SPECIAL REPORT | POWER PRICING
Negative prices and nuclear new build
At the height of the European summer, power prices went negative for hours and days. It’s a growing trend, but what does that mean for nuclear power?
THIS YEAR A COMBINATION OF wind and sun meant that there were consecutive days when wholesale power prices were negative in several energy markets. This has been seen in the past, but for shorter periods.
In Europe the Internal Energy Market (IEM), which is a ‘frictionless’ network that allows power to be sold across the bloc, has the effect of smoothing out variations in prices, because oversupply in one region allows for power to be sold directly to another region where there is undersupply. This year the negative price phenomenon was more widespread, with record low prices in the Nordic region at the same time because of high water levels in its hydropower system. In April to June, according to market intelligence company EnAppSys, the frequency of negative pricing meant that the average system price was the lowest since the first quarter of 2021 – including a period in May when system prices dropped as low as -£155.20/MWh (EUR180.14/MWh).
This is not a bug in a low-carbon electricity system, but
a feature. The low running costs of wind and solar mean customers benefit if maximum use is made of the power they generate on favourable days. However, the system is not fully able to accommodate
such large volumes of low carbon power yet. The IEM has the market mechanisms that allow power to be shared, but the transmission network often reaches its limits when sending that power on to areas of higher demand. Until more, bigger, cables are installed, some areas find
themselves discarding power. It is a regular occurrence in Great Britain, where large-scale generation from windy
areas in northern Scotland and the North Sea cannot be exported over the existing, relatively low capacity, links between Scotland and the major demand areas in England and Wales (or across high voltage interconnections with Europe). Wind farm operators with contracts for difference (CfDs – the British mechanism for providing stable prices) are not paid when the wholesale price is negative, giving them an incentive to shut down temporarily. If nuclear experience is anything to go by, wind farms could use this kind of unplanned outage for maintenance. But for offshore wind at least, there is a bottleneck that makes reacting in that way more difficult: the outage also has to coincide with a ‘weather window’ that allows access (and of course by their nature such periods will be on windy days) and both staff and vessels must be available. In the long term, if there are lots of periods of negative
prices, the CfD mechanism will either be agreed at higher prices to cover costs for shorter periods or the market will have to find another source of value for power generated at times of oversupply. This spring, Swedish wind farms also stopped generating during negative price periods, the operators said. This oversupply is the strong argument for hydrogen and the reason wind and solar companies are investigating electrolysis and long-term storage. It is also the reason why energy system operators and retailers are moving to customer-side options, passing on negative prices to business or domestic customers and asking them to soak up excess power by charging EVs or otherwise turning up demand at zero cost or even credits.
Above: Excess power cannot always be exported over the existing, relatively low capacity, links prompting negative electricity prices
36 | September 2023 |
www.neimagazine.com
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