(Montel) The 90-minute delay on Tuesday in clearing the Dutch spot market due to massive solar peak production should be a “warning” for summer, a Dutch power market analyst told Montel.
Dutch day-ahead prices for Wednesday settled below zero for six consecutive hours on Wednesday afternoon, with a low of EUR -195.41/MWh between 15:00-16:00 CET.
The publication was delayed by 90 minutes as exchanges had to run a second auction because the minimum threshold of EUR -150/MWh had been breached in the first auction.
The main reason for the low prices was high solar output, said Jean-Paul Harreman, power market analyst and director at EnAppSys.
Lack of price signals
The number of negative prices in the Netherlands had increased due to the exponential growth in solar PV in recent years, said Harreman.
The country added 3-4 GW of solar PV capacity last year to reach around 20 GW, the highest per capita in Europe.
Harreman said around 6-7 GW of this capacity lacked incentives to reduce production when prices were low, since their sales prices were fixed in long-term deals.
“If you have a power purchase agreement that remunerates your solar production, there is no incentive to curtail production,” he said, adding that the same was true for solar that was not connected directly to the grid.
The short-term solution was to curtail renewable generation in the Netherlands, while also boosting demand. Despite these measures, there was a risk that the Dutch spot could drop well below zero again as spring had only just begun, Harreman said.
“Everything running during the solar peak will be producing at a loss. When the sun starts to fade late in the afternoon, there will be a need to ramp up gas power plants, which usually comes at a premium,” he said, adding that he expected high volatility in the intraday and balancing market during the evening peak.
Exchanges did not reveal how low prices fell in the first auction. European spot prices are capped at EUR 4,000/MWh and EUR -500/MWh.