Renewables and Negative Energy Prices

For most of Sunday, May 8, German energy providers paid consumers to use electricity. Thanks to an unusually sunny and windy day, the country's renewables base--consisting of solar, wind, biomass, and hydro--suddenly provided over 85% of the 63 GW consumption, leading to a brief surplus. For comparison, Germany's renewables typically supply about 35% of the country's consumption. Around 1 PM prices dipped as low as -€130/MWh before stabilizing four hours later.

For localities with heavy renewables investment, negative power prices are not unusual. Providers plan for average conditions, and when favorable weather hits it's impossible to take most conventional plants offline, leading to excess energy. Germany has emerged as a global leader in successful renewable energy investment, increasing their net generation from renewables nearly sixfold since 2000. As part of their ambitious Energiewende plan, the country is aiming at 100% renewable generation by 2050--a lofty goal by any stretch, albeit one that's looking increasingly possible.

The US isn't immune to energy price anomalies. An EIA report pointed out that the Northwest US power sector experienced 80 instances of negative pricing during the spring and early summer of 2011 due to low-cost hydroelectric generation. While much of the surplus power was routed to California, prices still routinely dipped into the red. Texas, which experienced a notable case of negative pricing last September, generates 9% of its energy from wind power, more than double the national wind generation average. That situation was made more complicated by the fact that Texas is more or less a sovereign energy state, with its own electric grid run by the Electric Reliability Council of Texas, making it more difficult to reroute surplus energy to other states. But the September 2015 incident pales in comparison with the more recent one in Germany: at its trough Texas consumers were being paid around $8.50/MWh for their power.

These sudden surges in renewable generation may seem positive in some ways, but negative prices more often serve to point out issues in renewables-heavy mixes. Critics believe generous government subsidies and inflated power prices have led to overbuilding without simultaneous grid improvements, leading to both high costs (footed by taxpayers or energy consumers) due to intermittency and periodic overcapacity. These costs become even more difficult to stomach if government support is reduced or pulled completely.

Renewable power goals that don't consider wider integration issues create imbalances that cannot be overcome by shutting down conventional power. Texas wisely spent over $7 billion to adapt its grid to increased wind generation, a figure far beyond the millions quoted to build turbines. As far as Germany's ambitious energy transition, investment costs are predictably high, and the country spends €1.5 billion alone on annual energy research. Several studies have found that even a 100% renewables mix would need support from backup gas power for periods with low wind and sunlight, or major infrastructure transformation to create the flexibility necessary for fully intermittent power.

An energy utopia would completely eliminate negative prices. But for now they're an important bellwether that even the most developed renewable-heavy economies don't have the flexibility to handle the large surpluses and deficits common to intermittent resources.

Image credits: Dennis Jarvis / CC BY-SA 2.0