Why Utilities are Paying Germans to Use Electricity

by | published December 30th, 2017

Germany’s drive to use renewable sources of energy seems to be bearing fruit. Beginning last weekend, prices for electricity in the country declined below zero.

That means consumers are being paid to use the power, rather than the other way around.

This isn’t even the first time this has happened. According to one of Europe’s largest electricity trading exchanges (the EPEX Spot), it has happened more than 100 times in 2017.

All of this would seem to bode well for German households, long regarded as operating under the highest energy prices on the continent.

Well, not quite.

But someone else is getting paid.

And the whole matter has crucial implications for where the energy industry is going next…

Given the heavy amount of taxes and fees charged for power, the wholesale cost factors in only about 20% of the real price charged to the average residence.

That means that, while the period of negative costs helps, prices are still going up for German households.

Meanwhile, bigger wholesale users – industry, factories, and other primary end users – do see a nice pop. According to EPEX Spot figures, for example on December 24, such major consumers were paid about €50 ($59.50 at current exchange rates) per megawatt-hour (MWh).

The price decline results from a combination of low demand, warmer than usual temperatures, and the prevalence of ample winds that provided an abundance of wind power generation.

All of this results in excess supply that needs to be moved along the grid.

Due to the lack of efficient or effective battery and storage systems, electricity that is produced must be used.

It has become a traditional tradeoff between peak and off-peak hour generation or usage. The recently emerging German largess in solar and wind power has just accentuated the situation.

Meanwhile, variations on the demand side tend to contribute to supply excesses during times of low usage, such as weekends, and holiday periods. Both of those, of course, hit this past Sunday.

With the price tag for Germany now well over €100 billion, it would appear that the move to renewable, cleaner, energy has been successful.

Well, not so fast…

What the Future of Energy Will Look Like

Negative prices notwithstanding, the move to increase the contribution made by solar and wind has created its own uncertainties. Both sources need backup energy sources for when sunlight and wind are not present.

And then there is the opposite extreme. Wind on average provides less than 14% of the daily power on the German grid.

But on very windy days it can easily provide many times that.

Unfortunately, traditional sources such as coal-fueled power plants and the nuclear reactors being phased out nationwide cannot be turned down rapidly enough when renewables dump additional power on the system.

The result is either negative prices or lack of immediate access to power during those spells in which the combination of sources don’t meet expectations.

Other European countries – France, Belgium, Switzerland, the Netherlands, and even Great Britain – have also had their own experiences with negative pricing. France generates well over 70% of its power from nuclear, meaning the negative pricing phenomenon is hardly a result of only new renewable energy volume.

Nonetheless, German experiences have been more persistent, even when the country has been able to export excess power. The late December episode is the most recent.

But a similar bout in October resulted in payouts to consumers almost twice higher.

Experts are pointing toward the major revision both Germany and the wider European grid system must now undertake. Until this spasm of negative pricing, the older view of global power systems had been considered adequate.

Not any longer.

As one specialist noted this week, “we now have technology that cannot produce according to the demand, but is producing according to the weather.” This has become the main uncertain ingredient in the new age of rising renewable sourcing.

And one thing that’s becoming increasingly evident is that the new environment is providing a new stress on the wider power system.

This sets the stage for a range of possible changes in regulations and fee structures meant to encourage average households to tailor their energy use to periods of energy supply. That would seem to oblige some “carrot rather than stick” approaches.

Of course, that would mean benefits in lower costs moving directly down to the household level. That may take a bit more politics than just oddities in the energy grid.

Which means the push for renewables and energy storage will continue unabated in 2018.

In the meantime, happy New Year!

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  1. Pete Ronai
    December 30th, 2017 at 23:29 | #1

    Google “World’s largest battery in South Australia”

  2. December 30th, 2017 at 23:53 | #2

    its excellent

  3. George
    January 8th, 2018 at 22:16 | #3

    I’m probably thanking about what keeps popping up. Having the Utilities company pay me for been on there Grid. That’s a reason to hang around the house just sucking up all that will. But i live in America. Have lot’s of thoughts like a little while ago you sent me an article about the new and improved Solar cell that can operate when the sun goes down. There’s big profits to whomever can bring this to life. Did you send me this article coz there’s a way to profit from what’s going on?

  4. Billy
    January 13th, 2018 at 22:35 | #4

    @Pete Ronai
    The “World’s largest battery in South Australia” can power the state for 6 minutes if it is fully charged. All they need is several thousand more of those to cover for a few days.

  5. Billy
    January 13th, 2018 at 22:38 | #5

    Germans need learn to use their electricity on sunny summer weekend afternoons and turn their power off in the winter when renewables don’t function.

  6. January 14th, 2018 at 01:12 | #6

    World Luke to know more about ur tracing stragedy

  7. January 14th, 2018 at 01:18 | #7

    Waiting For response

  8. January 14th, 2018 at 03:25 | #8

    Very interested to your business

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