Power prices go negative in Germany, a positive for energy users

Germany has spent $200 billion over the past two decades to promote cleaner sources of electricity. That enormous investment is now having an unexpected impact — consumers are now actually paid to use power on occasion, as was the case over the weekend.

Power prices plunged below zero for much of Sunday and the early hours of Christmas Day on the EPEX Spot, a large European power trading exchange, the result of low demand, unseasonably warm weather and strong breezes that provided an abundance of wind power on the grid.

Such “negative prices” are not the norm in Germany, but they are far from rare, thanks to the country’s effort to encourage investment in greener forms of power generation. Prices for electricity in Germany have dipped below zero more than 100 times this year alone, according to EPEX Spot.

On Sunday, factory owners and other major consumers were at times paid more than 50 euros, about $60, per megawatt-hour, a wholesale measure, to take power.

What causes negative prices?

Basically, when the supply of power outstrips demand for it.

Demand is particularly low on weekends and holidays, when factories are idle and offices empty. The energy supplies that Germany depends on, however, are less predictable than they used to be.

Wind power, in particular, is highly dependent on changes in weather patterns. Giant spinning turbines produce, on average, about 12 percent of Germany’s power, but on windy days, they can generate several times that amount.

At the same time, other mainstays of the country’s electricity supply, especially some coal and nuclear power plants, are unable to dial back quickly enough, leading to negative prices on electricity trading markets.

Where do they go negative?

Several countries in Europe have experienced negative power prices, including Belgium, Britain, France, the Netherlands and Switzerland.

But Germany’s forays into negative pricing are the most frequent. At times, Germany is able to export its surplus electricity to its neighbors, helping to balance the market. Still, its experiences of negative prices are often longer, and deeper, than they are in other countries.

Why is supply so uneven?

The major drawback of both wind and solar power is that they wax and wane with the breeze and sunshine, and not in response to when they are most needed.

Battery storage capacity, meanwhile, is not yet advanced enough to take in all of the excess generation. And because older power plants that run on fossil fuels take a long time to ramp up and reduce electricity generation, they are not able to respond decisively enough to the shifting supply.

Like most traditional power systems, Germany’s was designed to match output to demand. However, “We now have technology that cannot produce according to the demand, but is producing according to the weather,” said Tobias Kurth, the managing director of Energy Brainpool, a Berlin-based consulting firm.

That, he said, is “one of the key challenges in the whole transition of the energy market to renewable power.”

What can be done?

Negative prices indicate that Germany’s power grid has not yet adapted to the increasing amounts of renewable energy being produced.

For now, technological improvements that would help store additional power, and better distribute it across and between countries, are lagging.

But regulatory tweaks could make a difference. Germany, for example, does not do enough to encourage customers to increase their use at times of oversupply.

That could be as simple as providing incentives for people to turn on the washing machine when power is plentiful and cheap. Companies could make even more use of such guidance, ramping up energy-hungry tasks at times of low-cost electricity.

Do consumers benefit?

Not directly. The wholesale costs of power make up only about a fifth of the average household electricity bill in Germany. The rest is a stew of taxes, fees to finance renewable-energy investments and charges for use of the grid.

That means their bills are lower than they otherwise would be, because power prices are sometimes negative, but utilities are not depositing money in customers’ bank accounts.