Do wind and solar curtail at negative electricity prices? Incentives and evidence across two decades of German renewable support schemes
This paper analyzes two decades of German renewable support schemes to reveal that current incentives often fail to encourage wind and solar generators to curtail production during negative electricity prices, thereby inflating subsidy costs and complicating grid stability, which necessitates policy reforms to ensure renewables respond to market signals.
Original paper licensed under CC BY 4.0 (http://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
In the modern world of electricity, the grid is a delicate balance beam. Power plants must generate exactly as much energy as people are using at any given second. When there is too much electricity, the system can become unstable; when there is too little, lights go out. For decades, the solution to having too much power was simple: turn down the big machines that burn coal or gas. But as countries like Germany have built thousands of wind turbines and solar panels, a new problem has emerged. On very windy or sunny days, these renewable sources can produce more electricity than anyone needs. Because wind and solar have no fuel costs, they are often the first to be called upon, but they cannot always be turned off easily if the rules of the market tell them to keep running. This creates a situation where the price of electricity can drop so low that it becomes negative, meaning producers actually have to pay to get rid of their power. The question facing engineers and economists is whether these renewable generators will simply stop producing when the price turns negative, or if they will keep flooding the grid with power that no one wants.
A researcher led by Lion Hirth set out to answer this question by looking at the last twenty years of Germany's energy history. They wanted to understand two specific things: first, whether the financial rules and subsidies in place actually gave wind and solar farms a reason to stop producing when prices dropped below zero; and second, whether the farms actually did stop when they had that reason. To do this, the researcher did not just look at what happened; they built a detailed, hour-by-hour map of what should have happened based on the complex laws governing every single wind turbine and solar panel in the country. They then compared this theoretical map against a new, highly accurate estimate of how much power was actually being wasted, derived from weather data and grid records.
The study reveals a story of two different technologies behaving in opposite ways. For wind power, the financial rules have changed over time to make the farms more sensitive to market prices. By 2025, when electricity prices fell to deeply negative levels, specifically below minus 50 euros per megawatt-hour, almost every wind farm in Germany had a financial incentive to shut down. The math was clear: it would have been more profitable to stop than to keep generating and pay the penalty. Yet, when the researcher looked at the actual data, they found that only about half of the wind farms actually turned off. The other half kept spinning, ignoring the price signal and continuing to produce power that the grid did not need.
Solar power tells a different, and perhaps more stubborn, story. Because a large portion of Germany's solar panels are small rooftop systems that sell their power back to the grid at a fixed, guaranteed price, they are completely shielded from the wild swings of the wholesale market. For these systems, the price of electricity dropping to negative numbers is irrelevant; they get paid the same amount regardless. The researcher found that nearly two-thirds of all solar generation potential had no incentive whatsoever to stop producing, even when prices were deeply negative. Of the remaining solar farms that were exposed to the market prices, only a small fraction actually curtailed their output. In total, when prices were deeply negative, only about 9 percent of the potential solar power was actually turned off, while the vast majority kept flowing onto the grid.
This mismatch between what the market signals and what the generators do has serious consequences. When wind and solar farms keep producing during times of negative prices, they force the grid to absorb excess energy that it cannot use. This makes the physical task of keeping the lights on much harder and more dangerous for grid operators. Furthermore, because many of these generators are still being paid subsidies for every kilowatt-hour they produce, the public ends up paying for electricity that is essentially being thrown away. The researcher calculated that this lack of response costs the public and the system billions of euros over the last few years. The study concludes that as countries continue to build more wind and solar capacity, the current support systems are becoming a liability. For the power grid to remain safe and efficient in a future dominated by renewables, the generators must be designed to respond to price signals and be willing to stop when the system tells them to.
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