Solar technology and the earth

Is there such a thing as too much free energy? Bright and breezy days are becoming a deeper nightmare for utilities struggling to earn a return on traditional power plants. Because wind and solar farms are sprouting up in more areas -- and their power gets priority to feed into the grid in many places -- the amount of electricity being generated is larger than demand during certain hours of the day. The consequence is that power prices are slipping to zero or even below more often in some areas. That’s adding to problems for generators from NRG Energy Inc. in California to RWE AG in Germany and Origin Energy Ltd. in Australia. Once confined to a curiosity for a few hours over windy Christmas holidays, sub-zero cost of electricity is becoming a reality for hundreds of hours in many markets, upending the finances of the business in the process.
“There is no time pattern for having negative prices in Belgium,” said Marleen Vanhecke, an official at the nation’s grid manager, Elia System Operator SA. “This phenomenon is mainly determined by high wind generation in Germany and enough import capacity towards Belgium.”
The chart below shows the incidence of so-called negative power prices so far this year, indicating the biggest issue is in Germany, where the government has been trying for more than a decade to shift the economy toward cleaner forms of energy.

Less Than Zero

Number of hours with negative power prices since the beginning of 2018
*California hours Jan. 1 to July 16, 2018
Source: Epex Spot, Nord Pool, CAISO, SEMO, OTE, National Electricity Market of Australia, and ERCOT
Periods with negative prices happen when there is more supply than demand, typically during a mid-day sunburst or early morning wind gust when demand is already low. A negative price is essentially a market signal telling utilities to shut down certain power plants. It doesn’t result in anyone getting a refund on bills -- or in electric meters running backward.

Negative Power Prices

Number of occurrences in day-ahead markets
Sources: Epex Spot, Nord Pool, CAISO, SEMO and OTE
Instead, it frequently prods owners of traditional coal and gas plants to shut down production for a period even though many of the facilities aren’t designed to switch on and off rapidly. This has left the utilities complaining that they can’t earn the returns they expected for their investment in generation capacity.

“Energy market price signals are critical to telling generators where to build new resources,” said Abe Silverman, deputy general counsel at NRG Energy, which is concerned about the anomaly in California. “As negative prices become more prevalent, we’ll have to evolve our energy market price formation strategies to ensure that we will continue to drive efficient investment.”

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