A windy week in Germany produced the expected result. Wholesale electricity prices from 19th to 26th February 2017 dipped below zero four times and much of the weekend saw figures below €25 a megawatt hour. This pattern is increasingly frequent across many electricity markets. As the Economist pointed out last week, the arrival of large scale renewables with zero operating cost is eating away at the businesses of those companies reliant on selling on the open market. €25 does not pay for the cost of the gas to generate a megawatt hour in a power station.
In the US, NRG, which is the largest independent producer of power, summed up the problem by saying its business model was now ‘obsolete’. Lower and lower prices are making it impossible to produce electricity from gas or coal in markets increasingly captured by solar and wind. Equally, no-one can raise the finance to build new power stations, even in those countries with ageing fleets, such as the UK, because of low prices and fewer and fewer hours of operation. This problem will get worse.