Friday's power price crash has a sequel: price floor on day-ahead markets to fall to -600 EUR/MWh

Electricity prices on short-term markets plunged sharply over the last weekend of April and the May Day holiday on 1 May. Around noon on 1 May, prices for delivery on the Czech market even hit the price floor of -500 EUR/MWh. Following these repeated plunges, European rules will trigger a 100 EUR/MWh reduction in the lower price limit. The new rules are expected to take effect by the end of this month.

The continually growing capacity of solar power plants has had a noticeable impact on short-term electricity markets in recent years. Negative prices have become increasingly common, and spot prices have also plunged further when supply has significantly exceeded demand. One example was the turn of April and May this year, when electricity prices across Europe suffered two sharp crashes. The first came on the last Sunday of April, followed by another on the public holiday on 1 May.

Until now, the lower price limit for trading on day-ahead markets in Europe was set at -500 EUR/MWh. But that will soon change following recent events. Under the revised rules in force since 2023, a mechanism was established to automatically adjust the lower limit of the price range for day-ahead markets. Until then, automatic adjustment rules applied only to the upper limit, which was raised to 4000 EUR/MWh following price spikes in recent years. The new rules, however, abolished automatic adjustment of the upper limit.

First adjustment of the lower price limit in history

For the lower limit on acceptable bids, however, the rules were changed so that repeated breaches of the 70% threshold trigger an automatic reduction of 100 EUR/MWh. With the current limit of -500 EUR/MWh, this meant electricity prices on the day-ahead market had to fall below -350 EUR/MWh at least twice within 30 days. This is exactly what happened on Sunday 26 April and again on Monday 1 May.

For the first time in history, the lower limit will therefore be adjusted. The change was also confirmed by EPEX SPOT, Europe's largest short-term market operator, according to news website Montel. The new price limit of -600 EUR/MWh will first apply to the auction on 28 May for electricity delivery the following day, 29 May.