Surge in renewables turns electricity prices negative
The surge in solar panels and wind turbines is leading to an increase in negative wholesale electricity prices. This phenomenon, occurring in regions such as southern Australia, southern California, France, and Switzerland, happens when production exceeds demand. For example, in southern Australia, negative prices have been recorded about 20 per cent of the time since last year. Southern California saw negative prices over 20 per cent of the time in the first half of 2024, up from the previous year. In France, negative prices occurred around 5 per cent of the time in the first six months of the year, surpassing last year’s record. On July 14, Swiss prices dropped to – 400 EUR per megawatt.
The International Energy Agency (IEA) attributes the increasing negative prices to a drop in demand since the COVID-19 pandemic and the war in Ukraine.
Negative prices reflect an oversupply of electricity when production is strong but demand is weak. To manage this, producers often reduce output when prices turn negative, although some may continue production due to fixed-price contracts or state compensation.
Future growth in renewables, as outlined in the COP28 climate conference agreement to triple renewable energy capacity by 2030, necessitates better grid management. According to Mathieu Pierzo of RTE, solar and wind producers will need to contribute more to balancing the grid. The IEA emphasizes the need for greater flexibility in supply and demand, calling for improved regulatory frameworks and market designs to support solutions like demand response and storage.
-The Hindustan Times