The Negative Wholesale Prices: An Inherent Bad Thing?

On the Debate Ignited by Energiewende Skeptics in Taiwan

I must say, it is very embarrassing for a nation to debate this kind of stuff while its annual variable renewable share in electricity is still around 1%.

Recently, the topic of Germany’s “negative electricity price” caught much attention on the internet communities of Energiewende skeptics in Taiwan. This is not the first time such things are discussed among that community. Negative wholesale prices was introduced to Germany in about ten years ago. Around 2013, this community began to notice such phenomena and described it as a sign of a lethal threat to grid stability: too much VRE was in the grid!

After four years, however, more renewables still got into the grid; the carbon intensity and total carbon emission continued to drop because of that. The grid was not destabilized because of the higher proportion of VRE; this claim is simply not true. Many of the trolls continue to bring up the issues of unserved electricity hours of Germany, ignoring the fact that this statistics actually improved in the recent years. It is also worthy to note that Germany actually has a more stable grid than its neighbors who usually use more conventional power sources.

Average annual interruption (SAIDI, including exceptional events) for European countries in 2013 (in red, if available) and 5-year average (available years only). Countries marked with * use an alternative indicator instead of SAIDI. Source: CEER Benchmarking Report 5.2, 2015.

There are also some people who wanted to make an economical case; negative wholesale prices will cause the cost of Energiewende to rocket, they claim. Again, they usually neglect the overall context where the data is derived. One of the most classic examples is the claim that Germany has to pay 40 million Euros for foreign nations to use their electricity in the year 2017. While restricting cross-border electricity trading might be good for the nation’s environmental goals in the short term and also avoid paying neighboring nations to use the electricity significantly, by doing so Germany would have to give up some 2.7 billion Euros of electricity export revenue (statistics from 2016), which is something neither it or its neighbor want to happen.

The effect of negative wholesale prices towards the renewable surcharge (EEG Umlage) is also exaggerated. The surcharge is mainly affected by the amount of renewables taken into account. After 2022 initial renewable capacities will no longer be under the FIT scheme, so this surcharge will begin to drop. It is also worthy to note that despite the recent rise of duration hours of negative wholesale prices, the summation of renewable surcharge and wholesale electricity prices stagnated during the past three years. The effects of negative wholesale prices toward the retailer’s price is therefore very limited. Germany is also learning quickly to adapt its FIT scheme toward a more flexible power system, and since 2014 larger renewable operators can no longer claim the EEG Umlage if wholesale price falls below zero for more than six hours.

All of the information above came from Clean Energy Wire since maybe 2015. The negative price issue has long been discussed in Germany. But why did Energiewende skeptics start to troll on it again recently?

It is because that Germany just achieved another milestone on its way towards Energiewende. During the Christmas and New Year’s break, the wind power output was said to have passed 40 GW for a while, and renewables even reached 100% of Germany’s domestic demand at around 6 in the morning on New Year’s day. The high VRE penetrations also coexisted with a long period of negative electricity wholesale price.

This is indeed a milestone for Energiewende, since most people would predict such event to occur in early Spring, when both solar and wind are strong. Instead, it occurred when there was no solar power output.

But that very morning was anything but epic to me; with all the shops closed at street in Nuremberg, it was hard to get breakfast that morning. I believe the 80 million population in Germany didn’t experience something transcendental when this milestone was achieved either. Milestones are like certificates or gold medals you keep in your room; what matters more is the persistence of effort and devotion, not the result itself. Life still goes on without a blackout, Energiewende continues and environmental groups stay engaged to make sure things go on at a pace it should be.

Nevertheless the negative wholesale price events during Autumn 2017 and New Year’s Day of 2018 still represented some notable trends on Germany’s Energiewende. I think this is where it gets danger to view negative wholesale prices as a mere result of insufficient residual load flexibility: by doing so, you are neglecting the complex reciprocal relationships between negative wholesale prices and residual load flexibility; in reality they from time to time form a relation of reciprocal causation.

Indeed, negative wholesale prices can be seen as a result of insufficient residual load flexibility, and this coincides with some of the main topics of Germany’s current discussion in Energiewende: for instance, how they can increase residual load flexibility, and where is the limit of it. Of course, the decommission of nuclear and coal power plants in the future will also increase the residual load flexibility of the power system as a whole, in addition to a rise of wholesale electricity prices. These trends will prevent some of the duration hours of negative electricity prices.

But there might be an underestimation of the potential of residual load flexibility even in Germany. This is not just my opinion. The key to this underestimation might lie in the fact that, in return, negative wholesale prices can affect the behavior of operators of conventional power plants. We saw that in two separate Sturmtief last year; the duration and extent of negative wholesale price was different, and so was the residual load flexibility. With a difference of about 10GW in residual load, the net electricity export during the two storms were still similar. Negative wholesale price, if lasting long enough, can be a strong signal to conventional operators, telling them to consider ramping down more or simply shutdown the plant to prevent further loss. If negative prices had been forbidden in the market, conventional operators might have been more reluctant to do such things and would instead have exported more of their electricity. This would have, of course, inhibited further reduction potentials of conventional power sources.

Ramping down of lignite plants during Sturmtief Sebastian with shorter duration of negative wholesale price
Ramping down of lignite plants during Sturmtief Herwart with longer duration of negative wholesale price

At the end of the day, there will always be an ace in Energiewende skeptics’ hands; they can simply claim that, none of this would need to be considered and studied, had it not been for Energiewende. This is 100% true (though then we will of course have other issues to consider and study). But we are talking about a nation with 90% of surveyed population regarded Energiewende as a positive thing worth pursuing as a national policy, so this kind of trolling won’t get you anywhere (there is even a study showing that many AfD voters don’t approve their party’s energy and climate policies).

Thus ends my discussion on this weird debate in Taiwan over whether negative wholesale price is inheriting bad to the power system. It starts with a phenomenon already existed in Germany for a long time, and it ends with a phenomenon already existed in Taiwan also for a long time: that all the Energiewende skeptics think they know more about Germany’s power system and Germany’s energy politics than the Germans themselves do.

Energiewende skeptics may have a very rational and objective way of thinking, they know science and technology better than the public, and they will always be right. It’s just that the world will always develop in the very opposite way as they wish for.

A Taiwanese student who studied Renewable Energy in Freiburg. Now studying smart distribution grids / energy systems in Trondheim.