The Solarplaza webinar, Curtailment & Negative Electricity Pricing Trends, explored key issues in the European power market related to curtailment and low- and negative electricity prices. The underlying reasons, related challenges, and potential opportunities were discussed by Sylvain Cognet Dauphin (S&P Global), Jean-Paul Harreman (Montel Analytics), and Gerard Reid (Alexa Capital). Below are the main takeaways from this webinar that serves as a precursor to the Solarplaza Summit Future Electricity Price Europe (November 27, Amsterdam)
1. Experts all emphasize the increasing prevalence of negative and low Electricity prices
The growth in renewable energy, particularly solar and wind, has led to a rise in the number of hours with low or even negative electricity prices across Europe. This trend is especially prominent in regions with high renewable penetration and low flexibility in the generation mix, such as Germany, Spain, The Netherlands, and Italy. Factors driving these negative prices include excess power during peak generation periods and limited grid flexibility to store or reroute energy efficiently.
2. The impact on revenue and business models for renewable projects can not be understated
Solar PV capture rates—representing the ratio of actual revenue to baseload price—have been declining, mainly due to price cannibalization during peak production. Wind capture rates have fared somewhat better due to their generation profiles. The drop in capture rates impacts the financial stability of renewable projects, pushing asset owners to seek new models and strategies to stabilize revenue and secure long-term project and portfolio financing.
3. Storage and flexibility should serve as key solutions
The webinar emphasized the need for enhanced energy storage solutions, which could address both the curtailment of renewables and price volatility. Short-duration storage, especially batteries, is viewed as valuable for absorbing excess solar generation during summer and responding to evening peaks. However, long-duration storage remains less economically viable due to seasonal pricing patterns. Increased grid flexibility, regulatory support for storage, and demand-response mechanisms, such as utilizing EVs and virtual power plants (VPPs), were highlighted as critical areas for investment.
4. Be wary of “hidden” negative prices and market adjustments
Some European countries, like Italy and Spain, use mechanisms to minimize instances of negative pricing by curtailing renewables or setting a zero-price floor. However, this practice of “hidden” negative pricing, where the market clears at zero instead of negative values, could change as regulatory frameworks evolve, particularly with Italy’s anticipated adjustments in Q1 2025. Looking at the “real” negative pricing situation in Spain, it does not make sense to invest in that market anymore from a financial perspective.
5. Growing high-low price spreads indicate underlying system stress
Price spreads (the gap between the highest and lowest prices within a day) are widening, reflecting the strain on the existing demand versus supply profile of our energy mix. While this highlights opportunities for storage and demand-side management, it also points to the need for significant grid upgrades to handle fluctuations in supply and demand better.
6. The apparent investment challenges require a drastic rethinking of future strategies
The current price environment and evolving regulations underscore the risk for new renewable projects, as low prices during peak production can impact project financing and viability. The webinar speakers emphasized the importance of flexible, distributed energy resources (DERs) to adapt to market demands, recommending investment in grid modernization and data-driven management for enhanced efficiency.
These insights form a strategic framework for stakeholders preparing for the future of electricity pricing in Europe. The upcoming Solarplaza Summit Future Electricity Price Europe (November 17, Amsterdam) will continue these discussions, focusing on actionable strategies for adapting to these industry shifts. You can find access to the full recordings and get access to the slides that provide context to these takeaways here.
