In recent years, we have been seeing negative prices at the power exchange more and more often. Especially on sunny holidays, power production has exceeded demand. Negative prices are a clear signal for electricity market experts that the market needs more flexibility.
It is usually high electricity prices that cause people to criticize the energy transition. However, especially during the summer months, there is an increasing problem with prices being too low. “Energy Madness: Free Electricity Causes Germany to Lose BILLIONS” was the headline in the German newspaper Bild Zeitung on May 22, 2024, and it is not alone in this claim. Of course, they are not referring to the electricity price for end users, but to the price in the energy exchange. Prices of zero and below always occur in the power exchange whenever supply is greater than demand. The season for negative prices is from April until August, and during the Pentecost and Easter holidays, negative prices are practically a given now. During these times, the seasonal high in solar power generation coincides with low demand from industry due to the holidays.
In principle, negative prices are not a problem. They show that the electricity market works and send a signal to shift consumption towards these times. In recent years, great progress has been made in increasing solar power generation, while the deployment of flexible consumers and storage systems has been comparably sluggish. This leads to negative prices becoming more and more frequent. In 2023, the day-ahead electricity price was zero or less for 260 hours, in 2024, it was already 440 hours by October.
Without the German Renewable Energy Sources Act (EEG), the phenomenon of negative electricity prices would probably only interest a handful of electricity market experts. However, three-quarters of wind and solar power plants currently receive a fixed feed-in tariff from the “EEG pot” – even when the market is signaling a surplus of electricity through negative prices. New and large-scale systems are usually required to sell their power in the market, so it becomes less attractive for them when prices are negative. But at least during the first few hours of negative prices, they continue to receive a market premium through the EEG. As a result, there are more and more hours each year when wind and solar power plants receive money from the EEG even though their electricity is not needed. Ten years ago, this already cost tens of millions of euros, and now that figure has grown to billions, which is very hard to convey.
The EEG cannot be blamed for the fact that there are negative electricity prices. Contrary to Bild and Welt’s portrayal, they are not an exclusively German problem. According to an analysis by the federation of the European electricity industry Eurelectric, electricity demand in the EU fell significantly in 2023 compared to the previous year. Eurelectric primarily blames the economic slowdown in the industry, as well as the fact that electrification – of transportation, heating and of the industrial sector – has not progressed as quickly as expected. Combined with an increase in green power generation and a continued lack of flexibility, this leads to a temporary oversupply of electricity.
Most of the time, negative prices are only a few euros below zero – but the peak values are becoming more extreme, says Josephine Steppat, Analyst at Energy Brainpool. Transmission system operator Amprion observed such a situation on Easter Monday in 2024. In the day-ahead market, they sometimes had to pay several hundred euros to lose a megawatt hour of electricity, in the intraday market they even paid thousands. This experience matches the results of Energy Brainpool’s analysis: Electricity spot prices are much more volatile than they were before the energy crisis. As experts predicted for years, renewables are now large enough to shape the energy system. However, there is still not enough flexibility to balance them out. As welcome as the progress of renewables is, we cannot allow this discrepancy to become permanent. Supply and demand must be brought back into balance – not only in the energy exchange but also in the local distribution of electricity, as the cost of redispatch, i.e. congestion management in the grid, has also drastically increased.
As a result, there is now an urgent need for incentives and ways to shift or absorb peaks in green power generation. In Germany, the outgoing government’s first step is to cut EEG subsidies during times of negative electricity prices. “Getting a feed-in tariff for electricity when the prices are negative increases the cost for our economy, so it makes no sense,” said Robert Habeck, Federal Minister of Economic Affairs and Climate Action, at the Forum Solar PLUS last November. His ministry’s latest plan is to withhold the feed-in tariff when prices are below zero. The same goes for the direct marketing premium.
A scenario by the consultancy Energy Brainpool shows that Habeck’s plans would eliminate negative prices from the electricity market within a few years. However, the rapid expansion of renewables would dramatically increase the hours of essentially free electricity at the energy exchange well into the 2030s. This may sound attractive to electricity customers, but it is not economically viable for wind and solar power producers. “If I sold 50 percent of the electricity I produce each year for zero euros, I would make almost nothing,” summarizes Tobias Kurth from Energy Brainpool. So if you are committed to the energy transition, you need to create the right framework to ensure that the expansion of flexibility is significantly accelerated.
One solution for PV plant operators to avoid negative spot prices are storage systems. “Large-scale storage systems with a capacity of around 2 GWh are already available today, and they are often added to solar power plants. They help obtain better market values for solar power,” says Bernhard Strohmayer, Head of Renewable Energies at the German Association of Energy Market Innovators (bne). These solar storage systems could be used in the winter to absorb wind energy and bridge “dark doldrums”, i.e. periods when neither wind nor solar power can be generated. However, many of these storage systems were funded as solar storage systems as part of the EEG innovation tender and may only be used for solar power produced on site. Their potential often goes unused during the winter. As a result, the focus is now shifting towards large-scale storage systems without solar power plants designed to absorb electricity from the grid when prices are low.
According to the Bundesnetzagentur’s core energy market data register, large-scale storage systems with a total capacity of around 2.5 GW are currently being planned in Germany. But the connection requests to Germany’s four transmission system operators are of a much higher order: A survey by pv magazine found that at the end of last year, there were 650 connection requests for a total of 226 GW of storage capacity. The status of these projects is unknown but Thomas Dederichs, Head of Strategy and Energy Policy at transmission system operator Amprion is already referring to it as a “tsunami of connection requests”.
However, technical complexity and regulatory confusion have been blocking the tsunami’s path. The technical problem is that storage systems are supposed to react in the electricity market. This behavior is described as system-serving. It is different from grid-serving behavior and can sometimes have the opposite effect: When storage systems absorb or feed large capacities into the grid (depending on the price), they can push the power grid to its limits. The grid would need to be upgraded to handle such amounts of electricity. To pay for this, grid operators are demanding construction cost subsidies from storage system operators, which makes many storage projects unprofitable. The German Federal Court of Justice is currently reviewing whether charging such subsidies is legal. Once a regulatory solution to this problem has been found, the expansion of storage capacity is likely to go through the roof.
The amendments to the Energy Industry Act, passed by the German Bundestag at the end of January 2025, ensure an amicable compromise. With so-called flexible grid connection contracts, grid and plant operators can easily agree that storage systems may be connected quickly and without the need to pay construction cost subsidies, provided they are operated with regard to grid constraints. “Flexible grid connection contracts are key to the expansion of flexibilities,” says Strohmayer. He is optimistic about the future. “Projects in California have shown that storage systems are excellent at absorbing feed-in peaks from solar installations. In Germany, too, everyone involved in storage is learning a lot right now. Nevertheless, grid operators remain skeptical of storage projects. Once they see the benefits of using battery storage systems and their attitude changes, and with a clear grid code in place, deployment will increase rapidly.” The storage tsunami may yet come.
When combined, private households have considerable potential for participating in the electricity market. Many households have already become so-called prosumers rather than consumers with a largely rigid profile, simply by operating a private solar installation. However, their energy management, if they have one, has only been aiming at minimizing the total amount of electricity drawn from the grid. With the introduction of smart meters and dynamic electricity prices, this is starting to change. Together, many EV chargers, batteries and heat pumps could form manageable swarms, which would turn them into proper electricity market players.
This model is not new. Green energy supplier Lichtblick was already working tirelessly on the swarm electricity concept ten years ago, but the time was not yet ripe. But its efforts were not in vain: Today, the company offers a white label solution called ison that connects home energy systems with electricity traders. When it comes to selling home storage systems combined with swarm management and an individual electricity tariff, supplier sonnen was also a pioneer. Due to their strong public relations efforts, start-ups like 1Komma5° and Enpal have garnered significant attention. In addition to solar installations, they also sell complete home energy systems that include a swarm intelligence-based management system and the required residual current. This makes them “virtual power plant” operators that can flexibly react to supply and demand in the electricity market.
The potential of commerce and industry, albeit more difficult to grasp, is almost as important. There are heated discussions about which processes could actually become flexible, to what degree and under which conditions. For example, it is easier to be flexible for five minutes than for 15 minutes or even longer. It also matters whether the load is to be increased or decreased, and how long the lead time is. As a result, any figure on the potential of commerce and industry would actually need to be accompanied by a long footnote. In an attempt to consider all of these factors, the Kopernikus project SynErgie concluded that industrial companies in Germany could reduce their load on demand by up to 3.3 GW for 15 minutes. For the same amount of time, the output could be increased by 1.5 GW. The future could see the addition of other flexible processes that no one has thought of yet – from ventilation control in sewage treatment plants to the electric extraction of carboxylic acids in the chemical industry, which is still largely dependent on fossil fuels.
The electrification of processes that have traditionally been based on fossil fuels also fits into Cillian O’Donoghue’s vision of tomorrow's energy market. As Eurelectric’s Policy Director, he believes the answer to negative prices is more flexibility and higher power consumption. This is not to say that energy should be wasted – on the contrary. Heat pumps are more efficient than gas-fired boilers, and electric cars are more efficient than cars with internal combustion engines. In other words, electrification will actually reduce the overall energy demand. Take electric ammonia crackers, for example: At 95 percent efficiency, they are more than twice as efficient as fossil fuel-powered crackers.
Our future energy world will require much less gas and fuel, but more electricity. However, companies are reluctant to invest. Electricity prices are still high compared to gas prices, in part because of statutory levies and surcharges, O’Donoghue says. This issue has also been addressed by the German Federal Association for Heat Pumps (BWP).
Most modern electrical devices are time-flexible and can react to fluctuations in the renewable energy supply. Dr. Simone Peter, President of the German Renewable Energy Federation (BEE), likes to describe flexibility as the “key currency for a reliable and affordable climate-neutral electricity system.” The BEE also continues to promote the role of biogas, which is intended to dampen peak prices when “dark doldrums” occur.
Smart Energy Europe (smartEn) has also studied the two extremes, midday peaks in summer and dark doldrums on cold winter nights. The European business association has calculated what the electricity world in Europe could look like in 2030, with and without a massive expansion of flexibilities. Its “inflexible” scenario still includes the use of electric cars, electric heating and cogeneration plants that can be controlled according to a schedule, similar to how storage heaters were used in the past, with electrolyzers and grid-integrated electricity storage systems being able to respond flexibly to the market. But that is not enough, smartEn concludes.
In smartEn’s flexible scenario, on the other hand, all players react to the market in real time – from industrial companies to electric vehicles that feed electricity back into the grid (vehicle-to-grid) whenever necessary. According to the association, such an integration of all technical flexibilities in the market would cut the cost of electricity generation by 4.6 billion euros while at the same time reducing the curtailment of renewables by 61 percent.
Once again, this shows that there is no panacea for balancing generation and consumption in the energy transition. In fact, there are many different types of flexibility. It will be a challenge to create a framework for unlocking this potential in an efficient and pragmatic way, but it is one that the next German government will have to address.
More electricity storage systems and greater demand-side flexibility are effective means against negative electricity prices. They allow large amounts of capacity, equivalent to the output of entire power plants, to be shifted to another time. Find out how flexibility can be intelligently integrated into the energy system from exhibitors at EM-Power Europe from May 7–9, 2025 in Munich.
As part of the EM-Power Europe, The smarter E Forum offers presentations with practical insights on the topic. For example, the European association smartEn will host a session on Optimizing Grids Through Demand-Side Flexibility. Exhibition attendees from industry and commerce can find out how to save costs and tap into new sources of revenue through flexible energy use. Another topic are Home Energy Management Solutions (HEMS) that prosumers can use to control their power consumption. On May 6 and 7, 2025, the EM-Power Europe Conference will focus on how to drive the electrification of households and industry in general, and how consumers can reduce their energy costs.
EM-Power Europe is part of The smarter E Europe, the continent’s largest alliance of exhibitions for the energy industry. 3,000 exhibitors and 110,000+ energy experts are expected in Munich from May 7–9, 2025 at the four parallel exhibitions Intersolar, ees, Power2Drive and EM-Power Europe.
For more information, please visit: www.EM-Power.eu .