Do electricity markets need to be redesigned?
On April 28, 2024, Spain, Portugal and southern France suffered large-scale power outages, but on May 1, the wholesale electricity market price in these regions fell to -10 euros per megawatt-hour. This means that power plants not only cannot make a profit by selling electricity, but also need to pay to inject electricity into the grid.
This phenomenon usually occurs during periods when electricity supply far exceeds demand, such as holidays or weekends, when industrial activities decrease and renewable energy (such as solar and wind) power generation surges due to good weather conditions. Because the power system must balance production and consumption in real time, power plants have to maintain operation through negative electricity prices to avoid losses caused by frequent starting and stopping of equipment.
Negative electricity prices are not uncommon in countries with a high proportion of renewable energy, such as Germany, the Netherlands and Finland, especially in spring and autumn, when demand has not yet reached its peak, but wind and solar power generation has greatly exceeded the grid's absorption capacity.
Although negative electricity prices appear in the wholesale market, household users usually do not receive electricity subsidies (unless they adopt special market-linked packages). For private power generators, negative electricity prices directly lead to revenue losses, and may even affect investment willingness due to long-term losses.
The more far-reaching impact lies in the stability of the power system. While providing electricity, traditional thermal power plants also maintain the stability of the grid frequency through "inertia". The intermittent characteristics of renewable energy, coupled with disorderly grid connection under negative electricity prices, may aggravate grid fluctuations and even cause power outages. In addition, frequent negative electricity prices may inhibit investment in new projects and hinder the process of energy transformation.
To solve the problem of negative electricity prices, a multi-pronged approach is needed:
1. Energy storage technology: Energy storage facilities such as those being promoted in Finland can absorb excess electricity and release it during peak demand.
2. Cross-border grid interconnection: Denmark balances regional supply and demand differences by strengthening power interconnection with other countries.
3. Dynamic demand management: France flexibly adjusts the output power of nuclear power plants to match the volatility of renewable energy.
Negative electricity prices are a warning signal for the transformation of the power system, highlighting the incompatibility of current infrastructure with a high proportion of renewable energy. In the future, it is necessary to accelerate the development of smart grids and improve market mechanisms to achieve sustainable integration of clean energy.