Negative electricity prices lower bills for households in Europe

The energy transition in Europe is slowly starting to bear fruit: household electricity bills are decreasing. The increase in solar and wind power plants in the European electricity system is boosting the number of hours with negative electricity prices on power exchanges, which allows suppliers to offer dynamic tariffs, including hourly billing, to consumers that can flexibly manage their consumption.

Data for the first six months of 2024 demonstrated that consumers with dynamic tariffs in Germany paid up to 34% less for electricity than the average price on the European Energy Exchange (EEX), German energy management solutions company tado said.

The main reasons are negative electricity prices on power exchanges. They occur when there is excess electricity in the system, either due to increased production or reduced consumption. They started to appear about fifteen years ago, correlating with a rise in the share of solar and wind power in production.

Lately, negative prices started affecting the Western Balkans, with some coal power plants having to reduce production.

Tado said that in the first half of this year, EEX had a record 226 hours with negative prices. It brought benefits for households with dynamic tariffs, which include hourly billing, and which are flexible in managing their consumption, the firm said.

The ones that consumed electricity in the ten cheapest hours of the day in the first half of the year paid up to 34% less than the average price at EEX.

In 2023, the measure was as high as 21%, and in 2022 the difference went to as much as 17%. Nado attributed it to the growth of the share of renewable energy sources. Renewables have covered 58% of consumption in the first half of 2024 in Germany, which is a new record.

Schmitz: Energy transition brings good things to consumers

Simon Schmitz, founder of electricity supplier aWATTar and head of the energy sector at tado, said the energy transition is good for consumers. The share of renewable energy sources in the power grid will continue to grow and, with it, price volatility as well, in his view. It is good news for households, Schmitz asserted.

It means that electricity bills could be reduced even more, Schmitz added. He noted that all that households need to benefit from the energy transition are dynamic tariffs and energy management solutions. Then they can shift the consumption of their heat pumps, electric cars or washing machines to times when electricity is cheapest.

Consumers can plan in advance when and at what price to turn the heat pump on or charge their electric car

Tado offers tariffs within which electricity is billed hourly instead of charging the average price through fixed tariffs.

The firm’s customers receive information on hourly prices for the next day, so they can employ energy management solutions to plan in advance when and at what price to turn the heat pump on or charge their electric car. It is done automatically and in line with the consumer’s choice.

The smart control tool allows households even to weather peak prices and have lower annual energy costs than with fixed tariffs, according to Tado.

Of course, that way they also help prevent wind and solar power from remaining unused.