📚 Germany Has Too Many Solar Panels, and It's Pushed Energy Prices Negative

An anonymous reader quotes a report from Markets Insider: Sunny days in Germany mean gray clouds for solar profitability as the nation's dive into renewables has left it with too much energy. According to a note from SEB Research, in the past 10 days, solar producers have had to take an 87% price cut during production hours. In fact, when production peaks, prices have slid well below zero. On average, the price received was 9.1 euros per megawatt-hour, significantly under the 70.6 euros paid during non-solar-power hours. "This is what happens to power prices when the volume of unregulated power becomes equally big or bigger than demand: Prices collapse when unregulated power produces the most," the Swedish bank wrote on Tuesday. Last year's record wave of solar installations are what's driving Germany's price "destruction" as inventory outpaces consumption. While total solar capacity topped 81.7 gigawatts by 2023's end, demand load only reached 52.2 gigawatts, noted SEB chief commodities analyst Bjarne Schieldrop. The difference between the two actually widens even more in the summer, a season of peak production and lower demand. This also means that consumers are not necessarily benefiting from the low prices, as they typically consume more energy in non-solar hours. Unless new installations are spurred on by subsidies or power purchase agreements, oppressed profitability could eventually halt Germany's solar expansion, Schieldrop said. Instead, focus is likely to move onto improvements that will make more use of the energy produced, such as investments in batteries and grid infrastructure. "This will over time exhaust the availability of 'free power' and drive solar-hour-power-prices back up," Schieldrop wrote. "This again will then eventually open for renewed growth in solar power capacity growth."

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