Power-price volatility hit EU wind markets during Covid-19
An oversupply of electricity in Europe as a result of the coronavirus crisis has triggered wholesale electricity prices to drop below zero, particularly affecting wind-heavy markets, according to a new report published last week.
An analysis by power market data firm EnAppSys revealed that in the first nine months of 2020, European countries on average saw negative prices almost one percent of the time.
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That is three to four times higher than levels seen between 2015 and 2018 and more than twice those in 2019.
Negative power pricing occurs when the market cannot use as much power as generated. Electric power plants cannot always be easily paused and started again and, accordingly, it might be cheaper to pay consumers to use electricity rather than charge them.
However, negative prices only occur on the wholesale exchange and, therefore, retail consumers do not benefit from these changes in market prices.
Nevertheless, power plants try to keep hours with negative prices as minimum as possible because paying consumers raises overall costs and logistics.
"It is worth bearing in mind that 2020 has been a unique year," warned Alena Nispel, business analyst at EnAppSys.
The markets have become "much more volatile" in 2020 due to the lower power demand during Covid-19, higher volumes of renewables output and increasing interconnection between markets, added Nispel.
Meanwhile, markets with high wind generation levels, such as Germany, Denmark and Ireland, were especially vulnerable to negative power pricing.
The reason is that peak levels of wind output started to outpace power-consumption demand amid the Covid-19 pandemic.
"It is here that we see one of the key challenges of renewables: their intermittency," said Nispel, referring to both production, which mainly depends on natural conditions, and demand.
Electricity storage from renewables could reduce these impacts "at least as far as it is economically sensible to do so," she said.
In contrast, the analysis also indicates that countries in which renewable generation makes up only a small part of the overall power mix, for example Poland, tend to operate in less volatile markets.
Given that negative prices are not possible under the market rules of Portugal and Spain, they are among the countries that have not experienced any negative pricing since 2015 - together with Bulgaria, Greece, Italy, Poland and Romania.
With the capacity of renewables projects expected to grow exponentially in the coming years, the trends identified during 2020 expose some of the challenges ahead.
As part of the European Green Deal, the European Commission will put forward an offshore renewable energy strategy before the end of the year.
"The benefits from investing in renewables at this time of recovery are significant for the economy, for the consumers and the environment - focusing on solar, wind and hydropower would create local green jobs and allow the region to gain from closer energy cooperation," said the EU energy commissioner Kadri Simson on Friday.
In central and southeastern European countries, for instance, it is estimated that the deployment of renewables energies could cover 34 percent of energy demand by 2030.
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