesman for the German organisation of municipal utilities, VKU.

Negative power prices will only benefit those with fixed pricing contracts once they have eventually lowered average market prices.

(Adapted from Reuters.com)