Negative spot prices - is a gift still too expensive?

In 2024, the day-ahead prices on EPEX SPOT were negative in 457 hours - this corresponds to five per cent of the 8,784 hours of the year. During these hours, an electricity producer has to pay money for the electricity it generates and the buyer receives the money. Electricity generation and electricity consumption must be identical in a grid area at all times, as this is the only way the electricity grid can be operated stably at a frequency of 50 hertz. If the grid frequency deviates from the setpoint, the transmission system operators are called upon to provide the necessary short-term balancing of the electricity volumes with the control energy procured in advance.

The weather determines generation

With the restructuring of the generation landscape as part of the energy transition from conventional power plants to renewable energy sources, the generation side is becoming increasingly dependent on the weather, while the flexibilisation of the consumption side is still progressing slowly.

A windy and sunny day increases the amount of electricity generated in some hours of the day to such an extent that it is far greater than the simultaneous demand for electrical energy by industry, trade, commerce and private customers. During these hours, there is a large supply surplus, which leads to very low and increasingly negative prices on the electricity market. Negative prices are not necessarily ‘bad’. They merely signalise that it is not worth producing electricity at that moment. If you produce electricity anyway, you have to pay the buyer of the generated electricity. Large batteries, which can store, ‘store’ and withdraw electrical energy up to the capacity limit, utilise the negative prices as customers. When prices rise again, the amount of electricity stored is sold again by the battery as a supplier. In this way, negative prices support business models for battery storage and increasingly also demand flexibility.

Price formation in exchange trading

The sale and procurement of electrical energy in wholesale trading takes place on separate markets depending on the desired delivery time - from long-term futures markets to short-term trading transactions on EPEX Spot. On the EPEX Spot day-ahead market, trading participants meet with their individual price expectations for the sale (supply) and purchase (demand) of forecast electricity volumes for delivery on the following day. The bids of the market participants are aggregated in hourly resolution in supply and demand curves, i.e. separate intersections of the supply and demand curves are determined for each hour of the following day and published as the respective market clearing prices.

The maximum EPEX spot price in 2024 was EUR 936.28/MWh and the lowest price was EUR -135.45/MWh. A total of 457 hours had a negative price and 62 hours still had a price of EUR 0.00/MWh.^[1]

How do negative prices arise on the EPEX Spot?

Negative prices are nothing new in the German electricity industry: back in September 2008, the then EEX spot exchange authorised negative prices of up to -€3,000/MWh - incidentally, they are now limited to -€500/MWh. Negative electricity prices occurred for the first time in the German market area on Sunday, 5 October 2008 and for a total of 15 hours that year. In the following years, the number of hours with negative prices increased: from 56 hours in 2012 and 97 hours in 2016 to 298 hours in 2020. This trend was only broken in 2021 and 2022, when prices on the electricity markets rose sharply as a result of the energy crisis. However, it continued in 2023 with 301 hours and in 2024 with new highs.^[2]  In the past, negative prices tended to occur on weekends and public holidays with high wind and solar feed-in and low electricity consumption. At present, high PV feed-ins at midday sometimes cause negative prices on weekdays too.  

More flexibility for fewer price peaks

To counter this trend, the old Bundestag passed the ‘Act to amend the Energy Industry Act to avoid temporary surpluses in generation’ on 31 January 2025. The law states: "Among other things, the draft law provides for regulations to increase flexibility in the electricity system. In particular, direct marketing will be expanded and made less bureaucratic in the EEG, the regulations on the remuneration of renewable energy plants in times of negative prices will be adjusted and the marketing of smaller plants by the transmission system operators will be reformed."

Direct marketing: Trading and plant control with expertise

At Vattenfall Energy Trading, we are very active in the direct marketing of solar and wind power plants from a size of 1 MW (here you can find more information on direct marketing at Vattenfall). Marketing takes place on the basis of the latest weather developments on EPEX Spot in the day-ahead and intraday markets.

If the exchange publishes a negative value for one or more hours, we try to avoid payment reversal in the interests of our customers and regulate the solar or wind power plants down within the framework of so-called market-related shutdowns. In the case of subsidised renewable energy plants, we compensate our customers for the work lost during the shutdowns at the value to be applied. An exception to this is the application of Section 51 EEG, which stipulates a reduction in subsidisation in the event of negative prices. Depending on the commissioning date of the EEG plant, different regulations apply with the result that the plant operator does not receive a market premium from the distribution grid operator in times of negative prices. The decisive factor here is the period over which negative hourly prices occurred continuously (6h, 4h and now 1h). In view of the increase in negative prices, the subsidy period is extended beyond the 20 years in order to compensate for the financial losses.

Expansion of battery storage as the backbone of the energy transition

In general, it is necessary for all market participants to utilise the available levers: On the one hand, the demand side must be made more flexible, i.e. more price-sensitive. This can be achieved, for example, through dynamic tariffs in the private customer segment and by incentivising load shifting to windy and sunny and therefore cheaper times in the industrial sector, for example through grid charges. On the other hand, the price signals described above are already incentivising the massive expansion of storage capacities in order to decouple the simultaneity of generation and consumption in the electricity system.

The realisation of battery storage systems (BESS) in the form of solid-state batteries and the construction of new pumped storage plants for the use of surplus wind and solar power are an important cornerstone for the success of the energy transition. Vattenfall Energy Trading is also active in this area and realises battery storage projects alone and with partners. Here you can find more information about large-scale battery storage at Vattenfall.

Do you have questions about negative prices or our services in the area of direct marketing and large-scale battery storage? Please get in touch with us!

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^[1]https://www.epexspot.com/sites/default/files/download_center_files/Q%26A%20Negative%20Preise.pdf

^[2] https://openenergytracker.org/docs/germany/prices/#verteilung-uber-den-tag