Christmas Eve in Germany brought an extra bit of joy to some,utilities paid customers to use electricity ratherthan the other way around. When there is too much supply, those producing thepower will pay others to use it.
This phenomenon of negative electricity pricing isn’t unheard ofin the United States,both Texas and California experienceit as well. Why though, don’t suppliers simply respond to negative prices byturning off their generators? In many cases, it’s because of poorly thought-outgovernment energy policy that generates minimal environmental benefits at theexpense of the poor.
The regressive effects of energy policy and the ways thatwell-intentioned environmental policies have actually contributed to energypoverty, meaning it made it harder for the poor to heat and power their homes,is an underappreciated area of debates around the transition from fossil fuelsto alternative energy sources. Policymakers around the world ignore it at theperil of “greening” the economy on the backs of thepoor.
Although extremely expensive, Germany’s Energiewende did lead toan explosion of renewable energy technologies being installed. That might soundlike a huge success for anyone concerned about the environment, but it has itsown unintended consequences.
More renewables connecting to the electrical grid also entail atechnical challenge of balancing the supply they create with the demand. Thisis because the renewables added to the grid are not dispatchable, which simplymeans that they can’t be ramped up or down with demand.
Solar panels produce when it’s sunny and wind farms produce whenit’s windy. Grid operators rely on weather forecasts to account for this, butthe inherent variability of wind and solar still create problems like negativepricing.
Mismatching supply and demand isn’t the only problem thatvariable renewables create - there are also environmental costs. As energypolicy expert Richard Martin ofthe MIT Technology Review wrote last year of Germany’s renewable energy policy,“after years of declines, Germany’s carbon emissions rose slightly in 2015,largely because the country produces much more electricity than it needs.”
Germany has to produce extra electricity in part because thewind might flag or clouds might obscure the sun. If that happens and therearen’t other sources that can be ramped up running in the background, the gridfails and creates blackouts.
Usually, the sources kept running as a safeguard against gridfailures caused by calming winds and clouds are dirty energy sources like coal.In fact, since Germany has been phasing out much of its nuclear power they’releft with few options other than coal.
Thus, Energiewende has required that Germany build more coal firedelectricity plants; 10 gigawatts worth in the last several years. In sum,despite Germany’s expensive and exuberant renewable energy support, they aren’t evenachieving their supposed goal of lowering carbonemissions. This is true even though renewables make up about 40 percentof Germany’s total electricity supply.
Negative electricity pricing is driven, at least in part,by the aggressive energy policies taken up by governments that spurred hugeincreases in renewable energydeployment.
At first glance, this appears to be a boon to the environmentand consumers who are paid to use electricity. A closer look,however, reveals that negative prices do neither of these things. Instead,negative prices come at the expense of both the environment and the averagetaxpayer. Policymakers in Germany, and other countries taking action on climatechange, should reconsider their energy policy and grapple with its actualeffects on the poor and the environment.
Randy T Simmons, Ph.D. is a professor of Political Economy atUtah State University.
