Negative electricity prices in EU: what are they, why do they happen and how can you benefit?

Negative electricity prices are a phenomenon that occurs when the supply of electricity exceeds the demand and the market price drops below zero. This means that producers have to pay consumers to take their electricity, instead of the other way around.

Negative electricity prices have become more frequent in recent months. For example the Netherlands have already had 36 days with negative prices this year compared with 23 for all of 2022. In Europe as a whole the first 7 months have had three times (3x) more negative electricity price hours vs 2022. There are several factors that can contribute to negative electricity prices, such as:

☀️🌬️ High renewable generation
Wind and solar power are variable sources of electricity that depend on weather conditions. When there is a lot of sun or wind, they can produce more electricity than needed, creating an oversupply in the market. Renewable generation also has low marginal costs, meaning that it is cheaper to keep producing than to stop or curtail output.

📉 Low demand for electricity
Demand can vary depending on the season, the time of day, the weather and the economic activity. When demand is low, such as during weekends, holidays or recession, there may not be enough consumers to absorb the available electricity.

💀 Inflexible conventional generation
‍Some power plants, such as nuclear, coal or gas, have high fixed costs and long start-up and shut-down times. This means that they cannot easily adjust their output to match the demand and may prefer to keep running at a loss rather than stopping and restarting later.

But why are they actually negative?
As switching energy production off for a short time is not an option for some power plants and the grid still needs to be in balance between demand and production, the negative prices is the market trying to encourage electricity users to switch their consumption to these hours. In practice power plant operators bid to the market, that they are willing to for example produce electricity at  -€50/MWh. In case of renewable plants, this is because due to government support schemes they can still earn a profit. For fossil power plants they do so, because it is more profitable to generate negative revenue for a few hours, compared with turning off the plant and restarting it (which can be an arduous task for coal-fired power plants).

Negative electricity prices can have both positive and negative impacts on the electricity system and the consumers. On one hand, they can signal the need for more flexibility and storage in the system, as well as more interconnection and integration between different markets and regions. They can also incentivize consumers to shift their consumption to times when electricity is cheaper, free or as we have seen more recently even negative, reducing their bills and helping balance the grid. Charging your EV or home battery is a great way to both help the electricity grid and fill up our car at lowest possible cost. Gridio can help you automatically catch these hours of cheapest electricity.

With negative prices reacing a record low of -60€/MWh as happened between 2-3pm CET in some spot price regions on the 16th of July, you might even get paid for charging up your EV, as they also pay for other additional costs such as transmission and taxes. As more renewable electricity production will enter the grids all over Europe we are likely to see this trend with negative electricity prices continue years ahead and the market is screaming for consumers to help balancing the grid.

‍To benefit from sub-zero electricity prices to charge your car, you can use maximum price (set to 1c/kWh) and minimum charge (e.g. 50%) to have enough electrons in the battery even if prices are above zero!

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