Sub-zero

“Imbalance costs (also known as balancing costs) are financial penalties that renewable energy producers incur when their actual energy generation deviates from their forecasted [sic and also sick] production.”

It is spring again in Europe, winds are abundant and so is sunshine, as said winds clear out clouds like nobody’s business, rendering weather forecasts pretty much useless, apparently, if you’re the operator of a wind or solar installation. As a result, negative electricity prices are back and they are back for an extended series of frequent visits, to the boundless joy of grid operators across the continent, no doubt.

Here’s the latest from Germany, courtesy of Bloomberg: “Above-average wind speeds meant the clean energy source was covering around 80% of Germany’s power load by Monday morning, according to data from the Fraunhofer Institute. Cloud cover in northeastern Germany cleared faster than expected by early afternoon, allowing solar output to rise more sharply, said Späth. Combined with an already oversupplied market, this led to a rapid escalation in excess generation from around 1 p.m, he said.”

This happened on Monday and resulted in intraday electricity prices of a negative 323.96 euro per MWh at 3 p.m. in Germany because we now cite hours, because wind and solar output is that flexible. And that sub-zero price happened despite “massive” curtailment of wind and solar, per the above-cited Stephan Späth, who is an individual wearing the twin crown of a meteorologist and electricity trader, which is a really clever combination.

Speaking of electricity trading, that negative price above was nothing compared to the imbalance costs, also called balancing costs just to make things clearer, that Germany’s wind and solar operators saw on that fateful Easter Monday. Ready? Here it is:

“Imbalance fees, charged when actual electricity generation or consumption deviates from contracted levels, fell to -€4,631.99 a megawatt-hour at 2.30 p.m., according to data from Germany’s transmission grid operators. This meant market participants who overproduced relative to forecasts faced high costs.”

Now, how can negative costs that fall be higher, one may wonder? Well, it is my strong feeling they were not, in point of fact, negative for the power generators. They were negative for the grid operator and very much had a positive value for the generators. Generators, in other words, had to pay the grid operator for the electricity they had produced because it exceeded demand so bloody much. Point to Gridoperatordor. Minus four thousand plus points to Generatorin. Please excuse the lame wordplay. Not a big Harry Potter fan. Negative prices, now, that’s something else.