last Monday, April 28, Spain, Portugal and southern France suffered a mass blackout. Given this situation, many questions arose and there is still no clear cause. However, in the following days, a paradox became evident: on May 1, the price of electricity in the wholesale market came to mark € 10 per MW/h, that is, generating electricity cost those who produced it.
In negative? Negative prices arise when the supply of electricity far exceeds demand. On holidays or weekends, with low industrial activity and favorable meteorology, renewables – especially solar and wind – produce so much energy that there is nowhere to place it. As the electrical system must be in constant equilibrium between production and consumption, the generators get to pay to turn their energy on the network in order not to stop turbines or panels. According to five days, this phenomenon is not as weird as it seems: it happens when the market is “overflowed” by the offer and cannot absorb all the electricity that is generated.
So what does it mean? At the wholesale level, a negative price indicates that generators pay to produce electricity. This does not mean that the domestic consumer charges money for lighting the light, although in some indexed rates a very low or even null bill can be noticed at certain times, as they have explained in the economist. In addition, for private operators, negative prices are a headache: they not only do not enter to produce, but they can also have to assume losses. For the electrical system, it also represents a challenge: overproduction requires a very fine management to avoid blackouts or infrastructure damage.
An increasingly common phenomenon. In countries such as Germany, the Netherlands or Finland have registered negative prices, especially in spring and autumn, when renewable production is high but demand has not yet reached its seasonal peak. This excess supply, driven by the rapid expansion of renewables, exceeds the storage capacity and flexibility of the electricity grid. The result: producers are forced to pay to inject energy into the system.
While it may seem good for the consumer, it actually raises a great challenge for the stability of the electrical system. The solution to this complex problem goes through a combination of improvements in storage infrastructure, as they are doing in Finland, greater interconnection between countries, as with Denmark, and a more dynamic management of energy demand, such as the case of France and loads them in their nuclear power plants.
Can it be a problem for renewables? Paradoxically, renewables – clarity for energy transition – are also victims of negative prices. When they are repeated too many times: investment in new projects is dissuaged or force to stop production, which can damage equipment or waste resources. In addition, another technical challenge is evidenced in these scenarios: the stability of the network. The thermal plants contributed “inertia”, that is, a way of sustaining the balance of the system. Today, technologies such as grid forming And synthetic inertia try to compensate for that lack of backup, but they are still in deployment, according to the economist.
Symptom of something else. Negative prices are not an anecdote: they are a signal. They indicate that the electrical system needs to be urgently transformed to integrate more renewable without collapsing. A storage improvement, intelligent and flexible networks, and a reform in the electricity market that adapts to the new paradigm is needed.
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