Renewable overcapacity in Europe causes huge drop in energy bills

  • Boom in infrastructure pushes prices into negative territory in major EU states
  • German prices reported to have fallen by 87% at times
  • Spain and France also see electricity prices tumble
  • Price collapse causing “bottleneck to transition”
The German solar industry is rapidly causing energy prices to fall

The surge in solar has caused energy prices to fall rapidly in major European markets 

Energy prices have fallen across Europe in the first six months of 2024 thanks to a boom in renewable energy capacity in Germany, Spain and France, with prices falling by almost nine-tenths in some cases.

The summer heatwave, the continuing Russia-Ukraine war, a need to reach net-zero sustainability targets, and support from governments are being credited with the rise in demand for renewable energy.

However, the biggest reason is an increase in domestic and industrial solar power projects.

German overcapacity

In Germany, the jump in solar capacity has made energy prices plummet, particularly during production hours. 

According to data from SEB Research, solar panel producers saw solar energy prices fall by 87% in normal production hours in May 2024. During high production hours prices fell into negative territory.   

This fall in prices is a direct consequence of what SEB Research calls “unregulated” solar power in Germany as capacity has rapidly exceeded demand. 

Solar panel installations in Germany rose by 35% year-on-year in the first four months of 2024, according to data from the Bundesverband Solarwirtschaft (BSW), the country’s solar power association. 

Additionally, the BSW said Germany’s solar market doubled in 2023 and it expects double-digit growth in 2024, with 56% of businesses and 60% of private property owners currently investing in solar energy.

Carsten Körnig, managing director of BSW, described solar and storage technology as “increasingly becoming the standard” for energy generation and that low-yield open spaces are “increasingly being electrified” with solar. 

Additionally, Kornig said the “reduction in bureaucracy”, which could refer to the lack of regulation SEB Research mentioned, has meant the housing industry can “increasingly build larger solar systems to reduce electricity bills”.  

‘Bottleneck’ to energy transition

It is a similar situation in Spain, where oversupply has caused a dramatic fall in electricity prices, but where the push towards renewable energies may be causing a bottleneck in the country’s energy transition. 

Speaking to the BBC, Miguel de la Torre Rodríguez, head of system development at Spain’s national grid, said the increased demand for renewable energy capacity in particular has seen prices fall for both renewable and non-renewable energy. 

Driven by a combination of the Spanish government’s ambitious plans for the country’s energy to be 81% renewable by 2030 and the effects of the COVID-19 pandemic, Spain has the second-largest renewable energy infrastructure in the EU after Sweden. 

However, energy consumption has dramatically fallen since the end of the pandemic and is now lower than it was in 2020, with 2023 seeing the lowest numbers for electricity demand for 20 years. 

Similarly to the situation in Germany, Spain’s capacity for renewable energy is significantly greater than demand, so much so that prices collapse during peak hours. 

“Since the power system always has to have an equilibrium – demand has to equal generation – that has meant there has been excess generation during those hours,” Rodriguez told the BBC.

“That has driven prices down, especially during certain hours, when the prices have been zero or even negative.”

This has caused a surplus of electricity on Spain’s grid, and while low prices might be great for consumers, it can discourage investors and cause what Greenpeace Spain describes as a “bottleneck for energy transition”.

As it is in Germany, the drive to renewable energy has put pressure on Spain’s national grid and emphasised the lack of battery storage capacity. 

It is the same in France, where EDF are routinely turning off nuclear reactors during periods of low demand as consumption falls by as much as six gigawatts between Thursday and Sunday. 

Written by:
Max joined The Eco Experts as content manager in February 2024. He has written about sustainability issues across numerous industries, including maritime, supply chain, finance, mining and retail. He has also written for  City AM, The Morning Star and the Daily Express.
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