Record negative electricity prices

In Germany, electricity prices are slipping into negative territory more often than ever before. This is according to data from the Fraunhofer ISE, which was analyzed by Handelsblatt. According to the data, the electricity market price has been below zero for a total of 248 hours since the beginning of the year – more often than ever before in the period up to the end of May. The negative prices are also reducing average electricity costs. In May, these were close to the level before the energy crisis. But companies have barely benefited so far, as the example of an electric steel mill shows. And the government is paying the price: The federal government may face unprecedented costs this year to offset the negative prices.

Record number of hours with negative electricity prices

In the first five months of 2025, negative electricity prices occurred more often than ever before. This creates opportunities for companies – and problems for the government.

Negative electricity prices are occurring more frequently in Germany than ever before. This is the result of an analysis of data from the internet platform Energy Charts by the Handelsblatt newspaper. According to the data, which comes from the Fraunhofer Institute ISE, the exchange electricity price has fallen below zero euros per megawatt hour in a total of 248 hours since the beginning of this year. This is a record.

In recent years, the number of such hours between January and May has been considerably lower; the previous record was 204 hours. The result: electricity is becoming cheaper on average. Electricity market expert Bruno Burger from the ISE explains that in May, the electricity price reached the level typical before the energy crisis, at just over six cents per kilowatt hour. "This is positive news," he emphasizes.

Ultimately, this development offers long-term opportunities for the economy: Companies that purchase their electricity on the exchange can obtain energy at low prices. Electricity contracts for industrial customers also cost less when electricity prices on the exchange fall. However, negative electricity prices have so far caused one thing above all: criticism. Because, for the foreseeable future, the advantages will be outweighed by problems and costs. One problem, for example, is that companies have so far only been able to benefit from the low prices to a limited extent. One example is Feralpi Stahl, which operates an electric steel mill in the Saxon town of Riesa. Since the steel mill receives its orders for reinforcing steel only a few weeks in advance, it purchases electricity on the exchange at short notice. Plant director Uwe Reinecke says: "On Tuesday, we had six attractive hours with negative prices. However, our electric steel mill operates around the clock. Mornings and evenings remain expensive."

On average, according to Reinecke, the plant is still paying significantly more than before the energy crisis – and more than its European competitors. He is therefore hoping for an industrial electricity price, such as the one the German government would like to introduce. However, periods of negative electricity prices are very expensive for the federal government. The basic rule is that when the electricity price becomes negative, the electricity producer has to pay for supplying electricity. This means that, for example, the operator of a coal-fired power plant has to pay the electricity customer for purchasing the electricity.

But different rules apply to operators of renewable energy power plants, such as wind and solar power plants: They are subsidized by the state. If a solar power plant operator receives seven cents per kilowatt-hour from the state and has to offer its electricity on the stock exchange for minus five cents, it costs the federal budget twelve cents. The state expects to spend around 17 billion euros on EEG remuneration in 2025. Last year, only around 10 billion euros were budgeted – although 18.5 billion euros were actually needed by the end of the year. The expenditure is high, but difficult to prevent in the short term. There are several reasons for this. Firstly, negative electricity prices cannot be fundamentally prevented. They arise when electricity production exceeds demand. To ensure that the electricity produced is purchased at such times, it costs less than zero euros. This means that those who buy electricity receive money for it instead of paying for it. This hasn't always been the case. Energy market expert Tobias Federico from the analysis firm Montel says: "Negative electricity prices have only been occurring in Germany since 2008." Previously, on days with excess electricity production, a so-called pro-rata system was used. This meant that if only 80 percent of the offered electricity was in demand, each supplier was only allowed to supply 80 percent of its originally offered quantity. However, according to Federico, this system posed technical problems: "Conventional power plants cannot simply operate at partial load, i.e., skip part of their production." This is why the option of negative electricity prices was finally introduced. Now, there are increasingly frequent electricity surpluses because more and more new solar plants and wind turbines are being built in Germany. Theoretically, coal-fired power plants should be taken off the grid instead. But they are still needed for periods without wind and sun. And they cannot flexibly ramp up and shut down at short notice. So, for example, there's often too much electricity at lunchtime, especially on sunny days – and prices become negative. Different rules depending on the plant. There's another reason why the high costs of negative electricity prices can hardly be prevented in the short term: the federal government can't easily escape its obligation to pay. The traffic light government has already revised the EEG subsidies: If electricity prices fall below zero, large renewable energy plants will no longer receive EEG remuneration. However, this rule cannot apply retroactively to solar plants and wind turbines that have already been built. Therefore, different rules now apply depending on the plant's output and year of construction. For example, since the beginning of 2025, new plants with an output of over two kilowatts will generally no longer receive remuneration if electricity prices are negative. For older plants, this sometimes only applies if electricity prices are negative for three, four, or six consecutive hours. Renewable energy plants receive remuneration for 20 years after their construction. Old, highly remunerated plants will only gradually cease to receive payments. And so the benefits of low electricity prices on the stock exchange are only slowly taking hold. However, the first signs of the new law's impact are emerging: Due to the limited compensation for negative electricity prices, the incentive for operators of wind and solar plants to continue producing electricity during such periods is also diminishing. Fraunhofer expert Burger says: "On average, negative electricity prices are no longer as low as in previous years." Data from Energy Charts show that negative electricity prices in 2025 have so far averaged minus 15.66 euros per megawatt hour. This is higher than in the two previous years. But the averages were even lower in 2016, 2017, 2019, and 2021. At the same time, adjustments to the system are dampening the negative price fluctuations. Expert Federico says: "The negative electricity prices make overall price volatility in the market possible. This makes completely new business models that are important for the energy transition attractive – for example, battery storage."

The operators of such storage systems buy electricity when the price is low or even negative and sell it later when it's expensive again. The side effect: Storage systems can provide relief – both for the power grids and for public finances. For large industrial companies like the steel mill in Riesa, this isn't yet a solution. Plant director Reinecke says: "As a major consumer with an annual electricity demand of 540 gigawatt hours, we won't be able to cover our daily electricity needs with batteries for the foreseeable future."

However, battery storage systems can provide relief in the overall system. Fraunhofer expert Burger says: "If new battery storage systems and electric cars are charged in a way that benefits the grid, this could also lead to a reduction in negative electricity prices."

QUOTES FACTS OPINIONS The government is expected to spend €17 billion on EEG subsidies in 2025. Source: own research

Image: Germany: Market electricity price – hours with negative electricity prices from 2018 to May 2025, monthly average electricity price from January 2018 to May 2025, average values ​​of all negative electricity prices from 2015 to May 2025

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