Negative electricity prices, an ambivalent phenomenon of the energy transition

What are negative prices?

The price of electricity fluctuates based on supply and demand. When production exceeds consumption, the price per megawatt-hour (MWh) can become negative on the wholesale market.

"Because electricity is difficult to store on a large scale, the electricity system must constantly balance supply and demand in real time," explains Eurelectric, which represents the electricity industry in 30 European countries.

"In times of low demand and high supply, extremely low or even negative electricity prices can occur. This means that producers (...) must pay to feed their electricity into the grid."

Why is this phenomenon increasing?

Negative prices occur at the peak of renewable energy production, which is intermittent by nature and because its production cycle does not always match that of demand.

Thus, the peak of photovoltaic power is between 12:00 p.m. and 16:00 p.m. while consumption is higher in the morning and evening.

During these episodes, it is sometimes more expensive for a gas-fired power plant, for example, to interrupt its production for a few hours than to pay to sell its surplus electricity. More flexible, renewable energy sources can shut down quickly.

What is the share of negative prices in different countries?

Negative prices vary depending on the electricity mix, i.e., the energy sources used to generate electricity. According to the International Energy Agency (IEA), they accounted for 25% of production hours in 2024 in southern Australia and 15% in Southern California.

In Europe, where they have been growing since 2022, they are mainly found in Finland (8% in 2024), Sweden (7%), the Netherlands and Germany (5%).

France recorded twice as many negative prices last year as in 2023, or 359 hours (4%), according to RTE, the French high-voltage network operator.

What is the cost for the electrical system?

According to the IEA, negative prices have "generally remained within a moderate range," between -1 and -30 dollars per MWh. In 2024, they averaged -2 ​​dollars per MWh in Finland, -7 in Houston, Texas, -12 in Germany, and -25 in Victoria, Australia.

For comparison, the average wholesale electricity price in 2024 was $80 per MWh in Victoria and $85 in Germany, according to the IEA.

In France, "these prices have mostly remained close to zero, without reaching very low levels," according to RTE. The French Energy Regulatory Commission (CRE) has estimated "for illustrative purposes" their cost to the community at around 80 million euros between January and June 2024.

How to reduce the bill?

To successfully achieve the energy transition, we must increase the share of electricity in energy consumption in order to reduce that of fossil fuels, which requires investment.

The first solution involves the electrification of uses (electric vehicles, heating, industry, etc.) to better absorb the surplus, explains Eurelectric.

It is also necessary to increase storage capacity using batteries to conserve unused energy during peaks and reinject it into the network when consumption increases.

The flexibility of the system can also be improved by modulating the production of renewable electricity during these periods.

Finally, we can adapt demand to supply.

In France, off-peak/peak billing will shift to times when electricity is plentiful and inexpensive, primarily in the afternoon. This will allow for "better smoothing" of consumption and "a controlled bill" for customers, according to the CRE.

Export surpluses

In 2024, France exported a record €5 billion worth of electricity to Italy, Germany, Belgium, and the United Kingdom, thanks to its nuclear, hydroelectric, and renewable energy production.

It "did not sell off its electricity," RTE emphasizes, "it almost constantly exported its competitive and surplus production which would otherwise have had no outlet."