Negative European Power Prices Across the Board

Negative European Power Prices Across the Board
Blog March 20, 2019

For the third weekend in a row, March 15-17, 2019, the European Power Exchange (EPEX) auction saw negative baseload and peakload power prices across Germany and other neighboring countries.

Hourly evolution of power prices for the Day-Ahead auction in Germany, France and Austria from March 15-17, 2019. Source: EPEX SPOT
Figure 1: Hourly evolution of power prices for the Day-Ahead auction in Germany, France and Austria from March 15-17, 2019. Source: EPEX SPOT

Negative power prices traditionally occur for a few hours when supply is ample and demand low. In this situation however, wholesale power prices turned negative for 20 consecutive hours, with the lowest price hitting EUR -20.23 per megawatt hour (MWh) for the hour 15:00-16:00 on Sunday, March 17. By averaging every hour of Sunday together, the baseload settlement reached EUR 0.43 / MWh, the lowest value Year-to-Date (YTD ).

Negative prices are useful as a market signal for demand shifts and storage implications. As wind and solar power shares grow, they will become more common. Indeed, the driver behind last weekend’s move was the increase in wind and strong solar generation coupled with relatively low demand. Figure 2 from our PowerRT platform shows live generation per fuel for the same period. Wind power production started the weekendaround 38 gigawatts (GW), averaging 33 GW through Sunday.

Live generation per fuel in Germany. Source: Genscape
Figure 2: Live generation per fuel in Germany. Source: Genscape 

On Sunday solar generation peaked at close to 17 GW at 13:00. With actual demand at 56 GW, the combination of supply from wind, solar (and other renewables such as hydro, pumped storage, geothermal etc.) and nuclear power (estimated at around 7 GW) pushed coal and lignite out of the money. 

Electricity is a rare commodity in two respects. First, it has no shelf life and is therefore consumed immediately. Second, power plants can’t always be easily stopped and restarted like production lines. It may be cheaper for a power plant to pay you to consume more power than ramp up and down. 

Behavior of a power plant in Germany during hours of negative prices. Source: Genscape
Figure 3: Behavior of a power plant in Germany during hours of negative prices. Source: Genscape 

Figure 3 shows the behavior of a power plant when its marginal costs of producing electricity become too expensive for a few hours.Here, a German coal plant ramps down its production when prices turn negative, before ramping production back up when it made economic sense.

With the PowerRT platform, a trader or electricity producer can follow the evolution of power production at the plant level and visualize a country’s fuel stack in real time. By plotting this against the Day-Ahead demand (or actual demand), they can monitor which fuel is marginal and the behavior of specific plants that are normally price-setting. PowerRT gives you an edge in anticipating such extreme price moves, allowing you to stay ahead of the game. To learn more, or to request a demo of PowerRT, please click here.