Negative electricity prices arise when the supply of electricity significantly exceeds demand and there is insufficient storage capacity. This phenomenon occurs particularly frequently when there is a high feed-in of renewable energies, low demand and a lack of flexibility in conventional power plants. Negative electricity prices first appeared on the European Energy Exchange (EEX) in 2008 and are closely linked to the energy transition.
Emergence of negative electricity prices
On days with strong wind or intense solar radiation wind and solar power plants generate large amounts of electricity that is not always fully consumed. As these energy sources are variable Operating costs close to zero they can still feed electricity into the grid economically even at very low prices. However, they have the decisive advantage that they can be regulated every second, provided they can be controlled remotely.
At the same time Conventional power plantsespecially nuclear or coal-fired power plants, a Lack of flexibility in their production. These plants cannot react quickly enough to fluctuations in demand or the supply of renewable energy. For technical and economic reasons, it is often cheaper for them to continue producing and accept negative prices than to shut down the plants and then ramp them up again later.
Especially during low consumption periods, such as at night, an Holidays or WeekendsHowever, industrial demand for electricity is very low, resulting in a surplus in the grid. As the electricity market is traditionally adapted to the expected consumption, imbalances occur when the generation of renewable energies fluctuates greatly.
In such situations, grid operators or utility companies sometimes even pay for electricity to be taken off the grid - especially on short-term trading markets such as the day-ahead and intraday market. This phenomenon illustrates the challenges of an increasingly renewable energy system and the need for flexible solutions such as storage or more intelligent consumption control.
Market mechanisms of the electricity market
The emergence of negative electricity prices is closely linked to the mechanisms of the electricity market, in particular the day-ahead and intraday markets.
The Day-ahead market is the most important short-term trading platform for electricity. Electricity volumes for the next day are traded here. Electricity producers and traders submit bids on how much electricity they would like to supply or purchase and at what price. These bids are then combined in an auction process to determine the electricity price for each hour of the following day. If supply significantly exceeds demand, negative prices can arise.
The Intraday market enables electricity to be traded on the same day as delivery, often until shortly before actual feed-in or withdrawal. This market is used to balance out short-term fluctuations that can occur after day-ahead trading, for example due to unexpected weather changes or power plant outages. Negative prices can also occur here if a sudden surplus arises.
Pricing on both markets follows the principle of Supply and demand. In situations of oversupply, some producers are prepared to accept negative prices in order to maintain their production. This can make economic sense if the costs of shutting down and later restarting the plants would be higher than the short-term loss due to negative prices.
The European Power Exchange (EPEX SPOT)
Power exchanges such as the European Power Exchange (EPEX SPOT) also play a central role in this price formation. They provide the platforms for trading and ensure transparency and liquidity on the market. The prices determined on these exchanges often serve as a reference for other electricity trading transactions and contracts. The possibility of negative electricity prices on these markets has been deliberately introducedto promote flexibility in the system and create incentives for demand-driven production. However, the current electricity market design, which is intended to ensure the integration of renewable energies, grid stability and security of supply, is up for discussion and Germany is openly debating a Capacity market.
Frequency and times of negative electricity prices
The frequency of negative electricity prices has increased significantly in recent years, not only in Germany, reflecting the growing challenges of integrating renewable energies into the electricity grid. For the year 2024, a total of 457 hours with negative electricity prices were recorded. This figure is remarkable and shows that negative electricity prices are no longer a rare phenomenon, but have become a regular occurrence on the German electricity market.
Over the course of a year, negative electricity prices usually occur in months with many public holidays. The following are particularly noticeable May and December. Although electricity production from photovoltaic systems is particularly strong in summer, negative prices are rare between June and October. The months from January to April are in the middle. The month with the lowest probability of this phenomenon is november. However, the high electricity production of PV systems is clearly reflected in the course of the day. Negative electricity prices are particularly common between 12 noon and 5 pm. In the evening, electricity prices usually rise again as the sun goes down and feed-in from photovoltaic systems drops sharply. At the same time, electricity consumption increases in the evening as households and businesses use more electrical appliances.
Effects of negative electricity prices
Negative electricity prices affect the entire energy sector. Conventional power plants suffer losses if they cannot economically reduce or stop their production. Renewable energies have so far often been protected by subsidy models, but could also suffer from falling market prices in the long term. Although this encourages investment in flexible generation and storage technologies, it signals to grid operators that grid expansion is inevitable and requires intelligent control systems.
Consumers with dynamic tariffs can benefit by shifting their electricity consumption to these times. In the long term, however, higher system costs could be passed on to everyone via grid charges. In addition, negative electricity prices are driving innovations such as smart grid technologies and flexible consumption models. They highlight the need to better integrate generation, consumption and storage.
Regulatory measures
Until now, the rigid market mechanism of the EEG funding This ensures that renewable electricity is fed into the grid regardless of current demand. However, the Renewable Energy Sources Act, with its market premium model introduced in 2012, reaches its limits when prices are negative. Although this system offers incentives for a more demand-oriented feed-in, it had to be restricted in 2014 by the so-called 6-hour rule and since 2021 by the 4-hour rule. This states that the market premium is not paid for hours with negative prices if this situation lasts longer than four consecutive hours.
In force since February 2025 Solar peak laws now stipulates that renewable energies must be curtailed from the very first hour of negative electricity prices and that no feed-in tariffs are granted. There are also discussions about making subsidies more market-oriented in order to create incentives for more flexible production. The balancing act is to find even better regulatory measures that better meet the challenges of the energy transition.
In order to balance out volatile energy generation and avoid negative electricity prices, the German government also initiated the so-called Power Plant Safety Act. Its main aim is to support the construction and modernization of hydrogen-based power plants. Programs such as "Benefits instead of rules" or the promotion of atypical network use aim in the same direction.
Innovations & technologies against negative electricity prices
In addition to regulatory measures or a new market design, there are also other approaches to making the energy system more flexible and efficient. In particular, investments in Energy storage like Large-scale battery storagepumped storage power plants and power-to-gas plants can absorb surplus electricity and release it again when needed. Smart grids also enable better control and distribution of energy. They can coordinate supply and demand in real time and thus increase the efficiency of the overall system.
In addition Sector coupling (e.g. use of surplus energy for heating or transportation) and more flexible operation of conventional power plants could mitigate the problem. More accurate forecasting models and a strengthened Cross-border electricity trading help to better distribute surpluses. Overall, experts believe that consistent implementation of these measures can reduce negative electricity prices. However, this will require considerable investment and regulatory adjustments in order to make the energy transition a success.
Energy transition without negative electricity prices as a goal
Negative electricity prices are a direct result of the increasing feed-in of renewable energies into a system that was originally designed for conventional power plants. They highlight the need to further develop the energy system in order to ensure a sustainable and economical supply of electricity.
While regulatory measures such as the Solar Peak Act and the adjustment of EEG subsidies are already the first steps towards a more flexible market, further investment in storage technologies, smart grids and sector coupling is essential. The electricity system can only be kept stable through the intelligent networking of generation, consumption and storage, and a comprehensive reform of the electricity market design is unavoidable in the long term.