Negative Auction Prices Hit European Generators

Exceptionally high wind generation and low UK demand December 7-8 led to a negative day-ahead price for power for the first time on December 9, according to Cornwall Insight. Prices for delivery from 03:00 - 04:00 local time on the hourly day-ahead auction dropped to minus £2.84 (-$3.34)/MWh.

Wholesale manager James Brabben said negative prices had happened before on the within-day wholesale market but never on day-ahead auctions. Wind output levels peaked at 16.2 GW December 8 and continued over the early hours of December 9. "It was a perfect storm for prices to drop," Brabben said.

“This incident also highlights the increasingly interconnected nature of coupled European markets," he said, as negative pricing was also observed throughout German, Dutch and Belgian day-ahead power prices. German prices reached a low of -€16.09/MWh from 02:00 - 03:00 local time.

At the time of negative day-ahead delivery prices, Great Britain was receiving 1.1 GW of power through two interconnectors from the Netherlands and exporting 1.4 GW through another interconnector to France. Britain "was effectively acting as a transit country for the flow of continental European power," he said.

“While this may be heralded as a watershed moment by flexibility providers, taking the opportunity to be paid to consume electricity, these low prices will be a cause for concern for generators, whose revenues could be significantly affected if this price cannibalisation effect continues," said Brabben.

“With increasing wind penetration across Europe, negative prices now occur even in the depths of winter and this is a trend to watch out for as more intermittent renewables capacity comes online,” he concluded in a December 18 comment.