Electricity prices dipped below zero several times last year – a phenomenon driven largely by the growth of renewable energies, particularly wind and solar. The number of hours with negative energy prices is expected to rise, though the lower prices are not yet showing in household bills.
Due to oversupply, electricity prices on the Belgian wholesale market dropped below zero for a record 222 hours last year, according to calculations by the Epex power exchange.
Negative prices are a recent phenomenon, only really appearing in Belgium since 2019 with the commissioning of new offshore wind farms. But it is becoming increasingly common, De Tijd reports. Compared to 2022, Belgium experienced a doubling of the number of hours with negative electricity prices.
Negative energy prices are the result of a mismatch between supply and demand. When Belgium's energy system was completely demand-driven and ran on fossil fuels, negative prices did not occur as gas and coal-fired power plants could simply be switched off when demand was low to maintain a balance.
Belgium has invested heavily in its wind park, diversifying the energy mix. Wind park at Zeebrugge © Hans Hilllewaert/Wikimedia
But the more diverse energy mix that feeds Belgian supply today also draws increasingly on sources that cannot be switched off so easily. When demand is low – typically on weekends or holidays – the risk of oversupply grows, especially on windy or sunny days. While wind turbines can be switched off, this is not possible with solar panels, meaning a surplus of electricity supply can occur.
During these periods it actually costs costs money to put electricity into the grid, meaning producers must pay for the surplus power they produce. Traders and large industrial consumers (a large freezing plant for example) are therefore offered money by producers to use energy.
In early July 2023, producers were offering customers up to €120 per megawatt-hour to draw from the network to consume more power than they normally would.
Who benefits from negative prices?
At present it is mostly just traders and large industrial consumers who benefit from electricity prices dropping below zero. For individuals, it is more difficult to take advantage of negative prices.
Only households on a dynamic contract – where prices move from hour to hour in line with market fluctuations – can really benefit. They can then adjust their energy consumption to use more energy at times when prices are negative. However, only about 1,000 households use such a contract in Belgium (where it is only available in Flanders) compared to almost half a million in the Netherlands.
As wind and solar continue making gains the number of negative hours will increase and high-voltage operator Elia has said a tariff that tracks energy prices by the hour is an important part of the energy future and would allow more consumers to participate in the market, ensuring demand stays high by using flexibility. This would mean that more people could adjust their energy consumption to benefit from the low or even negative prices.
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But energy watchdog CREG has warned of the need to be careful with dynamic contracts, which rely on consumers being "actively engaged" with their electricity consumption and match it with hourly prices (for example, high consumption during the night and low consumption during the day).
If a household on a dynamic contract consumes a lot at times with high hourly prices, it runs the risk of receiving a higher energy bill than on a variable (prices adjusted every month or quarter) or fixed contract.
