People in Germany essentially got paid to use electricity on Christmas.
Electricity prices in the country went negative for many customers – as in, below zero – on Sunday and Monday, because the country’s supply of clean, renewable power actually outstripped demand, according to The New York Times.
How this happens
The phenomenon is less rare than you may think.
Germany has invested over US$200 billion in renewable power over the last few decades, primarily wind and solar.
During times when electricity demand is low – such as weekends when major factories are closed, or when the weather is unseasonably sunny – the country’s power plants pump more electricity into the grid than consumers actually need.
The disparity arises because wind and solar power are generally inconsistent. When the weather is windy or sunny, the plants generate a lot of electricity, but all that excess power is difficult to store. Battery technology is not quite advanced enough to fully moderate the supply to the grid.
So when the weather is hot, like it was in parts of Germany over the weekend, and most businesses are closed, plants generate an excess supply of power despite unusually low demand. Then it’s a matter of simple economics – prices, in effect, dip below zero.
It’s important to note that Germany’s utilities companies aren’t depositing money directly into consumer’s accounts when this happens. Rather, the periods of negative-pricing lead to lower electricity bills over the course of a year.
The New York Times reported that some manufacturing plants and offices were incentivised to use electricity, at a cost of US$60 per megawatt-hour. And earlier this year, power prices in Germany spent a total of 31 hours below zero during an unseasonably warm October, according to the Times.
A key challenge for the transition to renewables
Traditional power grids – which mostly rely on fossil fuels to generate electricity – are designed so that output matches demand. But renewable energy technology hasn’t yet been developed to produce according to demand, since generation is a function of weather.
That’s “one of the key challenges in the whole transition of the energy market to renewable power,” Tobias Kurth, the managing director of Energy Brainpool, told the Times.
As storage technology lags behind the efficiency of renewable power sources, it’s likely that this negative-pricing situation will occur again. In that case, governments might need to provide incentives for people to increase their power usage when prices go negative.
These irregularities need to get figured out sooner rather than later, since renewable energy is growing rapidly, driven by the declining cost of technology and government subsidies. The International Energy Agency predicts that renewable energy will comprise 40 percent of global power generation by 2040.
In the next five years, the share of electricity generated by renewables worldwide is set to grow faster than any other source.
In Britain, renewable energy sources generated over triple the electricity as coal did in 2017, according to The Guardian. In June, during a particularly windy night, power prices actually went negative in Britain for a few hours as well – and it’s likely to happen again.
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