On the background of the advance of photovoltaic and wind energy, electricity has increasingly reached the situation where it is sold on the market at negative prices, a paradoxical trend that threatens a sector on the front line of the fight against global warming, reports AFP.

At the end of June, France recorded 235 hours of electricity production at negative prices, i.e. 5% of total production hours, already surpassing the record set in 2023 (147 hours), according to the operator of the French High Voltage Network (RTE) , according to Agerpres.

In South Australia, the share has reached 20% as early as 2023, the International Energy Agency (IEA) has revealed.

At the root of this phenomenon is an abundant production of renewable energy that leads to the collapse of prices when demand is low. The result, in the ‘spot’ market, where 20% of the electricity on the market is traded overnight, prices fell to minus 87 euros/MWh in 2024. In Switzerland, prices collapsed to minus 400 euros/MWh on July 14. These prices are generally recorded in the summer, at noon, when the production of photovoltaic energy reaches its maximum level.

This trend has been accelerating for three years, as a result of an unexpected drop in demand in Europe, after the Covid pandemic and the war in Ukraine.

Negative prices have an impact on the final bill, explains Rebecca Aron, market director at Valorem, a pioneering French renewables producer. But the impact is delayed in time and can go unnoticed through other moments of growth and decline. Large energy-consuming industries can benefit if they manage to shift their consumption to the most advantageous times.

A negative price “is an alarm signal that there is too much production in the electricity network” and that production must stop, explains Nicolas Goldberg, an expert at Colombus Consulting. The energy system needs to be in balance at all times, electricity being more difficult to store than other forms of energy such as gas and oil.

Currently, many companies operating renewable capacity shut down equipment when a negative price is announced, taking one minute to shut down a solar farm and two to three minutes for a wind turbine. But not all manufacturers do this.

“Renewable facilities can be shut down, but currently, depending on the production contracts, they are not necessarily incentivized to shut down,” explains Mathieu Pierzo, electricity market director at RTE.

Some producers are remunerated at a fixed price in the event of a shutdown or compensated by the state if their guaranteed price is not met. As for the plants that work with fossil fuels or nuclear ones, they can vary the production, but there are also some limits here (technical constraints, the cost of restarting, etc.).

The acceleration of this phenomenon is “extremely problematic” for the renewable sector, emphasizes Mattias Vandenbulcke, from the professional association France Renouvelables. “This allows some to come up with a nasty speech and say ‘renewable energies are useless,'” says Vandenbulcke.

“The recurrence of negative prices sends an urgent signal and shows that we need more flexibility regarding supply and demand,” the IEA recently estimated. This means that renewable facilities must become more flexible and electricity storage facilities must be increased. In addition, action must also be taken on the demand side through financial stimulation in order to shift consumption to the afternoon periods, for example for charging vehicles.