Negative power prices. Yes, you read it right. Getting free electricity or even getting paid to use electricity sounds like a dream, doesn't it? It has already happened a number of times and this may happen more often in the future. Therefore, we will tell you all about negative power prices in this article . 📈
Where do power prices come from?
To get a clear picture of where negative power prices come from, we'll take you to the source of our hourly power prices. It all starts at the EPEX Spot, the European energy market where electricity is traded.
On the day-ahead market of the EPEX Spot, various parties trade electricity daily for the next day. Energy producers, such as wind farms, solar farms and nuclear power plants, quote their prices for certain amounts of electricity they want to offer. Energy consumers, including energy suppliers and industrial users, indicate the prices at which they want to purchase certain quantities of energy. This trading goes through an auction, where a market price is set based on supply and demand. The auction is around noon and the results will be available around 1 p.m.. All energy producers who have offered a price equal to or below the market price will sell their energy. Energy consumers who submitted a bid price equal to or higher than the market price will buy this energy.
Good to know: the day-to-day market uses the "merit order. This means that producer offers are ranked by price, from low to high. Here, energy sources with low variable costs, such as solar or wind power, are usually on the left side of the merit order, while energy sources with high variable costs, such as gas or coal power plants, are on the right side. In this way, the cheapest available energy sources are used first, and the more expensive sources are turned on only when necessary. This keeps the price of energy as low as possible. An additional advantage is that this process also often means that green energy is used first before alternatives are used. So this is also good for the environment! 🌱
But how do the prices become negative?
Simply put, negative prices occur when energy supply exceeds demand. This phenomenon usually occurs at times when a significant amount of renewable energy is being produced, such as solar and wind power, while the demand for energy is low, such as in the middle of the day, at night or on weekends. Electricity cannot be easily stored for later use, so its generation must be almost simultaneous with consumption. The surplus energy on the power grid has to go somewhere, as it cannot just disappear. 😶🌫️ Therefore, energy producers have to pay money to ensure that other parties will use this surplus energy.
You might now think, "So why don't they just turn off wind and solar farms for a while?" Understandable! But here's the thing: Many wind and solar farms cannot just be turned off without risk of problems. In that case, shutting down and restarting would incur more costs than it would generate. In addition, the financial incentive not to produce often does not lie with the farm itself. Long-term contracts ensure that there is a guaranteed price, even if the price is low and investments are also based on this. In addition, wind and solar farms often have to report to investors and owners on availability and production. So from that perspective, it is better to just continue producing even if the price is negative.
How can it be that only a few hours of the day are involved?
We've already told you about the auction that takes place at noon, but actually this is not just one auction. It is actually 24 auctions, one for each hour of the next day. This means that each hourly price is determined separately. This is also how the hourly prices at Tibber are established. Given that the supply of solar energy is decisive and highest in the afternoon, there may be specific hours when energy prices go negative. So sometimes that's just one hour. ⏰
Why are next-day prices not displayed until later?
Within the EPEX Spot day-ahead market, there are certain upper and lower limits set for energy prices. Currently, power producers can charge up to €4000 for each kWh they produce, and they may be willing to pay up to €500 to get each kWh on the grid (that's where the negative prices come in).
When prices reach a limit and there is no match between supply and demand during peak hours, a second auction is held. During this auction, adjustments are made (for example, limiting imports or exports at country borders), under these changed conditions, an agreement is then reached between supply and demand. Moreover, the different parties can also adjust their bids, so an agreement is still reached. 🤝
Normally the final prices are published around 1 p.m., but so if an additional auction is needed for one of these hours, it all takes just a little longer!
It is quite rare for a second auction to take place. However, it is expected that this will become more common. This is because we are generating more and more renewable energy, and solar and wind energy are only available at certain times. So the upper and lower limits will start to be used more often.
Solar panels and negative power prices. Do I have to pay to feed power back?
With negative electricity prices, we often immediately think of the benefits of this, we can use free electricity, or even get money to charge our car! But if you produce your own power and deliver it back to the grid, things are just a bit more complicated. Let's look at what happens when you have solar panels, a dynamic energy contract AND face negative prices.
Picture this: it's a beautiful day, the solar panels on your roof are producing more power than you are consuming and the surplus power is fed back into the grid. Normally you would receive compensation for this, but in the case of negative prices it works slightly differently. As we explained in the article "Where do negative prices actually come from?", it is not easy to store electricity for later use. So if there is a surplus of electricity in the grid and you want your solar panels to supply additional electricity to the grid at the same time, you have to pay for it, just like any other energy producer. In this way, other consumers are encouraged to use this power anyway, and so the supply and demand of power in electricity grid is rebalanced. And this is what it's all about, making sure the power grid stays in balance so that it continues to function properly. ⚖️
What can I do?
Negative power prices will not disappear overnight. That's why it's good to know what you can do in these cases. As Tibber often points out, it's best to use your self-generated energy directly yourself, and Tibber wants to help you with that. For example, do you have an electric car, water heater or home battery? Then charge those as much as possible. Also try to do your laundry and bake some nice cookies! Of course, this also applies even if you don't have solar panels! 🍪
Are you unable to use the power generated by your solar panels directly in your home? Then you can consider switching off the solar panels at these times, either by switching off the appropriate group in your meter cupboard or by switching off your inverter. However, you should only do this if you are sure that your inverter can do this and if it is in an accessible location. It is best to contact your installer. If your inverter is not suitable to be switched off it can be damaged if you switch it off anyway.
However, do not count yourself rich by switching off your solar panels, it is often only a matter of a few hours and therefore we are usually not talking about significant amounts of money. Suppose you have 10 solar panels generating a total of four kWh. Then at a negative price of 15 cents, including taxes, you will have saved about 60 cents if you would not use anything yourself.
How can I turn on push notifications when the electricity price is low in the Tibber-app?
Would you also like to receive push notifications the moment tomorrow's power price is unusually low? Then in the Tibber-app, go to 'Account', tap 'Push notifications', then tap 'Power price'. Here you can turn on notifications for a 'Low power price'. Also want to receive notifications when there is a high power price? Then turn these on right away as well. 🔔