Are negative electricity prices a big problem?

As European energy prices once more dip into negative territory, due to a short-term glut of solar and wind renewable energy (and also new nuclear capacity, although that part is rarely reported), we have to ask what that actually means in practical terms.

Electricity prices dipped below zero in a dozen European countries this week, including Germany, France, UK (European?) and Netherlands. This was due to record investment in renewables combined with a reduction in demand following the Russia/Ukraine energy crisis of last year, and, in some countries a spike in hydroelectric power due to floods.

In practice, though, this doesn't mean that consumers were being paid to consume electricity. People pay agreed, contracted electricity prices, not the raw market spot price. It means that, temporarily, power suppliers have to pay their wholesale customers to take their electricity. Often, it means that power producers pay neighbouring countries to take excess electricity off their hands. Here is a pretty good explanation of how all that works.

Negative electricity prices have become more of an issue as countries become more reliant on relatively unpredictable, cheap renewable sources, and they will remain an issue until battery technology improves. They do, however, signal an "imbalance" in the market at the wholesale level, and could discourage future investments in energy infrastructure.

However, negative electricity prices are not necessarily a bad thing. They provide incentives for power utilities to make their power stations more responsive to changing conditions, and create new business opportunities in the area of demand adaptation and energy transmission and exportation. They are an indication that an electricity system is not sufficiently flexible. They are also an indication of just how cheap and plentiful renewable energy has become, an environmental success story. 

In some ways, negative electricity prices are a good problem to have. And, in the scheme of things, they don't actually happen that often, or for prolonged periods.