Due to the strong production of renewable energy, negative energy prices are more common in Europe

• Negative energy prices are becoming increasingly common across Europe.
• The most recent case occurred on Tuesday in Germany.
• Prices generally fall when both solar and wind energy are generated at high levels on the same day.

Energy prices in Europe are increasingly in negative territory due to the strong energy production from solar and wind power in the region.

In the most recent example, Bloomberg reported that electricity prices fell below zero in several markets on Wednesday. For example, the German day auction fell below zero for six hours on Tuesday, according to data cited by Epex Spot SE.

Since consumer tariffs are usually agreed in advance, this does not mean that households receive a reimbursement for their electricity consumption.

Day-ahead auctions instead deal with raw energy. When prices in this market turn negative, it indicates a significant imbalance between electricity supply and demand, which occurs when a lot of electricity is generated from solar and wind power at the same time.

It is an extension of Europe's significant investment in green infrastructure. The continent installed a record number of solar panels last year to reduce its dependence on Russian natural gas.

Germany is often used as a reference point because the country has added more solar capacity than consumers have demanded, SEB Research reported in May.

In 2023, the country's solar capacity will reach 81.7 gigawatts, exceeding a maximum demand load of 52.2 gigawatts, the statement said.

Meanwhile, Bloomberg reported that wind power generation in Germany will reach its highest average level in four months on Wednesday, at 22.7 gigawatts.

This summer, energy prices also fell into negative territory in France, which led to nuclear power plants being taken offline in June. However, reactor shutdowns are not uncommon and have also been carried out in Spain and Scandinavia.

One reason for the inefficiency of solar and wind power generation is the lack of battery technology to store the electricity generated. This means that consumers may not even benefit from the lower daily prices, as they often use more energy in hours without sunlight, SEB says.

The study warns that low prices could ultimately lead to a decline in investment in solar infrastructure. Solar prices, on the other hand, would rise if more money were invested in batteries and the power grid, it says.

However, this does not mean that Europe's appetite for solar power generation is waning.

According to Reuters, Eastern European countries are currently leading the way in the expansion of solar energy. In the first seven months of this year, solar energy generated by utilities in Austria, Bulgaria, Hungary, Romania and Poland increased by 55 percent compared to the previous year.