Europe has seen a record number of hours of negative power prices this year, driven by a surge in solar power generation that has outpaced demand. This mismatch between supply and demand is exposing the need for increased investment in energy storage solutions.
Wholesale power markets in key European economies have experienced zero or negative prices during periods of low demand, forcing producers to pay to offload power or shut down their plants. While strong hydro and nuclear power generation have played a role, the massive expansion of solar power capacity has been a significant factor.
Installed solar capacity in the European Union more than doubled to 263 GW between 2019 and 2023, with an additional 306,000 solar panels being installed every day in 2023 alone, according to SolarPower Europe. This has led to price drops during the lowest demand periods, typically in the middle of the day.
The surge in solar power has been driven in part by developers agreeing to power purchase agreements (PPAs) with buyers at fixed terms pegged to wholesale power market prices, allowing for a faster and bigger build-out than previous capped volume auctions for government-backed payments. However, as prices fall, developers are increasingly turning back to subsidy schemes.
Markus Hagel, an energy policy expert at German utility Trianel, acknowledged that “success is consuming its own offspring” as the oversupply of solar power leads to negative prices. Trianel has invested in 800 MW of photovoltaic capacity and has a project pipeline of 2,000 MW, but the lower prices are forcing the company to reconsider how it sells the power.
Negative prices are not a new phenomenon in Germany, which has the largest capacity of volatile solar and wind power generation in Europe. However, 2024 is the first year Spain is seeing negative prices, after several years of strong solar power growth.
This situation highlights the pressing need for increased investment in energy storage solutions to better match supply and demand, as Europe continues to rapidly expand its solar power capacity.