German and British wind farms generated unusually large amounts of electricity in October, yet negative power prices were almost entirely absent. German day-ahead electricity fell below zero for just two hours during the month, compared with 48 hours a year earlier. Britain recorded only five negative hours, down from 29 last October. The sharp drop points to a shift in Europe's power market that could persist through winter.
Soaring natural gas contracts have lifted the overall cost of electricity so much that even during periods of plentiful renewable generation, prices are not falling below zero. The pattern echoes October 2022, the height of Europe's last energy crisis, when elevated gas prices removed negative hours completely in Germany and the UK.
The change also shows how Europe's power system is adapting to its rapidly expanding fleet of wind and solar farms. Industrial users have become better at being flexible, absorbing more electricity when supply is high. Wind and solar farms are also increasingly cutting production when prices are too low. Developers and investors in renewables, who have seen returns squeezed by previous regular plunges in hourly prices, should welcome the development.
In Germany, average day-ahead prices more than doubled to about €171 per megawatt-hour in October from €82 a year earlier, the highest monthly level since late 2022. Britain saw a similar pattern, with average wind generation about 7% higher than a year earlier, according to NESO data. Volue Data & Forecasting says rising demand from batteries, pumped-storage plants and electrolysers is helping soak up excess electricity. Changes to renewable subsidies, including Germany's rule that new plants generally lose support from the first negative quarter-hour, are also reducing the incentive for generators to keep producing when rates fall below zero.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing