Negative electricity prices – How many renewable energy systems will run through?
- The so-called “hourly rule” is intended to incentivize renewable energy system operators to reduce their feed-in at times of negative electricity prices.
- Currently (as of October 2024), 70.2 GW, or 75.4% of PV systems, receive a fixed feed-in tariff or a market premium without restrictions due to the hourly rule and therefore have little or no incentive to react to market signals. The figure for wind energy plants is 47.7 GW (66.5 %).
- While newly built wind energy plants almost always have an incentive to become more flexible, the majority of newly built PV plants continue to receive a fixed feed-in tariff.
- It is becoming ever clearer: Photovoltaics is increasingly responsible for negative electricity prices.
The German expansion of renewable energies (RE) is progressing: in the first half of 2024, 9.3 GW of renewable energy installations were already added [1]. The government’s expansion targets for photovoltaics in particular have even been exceeded in some cases in recent years. The growing share of green electricity is also reflected in the electricity spot market: prices are becoming more volatile, short-term trading is increasing and the number of negative electricity prices is also rising [2]. These occur in particular at times of high renewable generation with low loads and signal an oversupply of electricity. At these times, conventional plants have to weigh up whether to reduce their generation or continue producing in order to avoid the costs of switching off and on. Meanwhile, plants that receive remuneration under the Renewable Energy Sources Act (EEG) have no incentive to curtail their generation. In order to encourage a more market-oriented behavior of RE plants, a remuneration limit was therefore introduced in the EEG, so that after a certain number of consecutive hours with negative prices for the period in question, there is no longer any entitlement to remuneration. In the following article, we analyze how this mechanism has developed and how many plants are affected by this regulation.
Remuneration of renewable energy systems under the EEG
The feed-in tariff first introduced in the EEG in 2000 [3] in Germany is one of the most successful means of incentivizing the expansion of renewable energies and has already been adopted by many other countries, e.g. China has adopted the EEG principle of fixed feed-in tariffs [4]. The design of the statutory remuneration model has been broadly defined in the course of various amendments, particularly through the introduction of the market premium. Since 2016, a gradual suspension of remuneration in the event of negative prices has been introduced for large installations. An overview of the changes in recent years is shown in Table 1 for wind energy plants (WEP) and photovoltaic installations (PV). In principle, the EEG also regulates the remuneration of other renewable energies (e.g. hydropower and biomass), for which, however, there is not the same dynamic growth as for wind energy and PV systems.
Until January 2012, all installations received a standard feed-in tariff for the electricity produced; from January 2012, installation operators could opt for the market premium model. From August 2014, the market premium was introduced for systems with larger production capacities. Smaller systems continue to receive a feed-in tariff. The assessment threshold was steadily reduced during the amendment process, meaning that more and more installations are receiving a market premium instead of a feed-in tariff. In 2016, a suspension of remuneration in the event of negative prices was introduced for the first time, initially after 6 consecutive hours with prices below zero €/MWh. This applied to PV systems >500 kW and wind power plants >3 MW. In 2021, the regulation was tightened and applied to all systems >500 kW after 4 consecutive hours of negative electricity prices. Since 2023, the suspension of remuneration has affected all systems >400 kW and will be reduced to one hour by 2027, meaning that no electricity produced in hours with negative prices will be remunerated. However, the regulation only applies to new installations from the respective EEG amendment onwards, not to existing installations, and installations below the specified thresholds are not affected.
How many PV and wind energy systems receive which remuneration?
In order to obtain an overview of which installations are actually affected by the loss of entitlement to remuneration in the event of negative electricity prices, and after how long this occurs for the respective installations, we have assigned the wind and PV installations registered in the Marktstammdatenregister (MaStR) in Germany to the remuneration forms of the EEG according to their installation size and age. We classify in Figure 1 for wind and in Figure 2 for PV installations whether they receive a fixed feed-in tariff or market premium and, in the case of the market premium, after how many consecutive hours of negative prices the market premium is suspended for the respective installation. As there are numerous special cases, we have listed additions to the assignment of the diagram categories in the appendix.
Figure 1: Installed capacity and forms of remuneration for onshore and offshore wind turbines from 2000 onwards, based on MaStR
Figure 2: Installed capacity and forms of remuneration for PV systems from 2000 onwards, based on MaStR
Wind turbines are significantly more affected by the regulation than PV systems, around two thirds of which receive a feed-in tariff. It can also be seen that the capacity of systems that fall under the feed-in tariff is continuing to rise for PV, but has fallen for wind power in recent years. This is due to the fact that there are still newly built PV systems below the power output limit. In the case of wind power, the usual power output of new systems today is well above the output limit introduced in the EEG. The decline in the output of wind energy plants with feed-in tariffs also shows the dismantling of plants after their end of life.
Currently (as of October 2024), 70.2 GW and therefore 75.4% of PV systems receive a fixed feed-in tariff or a market premium without restrictions due to the hourly rule and therefore have little or no incentive to react to market signals. For WTG, the figure is 47.7 GW and thus 66.5 %.
Impact of the EEG feed-in tariffs on electricity prices
Despite the increasing efforts to suspend remuneration in the event of negative prices, the frequency and duration of negative prices are increasing, as shown in Figure 3. If the effects of the energy crisis from the fourth quarter of 2021 to the first quarter of 2023 are excluded, a significant increase in the number of hours with negative prices since 2018 can be seen. The current year 2024 in particular stands out here, in which the number of negative prices within the first nine months is already significantly higher than in all previous years.
The further rise in negative prices can increasingly be attributed to PV systems, which still get a fixed feed-in tariff. This can also be seen in the increasing share of PV in total generation at hours with negative prices shown in Figure 4. Plant operators who fall under the hourly rule are keen to stop their feed-in in hours with negative electricity prices and no longer receive remuneration, as they would otherwise pay for the electricity produced. In contrast to the sharp rise in the share of PV generation at times of negative prices, the share of generation from wind power has fallen slightly in recent years. The 2024 shares signal this even more dramatically, although it must be noted here that the period only covers the first 9 months and is therefore significantly more dominated by PV.
Conclusion
The increasing expansion of renewable energies is increasing the periods of overproduction and thus the number of hours with negative electricity prices. The reason for this is the lack of incentive to reduce feed-in as a result of remuneration that is independent of the market price. With the hourly rule, an instrument was created to address this problem. However, the size limits for its application in PV are not narrow enough, meaning that many systems still do not “see” any price signals from the market. In the case of wind power, almost all new installations fall under the hourly rule. The trend can therefore be observed that PV is increasingly responsible for negative prices and the influence of wind power is declining. This trend will intensify in the future, as the number of WEPs with fixed feed-in tariffs will continue to fall, but PV installations will continue to be added outside the hourly rule (65.1 % of new installations in 2023, 55.3 % of new installations in 2024).
At the same time, this leads to the conclusion that negative prices will continue to occur in the future and that the trend of increasing accumulation shown in Figure 3 can only be reversed by adjusting the regulations or making demand more flexible. This in turn presents great opportunities for electricity storage flexibilities, such as large-scale battery storage systems, which are increasingly using price spreads to realize profits.
An outlook on future developments will be evaluated in a follow-up article.
We have already provided more detailed information on the emergence of negative prices in another article: Negative electricity prices on the spot market
Appendix
Notes on diagram categories
Due to several special cases, we have decided on the following simplifications for the classification in the categories in Figures 1 and 2. All installations that are entitled to feed-in tariffs are assigned to the “Feed-in tariff” category, even if the installation operators have the option of voluntarily switching to the market premium model. Installations that no longer receive a fixed feed-in tariff after the legally stipulated 20 years will remain in the “feed-in tariff” category. We have also dispensed with a separate listing of citizen energy installations and have also assigned them to the “feed-in tariff” category.
Unsubsidized installations*: Unsubsidized installations are units with a capacity >1000 kW that were realized outside the EEG tenders. Some of these may still contain unverified data records with incorrect information.
Literatur
[1] Bundesnetzagentur – Presse – Zubau Erneuerbarer Energien im ersten Halbjahr 2024
[2] Negative Strompreise am Spotmarkt – FfE
[3] Bundesgesetzblatt BGBl. Online-Archiv 1949 – 2022 | Bundesanzeiger Verlag
[4] BEE: Feste Einspeisetarife setzen sich weltweit durch | energate messenger⁺ (energate-messenger.de)
[5] EEG (2009). EEG_2009_Urfassung_juris_0.pdf (clearingstelle-eeg-kwkg.de)
[6] EEG (2012). EEG2012_juris_120817.pdf (clearingstelle-eeg-kwkg.de)
[7] EEG (2014) EEG_2014_140721_1.pdf (clearingstelle-eeg-kwkg.de)
[8] EEG (2017). EEG_2017_161222_1.pdf (clearingstelle-eeg-kwkg.de)
[9] EEG (2021). EEG2021_201221.pdf (clearingstelle-eeg-kwkg.de)
[10] EEG (2023) EEG_2017_161222_1.pdf (clearingstelle-eeg-kwkg.de)
