“Let’s consume energy, it’s free!”

We all know that the development of renewable energy sources (RES) is fundamental for the environment. Nowadays, however, it is still difficult to imagine that RES can also help us saving money. But last 28th October in Germany, people could understand what RES can do for our wallet. During a winding weekend the wind power plants were able to produce more energy than the demanded. As a consequence of this, the price of energy became negative.

In this state of emergency, the energy producers started asking people to consume energy. What happened in the German electrical power system? Can a negative energy price be real? Let’s try to understand something more.

The rules of the energy market

We already talk about the energy market, the auctions and the organization of the Italian one. The energy price is given by the intersection of two curves: the supply and demand curves. Supply curves are obtained considering the amount in “x” MWh of energy that producers are willing to supply at a certain price “y” at the time “t”. Every producer decide the price of selling in order to maximize his benefit.

If we consider RES, most of them (except for biomass) have a zero fuel cost. The energy produced from RES is presented with “zero price”: this energy’s supplies are sure to enter the market because the supplies are ordered  according to economic merit criteria. In the previous graph it’s represented the effect of RES production on the energy price. The intersection between the two curves moves down, so the energy price becomes lower.

Now we can try to understand what happened in Germany. As we can see from this picture, the wind’s power was so high that the energy price turns negative. Portando al limite il discorso, si può comprendere cosa sia successo in Germania. The passage from the zero matches with 39409 MW of power from wind generation. We can also see that this hasn’t been the only negative peak of the German energy price: it happened also on December 2012.

The consequences

Due to the fluctuation of energy price, Germans were paid in order to consume energy or were allowed to consume it free. The electric system managers also asked producer to shut down their fuel plants or to reduce the production, even if this operations are easy only using some technology (gas turbine, for example).

Managing high value of power on the electric grid isn’t easy and it can lead to the instability of the system. One possible solution to this problem is storage. In this way, the energy surplus from RES production could be stored and used when needed. Germany, with 415 GWh per year produced by wind power plant, is starting the development of a new kind of storage system, called distributed storage blockchain.