Market dynamics
Article 5 of 20 · Energy markets and market dynamicsNegative electricity prices explained for businesses
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Negative electricity prices are moments when the market price for power drops below zero: you get paid to consume electricity. They arise when supply exceeds demand, usually with a lot of solar and wind and low consumption at the same time. On the EPEX SPOT day-ahead market such a below-zero price forms when producers would rather keep running than switch off.
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Negative electricity prices explained: scattered information versus Energy Intelligence
On sunny, windy days the Dutch electricity grid is offered more power than the country uses at that moment. Think of a sunny Sunday afternoon in spring: solar panels and wind turbines run at full output while factories and offices are closed. The market still has to place that surplus power. Then the price drops below zero. This matters to anyone with a dynamic contract, with their own generation, or with flexible consumption that can shift to cheap hours.
- A negative price means the buyer gets paid and the producer has to pay to put power onto the grid.
- They arise from a surplus: heavy solar and wind output at a moment of low demand, such as a sunny Sunday afternoon.
- As solar and wind grow, negative hours occur more and more often in the Netherlands, mainly in spring and summer and at weekends.
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How does a negative price arise?
The electricity price is set on a market where supply and demand meet per time block, such as the EPEX SPOT day-ahead market. The price is the point where total supply equals total demand. Most of the time that price is above zero. When demand falls low while solar and wind deliver a lot, there is more power than the grid needs. Large power plants and many solar and wind farms cannot simply be switched off: stopping and restarting costs time and money, and some producers receive a subsidy or have delivery arrangements that make running worthwhile. To place the last unit of power anyway, the price has to fall below zero, until buyers are willing to take that power.
- The price is where total supply and total demand meet per time block.
- With a surplus and low demand the price falls, and can drop below zero.
- Switching off costs time and money, so much production keeps running.
- Subsidy or delivery arrangements can make running more attractive than stopping.
Why do they occur more often?
The number of hours with a negative price grows along with the installed capacity of solar panels and wind turbines. The more generation there is in the ground and on rooftops, the more often supply exceeds demand at a quiet moment. Negative prices therefore cluster in spring and summer, at weekends and on public holidays, and around the middle of the day. The subsidy framework plays a part too. Under the Dutch SDE scheme, a consecutive run of hours with a negative price does not count towards the subsidy, precisely to discourage production during a surplus. Those who can control their output switch off. Smaller installations that cannot be remotely controlled sometimes keep running, which deepens the negative price.
- More solar and wind means a surplus at quiet moments more often.
- Negative hours cluster in spring and summer, at weekends and around midday.
- Under the SDE scheme a run of negative hours does not count towards the subsidy.
- Non-controllable installations sometimes keep running and deepen the surplus.
What does this mean for your business?
For a consumer a negative price is an opportunity. If you can shift consumption to those hours, for example charging, cooling, heating or filling a battery, you take power at the cheapest moment and are sometimes even paid for it. A battery can store the cheap power and use it later when the price is high again. If you generate your own power the logic reverses: during negative hours feeding in earns nothing and can cost money, because you then have to pay to put power onto the grid. There are limits too. Using these hours requires a dynamic contract, metering per time block and the ability to control consumption or generation. Without that control, the negative price never reaches you.
- Opportunity: shift consumption or storage to the negative hours.
- A battery stores cheap power for more expensive hours later.
- Risk: feeding in your own generation earns nothing and can cost money.
- Condition: a dynamic contract, metering per time block and controllable load.
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