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In Germany, more and more electricity is being generated by photovoltaic systems. While this sounds positive, there is also a downside. When more electricity is produced than consumed in summer, this is referred to as a ‘solar peak’. These peaks can lead to negative prices on the electricity exchange and are no longer an exception. Measures such as the ‘Solar Peak Act’ passed in spring are now intended to counteract these developments.
Photovoltaic systems usually produce electricity with a high degree of simultaneity, which can result in the grid becoming overloaded when feed-in levels are too high and negative prices emerging on the market. This development is evident across Europe, and this year negative electricity prices are increasingly approaching the lower limit of the day-ahead market, the market on which energy is traded for the following day. In 2024, Germany already recorded 475 hours with negative wholesale electricity prices – a significant increase compared to 2023, when the figure was 301 hours in the negative range.
There are also signs that the negative trend will continue to gain momentum in 2025. The price behaviour in April and May was particularly striking: several days in a row saw consistently negative prices. On 6 April, a massive oversupply of solar power was reported not only in Germany but across large parts of Europe – with corresponding effects on the market. On 1 May, the electricity price even slipped to -129.99 €/MWh at midday. On 11 May, prices remained in negative territory between 9 a.m. and 6 p.m. in many countries in continental Europe: At midday, the price in Germany fell to -250.32 €/MWh, and in Belgium to as low as -462 €/MWh – just above the day-ahead price floor of -500 €/MWh.
This can result in marketing costs that threaten the very existence of companies
If supply and demand on the electricity exchange ultimately no longer match, a pro rata allocation takes place. In concrete terms, this means that electricity demand is fully covered, but on the supply side, only part of the allocation can take place. Producers therefore only receive a proportionate share of the allocation – in proportion to demand and supply.
If no balance is achieved on the day-ahead market, trading continues on the intraday market – if the oversupply persists, prices fall again, in some cases to as low as -9,999 £/MWh. If the electricity is not sold here either, there is a risk of what is known as imbalance: open quantities must be balanced by expensive control energy – with potential costs of up to -15,000 €/MWh. Such costs pose a high economic risk for traders, even threatening their existence. To avoid this, market participants in the day-ahead market could adjust their bidding strategies, for example by deliberately offering more in order to have to purchase less electricity in the event of a possible pro rata allocation. However, this opens the door to strategic behaviour and complex market mechanisms.
Greater grid stability with the Solar Peak Act
The problem of solar peaks must also be solved so that the expansion of photovoltaics is not slowed down, grid stability is guaranteed and solar energy does not subsequently become a risk to the energy transition. In February 2025, the so-called ‘Solar Peak Act’ was enacted, which contains various ways of dealing with solar surpluses.
The aim is to improve the electricity grid infrastructure so that surplus electricity can be transported to where it is needed. Above all, however, the law is intended to counteract the uncontrolled operation of many solar power systems. Such systems are often designed for self-consumption and have no incentive to throttle back, meaning they do not respond to market signals and feed in continuously. The new law makes control boxes mandatory for all new solar installations – with the aim of enabling remote control. Energy management systems and battery storage are thus becoming increasingly important and contribute to better control of the electricity generated.
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Image: American Public Power Association on Unsplash
Sources: ewe.de,
next-kraftwerke.de, Johannes Viehmann and Verena Dubois, 16.05.2025