Negative Pricing: Germany Swamped with Renewable Energy

You can practically see the circuits blowing at conservative Bloomberg News, which is following the evolving story of Germany’s transformation to a renewable electric economy.

First, this week, Paul Gipe, the indispensable sage of renewables sent me this:

Recent data shows Germany continues to export electricity despite closing seven nuclear reactors.

Meanwhile Bloomberg reports that continued renewable energy expansion in Germany is driving down power prices.

The Bloomberg article reports:

“The installed solar base in Germany is growing rapidly thanks to continued feed-in tariff support,” Jenny Chase, a solar analyst at Bloomberg New Energy, said today by e-mail. “We expect this to weigh on power spot prices, particularly because renewable energy has priority grid access and near-zero marginal cost.”

but includes the usual caveats about “less reliable” renewables, oldthink need-for-baseload, yadda yadda.

Now, we have this, again Bloomberg – Utilities Giving Away Power as Sun Floods Grid:

The 15 mile-per-hour winds that buffeted northern Germany on July 24 caused the nation’s 21,600 windmills to generate so much power that utilities such as EON AG and RWE AG (RWE) had to pay consumers to take it off the grid.

Rather than an anomaly, the event marked the 31st hour this year when power companies lost money on their electricity in the intraday market because of a torrent of supply from wind and solar parks. The phenomenon was unheard of five years ago.

With Europe’s wind and solar farms set to triple by 2020, utilities investing in new coal and gas-fired power stations no longer face stable returns. As more renewables come on line, a gas plant owned by RWE or EON that may cost $1 billion to build will be stopped more often from running at full capacity. It may only pay for itself on days like Jan. 31, when clouds and still weather pushed an hour of power on the same-day market above 162 ($220) euros a megawatt-hour after dusk, in peak demand time.

“You’re looking at a future where on a sunny day in Germany, you’ll have negative prices,” Bloomberg New Energy Finance chief solar analyst Jenny Chase said about power rates in wholesale trading. “And a lot of the other markets are heading the same way.”

Clearly, this is a temporary situation as the old centralized grid reforms itself to deal with distributed, decentralized renewable technologies.  Better transmission, load management, and probably some energy storage based on off the shelf technologies will more than solve this.

Germany’s model Feed-In-Tariff, now being copied in places like Ontario and Japan, seems like one of the most effective models for bringing new technology to market quickly, creating jobs, and jump starting new industry.

The pattern holds. Whenever someone moves boldly in the direction of renewable energy, they meet with greater success, sooner, and at lower cost, than even the most enthusiastic proponents have imagined.