From one extreme to another: Negative and zero electricity prices harm investment

Electricity prices have gradually stabilised following the energy crisis. However, on spot markets they are very often falling into negative territory across Europe. In some European Union member states, electricity is free of charge or even carries a negative price every tenth hour this year. Low prices benefit consumers, but they pose a major problem for investors in new generation sources.

The energy sector has been on a rollercoaster over the past three years. The sharp rise in electricity prices that began in the second half of 2021 was followed by an equally rapid decline. This decline is most apparent in spot electricity prices. This year, they have spent a record amount of time at zero or even in negative territory across Europe.

The reason for zero or negative electricity prices is low consumption and high short-term electricity generation, primarily from renewable energy sources. This can also be seen in charts and data showing when zero or negative electricity prices occur most often. Such hours occur by far most frequently on public holidays and around midday, when electricity generation from solar sources is usually at its highest.