Proliferation of Solar Panels Has Crashed Kilowatt Prices In Germany

German solar power producers cut prices by 87% last week during business hours and received a volume-weighted electricity price of just €9.1/MWh, according to a report by SEB Research.

In fact, when production peaks, prices fall well below zero. 

For comparison, the average electricity price during non-solar hours was 70.6 EUR/MWh. Thus, solar power producers have received a massive reduction in the price of electricity they receive during production compared to the price of electricity during non-solar hours. 

‘This is what happens to electricity prices when the amount of unregulated electricity becomes equal to or greater than demand: prices fall when unregulated electricity is producing the most,’ the Swedish bank wrote on Tuesday.

Last year's wave of solar installations caused prices in Germany to be ‘destroyed’ as stocks outstrip consumption. While the total capacity of solar panels exceeded 81.7 gigawatts by the end of 2023, the demand load reached only 52.2 gigawatts, said SEB's chief analyst Bjarne Schildrop.

The difference between the two actually increases even more in the summer, the season of peak production and lower demand. 

This also means that consumers do not necessarily benefit from low prices, as they typically consume more energy during hours when there is no solar power. 

Unless new installations are incentivised by subsidies or power purchase agreements, low profitability could eventually halt solar expansion in Germany, said Schildrop.

So now the focus is likely to be on improvements that will allow for greater utilisation of the energy produced, such as investments in batteries and grid infrastructure.