European wholesale electricity markets have seen zero or negative power prices for the most hours on record this year amid soaring renewable energy generation and a mismatch between supply and demand hours for solar power.
Zero or negative wholesale power prices have started to slow investment in capacity additions and make the case for the need for higher investment in energy storage, through which power producers would avoid curtailing electricity output or having to pay to offload electricity, according to a Reuters analysis.
The number of tradable hours in which power prices were zero or negative have jumped so far this year in major wholesale power markets, including Germany, France, the Netherlands, Spain, Finland, and southern Sweden, per LSEG data cited by Reuters.
Spanish power prices, for example, tumbled in February to a fraction of the price in neighboring France as record wind and solar power generation in Spain triggered an extreme slump in prices.
However, solar power producers have started to see slowing investment in capacity, Spain’s renewable energy association says, as negative prices have become more common in the country’s wholesale power market this year.
“It is not something that worries us at the moment. What does worry us is that it will be repeated or can be repeated over time,” José María González Moya, director general of renewable lobby APPA Renovables, told Reuters.
“And yes, in a way, investment is slowing down. Not stopping, but slowing down,” Moya added.
The possible solution to this situation in which booming solar additions weigh on solar power producers is higher investment in storage or solar plus storage, analysts and forecasters say.
“Volatile wholesale electricity prices create uncertainty for renewables companies over the impact on revenues and future investment, underlining the need for storage and grid expansion,” the International Energy Agency (IEA) said in its World Energy Investment 2024 report earlier this month.
“Developers who choose not to co-locate their wind and solar PV power parks alongside battery storage or other sources of flexibility may see a drop in potential revenues during peak generation – hampering profits and discouraging investment.”
