Renewable hit records: in Germany led to negative prices

Renewable hit records: in Germany led to negative prices

12/05/2016 source “Dinheiro Vivo”

On Sunday May 8, renewable energy production in Germany reached a peak so high that made the market prices of buying and sale of energy go down to negative values, specifically for least 124 Euros per megawatt/hour consumed. “It is clearly an exception. This almost never happens. It’s like sales to dispatch stock”, said the president of the Portuguese Renewable Energy Association (APREN), António Sá da Costa.

In fact, that’s what happened. The electricity that is produced in several power plants in a country, whether in Germany, Portugal or Spain is traded in a market where the producers make energy offers and the first to leave is the cheapest, it is to say, renewable energy. Only after that the energy that is being produced in gas plants, coal or nuclear is placed on the market to sell to retailers, who then sell to final consumers.

Says the online newspaper Quartz that last Sunday in Germany renewables have produced 87% of consumption, and therefore the other plants were not necessary. The gas plants were closed, but coal and nuclear can’t do that so simply and continued to produce. Result: they started selling off to drain the production. “But they did that only because they knew it was for a limited period; after that, prices go up”, highlights Sá da Costa. The newspaper Quartz, quoting the German consultant Agora Energiewende, says that on Sunday the price rose again up to 24 Euros per MWh consumed.

In Portugal, the prices have never been negative, because there are no nuclear power plants and the coal plant does not need to make prices go so down, but it is increasingly normal to have times when prices are at zero and the producers are gaining less.

For example, according to Sá da Costa, in 2014 – which was a record year for renewables – there have been 200 hours with the price at zero. But in the first four months of this year – in which renewable energy returned to break records, representing on average 90% of the consumption – were registered only two hours at price zero. This is because gas and coal prices are too low and made the average market to go down from 45 to 29 Euros per MWh.

Consumer does not feel impact

The fact that prices are at zero or negative has almost no impact on consumers, says Sá da Costa. That’s because the consumer does not buy to the producer, but to the supplier that charges a fixed value and assumes the price risk to be higher or lower.

If electricity were purchased to the producer, there would be times when it would be free or cheaper and others in which it would be so expensive that the monthly bill would raise to higher values than the contract with fixed price for energy. For example, in 2014, there were days when the energy was 7 Euros but then shot up to 75 Euros. In addition, says Sá da Costa, energy is only part of the energy bill. We have to pay also the cost of the networks, transportation and taxes. And this is true both in Portugal or Spain and Germany.

The fact that prices reach low values is positive because it shows how it would be if the entire production was renewable, but it still isn’t. In fact, there are market players who believe that never will be because dams, wind and solar plants are not always working and centrals will be always needed as reserve.