Oversupply causes spike in negative electricity prices

The Belgian wholesale market recorded negative electricity prices more often than ever in 2023, financial newspaper De Tijd reported on Tuesday. When prices fall below zero, wholesale consumers receive money to use surplus electricity - but private households are generally unable to benefit from negative prices.

Those who bought electricity on the wholesale market between 3:00 and 8:00 on New Year's Day were paid for using extra electricity. This scenario is becoming increasingly common, the statistics for 2023 show.

Due to oversupply, last year saw a record 222 hours in which Belgian electricity prices fell below zero. This is twice as many as the previous year, according to data provided by Entso-E, the European association of grid operators. It also surpassed the previous record year of 2021, when prices were negative for a total of 160 hours.

More renewable energy

The steep rise in negative electricity prices is due to the growing availability of renewable energy, writes De Tijd. This increase comes on top of the lifetime extension of Belgium's youngest nuclear reactors, which the federal government approved in 2022. When demand is low, often on weekends or holidays, an oversupply of electricity is increasingly common.

As electricity can only be stored to a limited extent, production and consumption must be matched well enough to avoid blackouts. During periods of oversupply, negative prices encourage consumers to use more electricity than they normally would and producers to limit their production capacity.

Dynamic contracts

However, it is difficult for domestic consumers (i.e. households) to benefit from negative prices. The main beneficiaries of overproduction are traders and large industrial consumers. Only private consumers with a dynamic contract, where prices move with market fluctuations from hour to hour, can benefit by shifting as much consumption as possible to hours with negative prices. In Flanders, only 0.06 per cent of households have such a dynamic contract.

Energy market watchdog CREG warned in a recent report to be careful with dynamic contracts, as they can expose consumers to extremely high prices at certain times. More than 80 per cent of Flemish households currently have a variable electricity contract, where prices are adjusted every month or quarter.



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