In Europe’s power markets, energy prices are dropping below zero. The demand-supply chain is being compromised as the supply sometimes vastly exceeds the demand.
Although this phenomenon has benefitted over a million consumers by providing free electricity, it raises investor concerns. They are questioning how much more renewable power they can build into an $800 billion market before returns start to suffer.
Read more: Sunny Side Down for Germany’s Solar Power Sector
Axel Thiemann, chief executive officer for solar developer Sonnedix, said, “Negative pricing is going to slow down the deployment of renewable capacity for most players. That affects your ability to invest at reasonable levels”, Bloomberg reported.
Although this trend is not new, it is rare. Negative electricity prices were first seen in Germany in 2008 as the country ramped up wind and solar production.
Germany, Europe’s biggest power market, had about 300 hours with prices below zero last year. According to energy analytics firm EnAppSys Ltd, that may double in 2024.
The most common solution for producers and investors is to build more batteries to store excess electricity for distribution.
In an interview with Bloomberg, Statkraft AS CEO Birgitte Ringstad Vartdal said, “We need to manage the market’s intermittency. Negative prices are also an opportunity to create value.”
Negative prices, in turn, lead to a phenomenon called price cannibalization, in which operators hesitate to invest further because the current market prices for their produced clean energy are insufficient to justify new investments.
Alexander Hauk, a spokesman for the German Association of Local Public Utilities, confirmed the phenomenon and said, “The effect is now so strong that interest in investing in solar parks is declining sharply,” Bloomberg reported.
