For two years, the number of episodes of negative electricity prices has broken records: 102 hours in 2022, 147 in 2023, then 352 in 2024. In three years, with +345%, the increase was meteoric! This is not a new phenomenon. Since the end of the 2000s, it has affected several markets in Europe, such as the Netherlands or Germany. But the rise of renewable energies is accelerating this trend. Faced with this evolution, the Commission for Energy Regulation (CRE) launched the alert in November 2024, publishing a series of recommendations.

If these negative prices are not reflected in consumers' electricity bills, they weaken the market and can impact long-term prices. Why these extreme declines? What are the consequences? And above all, how can these imbalances on the electricity market be avoided?

Sirenergies unravels the mystery of negative prices.

How can negative electricity prices be explained?

Under the law of the market, negative electricity prices occur when supply exceeds demand. With the rise of renewable energies and climate change, periods of negative prices have followed one another since 2023.

An increase in electricity supply...

The impact of renewable energies on electricity prices

Renewable energies are intermittent and unpredictable. Their production varies according to weather conditions. It can leap under the effect of strong sunlight or a strong wind.

If this sudden increase coincides with low demand, the electricity market is out of balance, with a risk of negative prices.

The constraints of conventional power plants

Faced with this increase in renewable production, the solution may seem simple: why not stop the production of traditional power plants?

The reality is more complex. The flexibility of nuclear power plants, gas or coal, is limited. The cost of restarting is high; a minimum technical power threshold must be respected; the minimum downtime is incompressible. While production can be slowed down, stopping completely is difficult.

Faced with these technical and economic constraints, producers prefer to sell at a negative price on the spot market rather than stopping their installations. A controlled loss of production over a few hours leads to smaller financial losses. In its report, the CRE estimates that this valuation of the electricity produced by the French fleet in hours of negative prices cost around €80 million in the first half of 2024.

... coupled with a drop in electricity demand

The price of electricity fluctuates with demand. The latter varies according to consumer behavior and climatic conditions.

Negative prices occur especially during the summer, when demand weakens. Rising temperatures, longer working days, the summer closure of businesses and vacations are slowing consumption. During this period, solar production reached its maximum, accentuating the network imbalance.

Also in its report, the CRE also highlights the risks of negative prices on weekends and afternoons.

Climate change is making the situation worse. With mild winter and spring temperatures, negative prices are being observed earlier and earlier in the year.

What are the consequences of negative electricity prices?

Negative electricity prices could be welcome. But this phenomenon is not sustainable in the long term. Negative prices disrupt the market, with unexpected and sometimes problematic effects.

A risk of producer investors disengaging

Negative electricity prices are making investors cautious. If profitability becomes uncertain, Businesses are hesitant to finance new means of production, fearing not to cover all of their fixed and variable costs.

In a market, seeing negative prices is normal. They reflect the balance between supply and demand at a given moment. But their frequency raises questions about the viability of this economic model if it ultimately discourages electricity production.

A lack of confidence in renewable energies

The rise of renewable energies accentuates the phenomenon of negative electricity prices. A country with high wind capacity could suffer the consequences, such as Germany.

Usually, excess energy is exported thanks to European interconnections. However, with the rise of renewable energies in all countries, The electrical networks are saturating. It then becomes difficult to transport excess production to Europe. In 2023 and 2024, France remained an exporter in 85% of cases during hours at negative prices. But trading volumes are falling compared to hours with positive prices.

How to avoid negative electricity price situations?

To limit negative electricity prices, several measures are being studied. Some are in the process of being implemented. They target both supply and demand. The law of the market is relentless: playing on supply and demand is the only solution to reduce risks.

Encouraging the flexibility of electricity consumption

Intelligent systems offer a simple, fast, and effective solution for adapt electricity consumption to supply in real time. The intelligent control for certain uses (heating or cooling via heat pumps, electric vehicle charging) reinforces the stability and flexibility of the system in the face of unexpected variations.

The TURP 7 brings a major breakthrough, with the reform of off-peak and peak hours. By establishing at least two off-peak hours in the afternoon, CRE intends to stimulate demand when renewable production is strongest, thus reducing the risks of negative market prices.

Reducing renewable production in case of negative prices

Negative electricity prices have no impact on renewable energy producers who are obliged to buy. They then have no interest in stopping their production despite a low downtime cost.

In its recommendations, the CRE recommends the support for the stopping of photovoltaic installations and wind turbines during a period of negative prices.

Several options are being considered, depending on the type of production and the contract:

• Amend existing contracts with the establishment of financial compensation in the event of a cessation of production.
• Lowering the thresholds triggering additional remuneration.
• Revise the purchase obligation regime for photovoltaic open windows.
• Adapt the conditions for the payment of the non-production bonus in the event of negative prices.

The CRE also insists on strengthening the contribution of renewable energies to the balancing mechanism of the electrical network. She recommends the establishment of a programming obligation in network access contracts in order to help RTE better anticipate imbalances.

Develop electricity storage capacities

When electricity production cannot be reduced or consumed, one option is needed: store for later use.

In France, hydroelectricity and WWTPs are the pillars of electricity storage. But other technologies are emerging, including electrochemical storage batteries in full growth. Promising prospects are also emerging with the Power-to-Gas and the storage of electricity in the form of hydrogen.

By balancing supply and demand in real time, storage increases the flexibility of renewable energies and stabilizes the electrical system.

Strengthening the supranational interconnections of electrical systems

The coupling of national markets and the pooling of flexibility resources maintain homogeneous wholesale electricity prices in a large part of Europe.

An unbalanced network can be rebalanced thanks to a nearby electrical system, provided that the capacities of the interconnections are not saturated. Strengthening these links would make it possible to limit negative price episodes.

Negative electricity prices are not just a temporary anomaly: they reveal an electrical system put under stress by the necessary energy transition. While renewable energies are essential for decarbonizing the future, they are upsetting market balances. Their massive integration, without solutions for flexibility, storage or intelligent management of demand, generates perverse effects. The incentive to reduce renewable energies during a period of negative prices, while maintaining fossil production, once again highlights the major challenge of our time: reconciling climate ambition, energy security and economic imperatives.

Did you know that?

Your Sirenergies space allows you to visualize market price curves updated daily.
There are various products:
— Forward products in electricity (baseload and peakload) and gas over the years, quarters and months periods;
— Total depth since the products were put on the market;
— Product history, current products and forecasts for A+4 and A+5;
— Spot product in electricity and gas (PEG and TTF) by the hour, day and month;
— CO2 year and December.

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