French electricity prices turn negative amid weak demand

French electricity prices turned negative for hours on Tuesday morning amid tepid demand in a struggling economy and rising renewables output.

French intraday energy prices traded at -$22.25 (-20 euros) per megawatt-hour (MWh) on the Epex Spot exchange, according to data compiled by Bloomberg.

So far this year, France’s energy demand has exceeded network operator RTE’s forecasts as the French and European economies experience little, if any, growth.

France, which gets about 70 percent of its electricity from nuclear power, returned to Europe’s top net energy exporter last year as its nuclear fleet returned from maintenance and domestic demand was lower. Even with a high level of electricity exports, France’s electricity supply will exceed demand for several hours on Tuesday.

European wholesale electricity markets have seen zero or negative energy prices for most hours on record this year, amid rising renewable generation and a mismatch between solar demand and supply hours.

Negative prices occur when there is more supply of electricity than demand, a scenario becoming more common as Europe continues its aggressive push towards renewable energy.

The number of tradable hours in which energy prices were zero or negative has increased so far this year in major wholesale energy markets, including Germany, France, the Netherlands, Spain, Finland and southern Sweden, according to LSEG data cited by Reuters.

Zero or negative wholesale energy prices have begun to slow investment in capacity additions and justify the need for greater investment in energy storage, whereby power producers would avoid curtailing electricity production or having to pay to offload electricity.

The rapid expansion of wind and solar capacity is changing the continent’s energy landscape. On days when both sources generate at high levels, the market can become saturated with cheap energy, driving prices to the point where they even become negative. While this benefits consumers in the short term, it also highlights the challenges of managing an energy grid that increasingly relies on intermittent renewables.

By Charles Kennedy for Oilprice.com

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