Okay, so there’s no such thing as free electricity – of course there isn’t. However on 11th May this year something extraordinary happened in Germany, when industrial electricity customers found themselves actually earning money for the energy they were using.
Widely reported in the press, this unusual situation came about for a number of reasons.
87% Renewable Energy Production
At one peak point over the weekend of May 11th, Germany was able to meet 87% of its domestic energy needs from renewable sources such as solar, wind and hydro. Even for Germany, which aims to generate its entire electricity supply from renewables no later than 2050, this is an unusually high figure.
This peak in production was due to an exceptionally sunny and windy day providing ideal conditions for the country’s solar and wind generation facilities.
Germany, of course, is not alone in its quest to increase the use of renewables. In Northern Ireland solar panels are becoming more common as companies install solar panels in Northern Ireland to generate more green electricity there as well.
Reduced Demand for Nuclear and Fossil-Fuel Power
This peak in renewables led in turn to a reduction in demand for power generated from nuclear and fossil-fuel powered generating stations. The grid needs only so much electricity and, with the demand being met from renewable sources, there was an understandable desire to shut down older, more polluting and more expensive to run power stations.
Unfortunately, these generating stations, particularly nuclear, oil and coal powered plants, are not able to react as rapidly to changes in demand for their power as the peaks in renewable production increase. This situation leads to an excess in supply and potential overloads in the power grid as, quite literally, there is more electricity being put into the grid than is being taken out of it by consumers.
The Solution: Negative Pricing
In common with all countries, Germany’s national grid solves this problem by reducing prices in periods of low demand and high production so that more electricity is used. In extreme situations, the grid may even cut pricing for high-volume users to below-zero, effectively paying them to use electricity, to protect the system from damage due to overloading. This action helps industrial users who find that the more electricity they use, the more they earn.