Amid a massive buildup of renewable energy in Germany, sun and wind occasionally produce more electricity than can actually be used, tipping prices into the negatives. Why's this happening? And what effects does it have?
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00:00Year after year, the cost of clean electricity technologies is falling and could hit another
00:06low again this year.
00:08But cheaper and cheaper production prices have correlated with a burst of negative energy
00:12price hours across Europe.
00:14The negative power price is a problem.
00:17It is a bad thing.
00:18More bad news for the energy transition.
00:20So we're looking at this current topic.
00:22Is there a positive to negative energy prices, what sparks them and who benefits?
00:28The renewable energy sector in Europe is growing between 2004 and 2023.
00:34The share of renewable energy almost tripled, rising all the way to 24 and a half percent
00:40in 2023.
00:42Every kilowatt hour brings us closer to a renewable future and a green utopia and a
00:46cleaner climate.
00:48But wait, what's the negative energy price and is that good or bad?
00:56Whenever a lot of people want to generate electricity and not a lot of people want
01:01to buy it and usually prices drop, then you're probably selling the electricity for a very
01:07low price and it could potentially be negative.
01:10Negative money?
01:11Let's break this down.
01:13In very simplistic terms, energy providers make money by matching demand and supply of
01:18electricity.
01:19But a negative energy price happens when there's more energy being produced than there is demand
01:24and the balance gets out of whack.
01:26For example, on bank holidays, factories, stores and offices are closed so they don't
01:32need energy to operate.
01:33But if it's a sunny summer holiday, well, those solar panels, for example, are still
01:38on, even as demand is lower.
01:41And when supply is a lot bigger than demand, prices get cheaper and cheaper and cheaper
01:46until they slip into the minus.
01:48That's where the word negative comes in.
01:54But wait, that sounds good.
01:56Energy is so cheap that it's free?
01:58So what's the problem?
02:01When there are negative energy prices, the suppliers of this electricity and the investors
02:06in this technology suffer financial losses.
02:09The negative energy price means that you're not only not earning something for the electricity
02:15that you're providing to the market, but that you have to pay something for providing that
02:20electricity to the market.
02:22So it is, for an investor, it is a bad thing.
02:26Wahlberger-Hemetsberger is the CEO of Solar Power Europe.
02:30She says negative energy prices have been hitting record highs in recent years in Europe.
02:35We recorded some 6,000, roughly 6,500 negative prices, hours where there were negative prices
02:43all over Europe in 2023.
02:46These kinds of record highs are not the kind that Europe wants to be hitting.
02:50Remember when Wahlberger mentioned investors?
02:53It is, for an investor, it is a bad thing.
02:59Some of the analysts we spoke to say that there are some interest groups worried about
03:03investing in projects that won't make a return.
03:06We heard some concerns and anecdotal stories of investors hesitating or asking more questions
03:11about the viability of these green energy project investments.
03:19I think the clearest example of that we see is the recent wind power auctions in Denmark.
03:26That's Chris Rosslow.
03:27He's a senior energy analyst for a think tank called Ember.
03:33Where no bids came forward for the latest offering.
03:37I know that uncertainty over the future of power prices and whether there would be enough
03:43electricity demand at the times in which wind was producing energy.
03:48That was part of the concern there.
03:50And the lowest price we've seen is minus 500 euros per megawatt hour in history.
03:55Fabian Hunecke is an energy analyst with a focus on Germany at Agora Think Tank.
04:00For reference, a megawatt hour is 1,000 kilowatt hours and in practical terms, for example,
04:06the German government estimates that approximately 3,500 kilowatt hours of electricity are used
04:12annually by a two-person household.
04:15A reduction in government subsidies in Germany is also contributing to investors asking more
04:20questions about renewables projects, according to Fabian.
04:26When we look back to maybe 20 years ago, the subsidy for photovoltaic was above 50 cents
04:33per kilowatt hour.
04:35And now 20 years later, when you look to the auctions for photovoltaic, ground mounted
04:42photovoltaic, you will see prices about 5 cents per kilowatt hour, so only one tenth
04:47of this value.
04:49Whereas the power price itself is about 8 cents per kilowatt hour at the moment.
04:55But back to negative energy prices.
04:57Does anyone actually benefit?
05:01Let's take a beat here for a second.
05:03Ideally, economics and sustainability shouldn't be at odds.
05:07After all, we are talking about the health of the planet and limiting the worst effects
05:11of climate change.
05:13Not to mention, there are tangible economic gains.
05:18Along with the growth of renewable energy capacity have come jobs.
05:22In Germany, the figures from the government show that the sector hit a recent high in
05:262022 with over 387,000 people employed.
05:31The OECD also estimates that between 14 and 21 percent of jobs in Germany are green driven,
05:38if not directly in renewables industries.
05:42But who benefits directly when energy prices go negative?
05:48The end consumer is not really seeing these price signals because we're talking about
05:54wholesale energy markets here, which is the place that your energy supplier goes to buy
06:00the energy that they then pass on to you.
06:02So you won't see a rebate on your energy bill.
06:05Some analysts working in the renewable energy sector say that ultra cheap prices have contributed
06:10to keeping energy costs from getting too high for everyone.
06:14The trading companies who are buying electricity for you and for the industry and for all the
06:21consumers, they have less cost when buying electricity because of the negative power
06:26prices.
06:27Fact one, the negative power price is reducing also the average power price, which you in
06:35the end have to pay for.
06:37So how much savings have been made exactly?
06:42What we have reckoned is that roughly per year, the electricity price is dampened by
06:48about nine billion euros a year annually.
06:54This is David Vadepol.
06:55He basically makes the sun shine at the German Solar Association.
06:59How much of the prices that they pass on, you know, we can't tell you, but certainly
07:08there's a very visible effect of this because the marginal cost of solar, they are zero.
07:14So economically, negative energy prices are potentially good for the consumer, but currently
07:19bad for producers and investors.
07:25Different countries have different energy mixes and needs, but one thing remains consistent.
07:30The reasons for negative energy prices are not straightforward.
07:34They can be complex and varied, but in some countries it's quite clear what the reason
07:38is.
07:39We heard from Chris earlier.
07:40He's an analyst at Ember.
07:44In countries like Spain, Netherlands and in Germany, we've seen very rapid growth in solar
07:50power, especially since the gas crisis, when gas became very expensive and coal as well,
07:57which really made solar power a much more attractive investment financially.
08:02According to IRENA, Germany is a front runner in solar generation in Europe.
08:08The latest figures show sunny Spain was the second largest generator of solar energy in
08:132022, with Italy coming in third.
08:17Meanwhile, here are the top European countries for negative energy price hours in 2024.
08:23Topping the list are Finland and Sweden.
08:25Germany and the Netherlands are also on the list, just like Chris said.
08:30And while Spain doesn't break through to the top here, the shocking part with Spain is
08:34that in 2023, there were no negative energy prices.
08:38But a year later, 247 negative energy price hours.
08:42That's massive growth.
08:44Situated in the southwest of Europe, when it comes to power connections, Spain is relatively
08:48isolated from the rest of the continent, according to Chris.
08:51Spain and the whole Iberian Peninsula is not very well connected to the rest of Europe.
08:58So this is one of the reasons why Spain is currently a hotspot for negative or low prices.
09:07They are finding their own solutions to that, however.
09:10So what kind of solutions does Spain have that the rest of Europe might be able to catch
09:14on to?
09:16We've travelled to Sevilla, a city in the southwest of Spain, sunny and clear even on
09:21this winter morning.
09:22We're visiting a five-year-old solar power plant outside of town that produces enough
09:26energy for 3,000 households when operating at peak capacity.
09:34So the negative energy prices is the new elephant in the room in Spain.
09:38And this basically comes from the fact that solar produces the most at times when the
09:45demand of the country is lower.
09:49Jesus Baucho Castillo is the head of business development at BlueTree Group.
09:54They basically oversee renewable energy projects in Europe, North America and South America.
10:00Here in Spain, he sees one potential solution as big industrial batteries.
10:05This is the most used product at this moment.
10:09It's true that there is being like a huge amount of R&D around batteries.
10:14So you have big players like KTL, Tesla, BYD that are doing amazing stuff.
10:19These massive batteries from companies like Form Energy, Tesla and BYD can help smooth
10:25out these energy extremes we spoke about earlier, saving the excess energy and storing it until
10:30it's needed.
10:31The industry has been ramping up, anticipating this need in the race towards net zero emissions,
10:37with a record high addition of 45 gigawatts added to the global energy storage market
10:42in 2023, according to Bloomberg's research arm NEF.
10:46So the battery storage market in Spain is improving.
10:51They're also looking towards green hydrogen as a way to use this excess of power they
10:55have at certain times of day.
10:57That's right, hydrogen, or more specifically, green hydrogen, as a direct fuel source made
11:03using renewable power.
11:05Green hydrogen is produced through a process called electrolysis.
11:09To learn more about the process, we head to Guadalajara, also in Spain and about an hour
11:13outside of Madrid.
11:15We're visiting the Accelera factory, where they're making the actual hydrogen electrolyzers
11:19needed for the electrolysis process.
11:26Andreas Lippert oversees this kind of business happening at Accelera.
11:31So in essence, an electrolyzer is very simply reversing the reaction to create water.
11:37So we take water and electricity, which is the energy source, and split the water into
11:43hydrogen and oxygen.
11:46And then it comes out pretty pure hydrogen on one side and oxygen on the other side.
11:51Only water vapor is emitted when the hydrogen is burned, making it a clean fuel source,
11:57especially if renewable energy is used for the electrolysis process.
12:01And at Accelera, they're going even further.
12:03According to this plant's head of production, Luis Eñiguez, who says they're even using
12:08renewable power to help make the electrolyzer devices themselves.
12:14We have 1.58 megawatts of photovoltaic power on the roof to supply the energy we need for
12:19the manufacture of electrolyzers and for air conditioning.
12:23Good strides for sure.
12:25But it's important to mention that there's a serious inefficiency issue associated with
12:29electrolyzing water into hydrogen.
12:32It's not a one-to-one transfer of energy.
12:35A lot of energy is lost.
12:37So one third of the electricity at best can be used.
12:43And compared to a battery storage system with 90% efficiency, the hydrogen alternative
12:52is not as good as battery storage systems.
12:58However, battery storage systems can only store for short periods of time, for days
13:03and hours, and hydrogen can store energy for months and years.
13:09So to cover seasonal effects, hydrogen could be a solution.
13:14The Accelera facility opened at the end of 2024.
13:18When it was first announced, the company hoped it would be able to produce 500 megawatts
13:22of electrolyzers per year.
13:25Another argument for green hydrogen is that the infrastructure to store, compress and
13:29move it already exists.
13:34One thing that people forget is that we actually produce 100 million tons of hydrogen today
13:40and so the equipment exists.
13:44When we think about transporting hydrogen in pipelines, many of the natural gas pipelines
13:50in Europe can be retrofitted to actually move hydrogen.
13:54So in the case, for instance, of Germany, of the core grid, of the 9,000 or so kilometers,
14:00about 60% will be repurposed natural gas pipelines.
14:05So not everything is brand new.
14:06In fact, we know how to do this.
14:09Currently, the vast majority of hydrogen made in Europe is made with fossil fuels, with
14:14various processes that fall under the umbrella term reforming.
14:18Only a small sliver of hydrogen is green.
14:23And zooming out even more, at the moment, hydrogen makes up a tiny part of the European
14:27energy mix, just 2%, at least in 2022.
14:33When looking at the costs of this technology, on the startup side, green hydrogen is much
14:37more expensive than solar panels, for example, which have become remarkably cheap with China
14:42dominating the market.
14:45But as we've laid out, there is no silver bullet in the green energy transition, since
14:50commercial storage batteries really hold energy best for a few days maximum.
14:57But for weeks or months like this, other solutions will be needed.
15:04Negative energy prices have been on the rise in Europe for a few years.
15:08While potential solutions for storing excess energy and helping to regulate market demand
15:12do exist, there's currently no silver bullet.
15:17Green hydrogen could be part of the puzzle, but the energy conversion rate is low.
15:22To maintain investment in the renewable sector, there'll need to be a better balance between
15:27energy supply and demand, ensuring renewables don't become a victim of their own success.