Published on December 29th, 2012 | by Zachary Shahan12
Negative European Power Prices Seen Sunday Through Thursday Due To Strong Wind Power Supply
December 29th, 2012 by Zachary Shahan
The European Energy Exchange has seen the price of electricity turn negative during certain hours of the day Sunday through Thursday of las week. This is largely due to a strong supply of wind power combined with relatively low electricity demand, which is partly triggered by warmer than average temperatures.
Negative prices are expected to return again Sunday through Tuesday.
We’ve reported on such occurrences before, but this is still something that I’m sure many people are unfamiliar with, so let’s run through a quick rehash:
On the wholesale electricity market, the lowest bidder looking to supply the grid with electricity wins. Since wind and solar power have fuel costs of $0, they can bid lower than coal, natural gas, nuclear, etc (which do have fuel costs) — naturally, this brings down the price of electricity on the wholesale market.
When the supply of solar and wind rises and electricity demand drops, the effect is strengthened.
Furthermore, with subsidies for wind and solar power production, wind and solar power producers can actually bid below $0 per unit of electricity and still make a profit. We’ve seen in happen in Germany due to high solar power production in the spring and summer, and we’ve seen it happen in Texas due to high wind power production, and it has happened many other places as well.
Wind, solar, and low demand aren’t the only causes of this phenomenon, however. Nuclear and hydro are also often implicated. Nuclear and hydro power plants can’t easily shut down or start up, so it may be more worth it to them to pay a little to put electricity on the grid for a short time than lose revenue from being shut down when it could be selling electricity for a profit.
Negative pricing isn’t that big of an issue, of course, but it’s an indicator of the rather noteworthy fact that wind and solar power drive down wholesale electricity prices. Unfortunately, that isn’t always passed on to retail electricity customers.