The expansion of solar energy in Germany and the negative effects of overproduction of electricity

As we move towards more low-carbon energy, we see one of the pillars of electricity grids being torn down: the pillar of carefully balancing supply and demand. This is not just a short-term thing. It also influences the construction of new power plants, investments in transmission capacity, and so on. The problem with too much capacity is that it effectively destroys the electricity market because suppliers need to make profits to maintain and build generators and invest in transmission capacity. This is currently a problem Germany is facing due to overcapacity of variable renewable energy sources (VRE) such as solar and wind.

Overcapacity on windy and sunny days causes prices to drop to zero or even go negative. While this may sound positive (pun intended), it means that producers are not getting paid. Worse still, this means that when, for example, France buys German wind power for negative euros through the European Electricity Exchange (EEX), it means that Germany is actually paying France, not the other way around. The highly variable production of wind and solar power also means a large increase in curtailment and redistribution measures to maintain grid stability, all of which costs money and increases operational costs.

One suggested solution is to add more transmission capacity and more memory at the network level, but these do not scale well and are not economically viable. Germany could also limit its solar and wind generators, something it currently avoids. Meanwhile, countries such as Finland and France are also incorporating significant VRE into their grids, but with a strong base of hydropower and nuclear power plants (both capable of charging further), which significantly reduces operating costs. Ultimately, some safe level of VRE grid integration is likely to be found, alongside hydro and nuclear plants, including some with strong load adaptability such as TerraPower’s Natrium. As we have already mentioned, this is not just a European problem.