Comment Electricity price setting in Europe (Score 4, Informative) 105
It is important to understand how electricity prices are determined in a large part of Europe.
Models are used to predict the production (weather prediction like sunshine, wind etc) and consumption needs for electricity on a hourly basis (I think it is going down to 30 minutes soon). Suppliers can set prices to deliver electricity for said time-slots. We then start allocating electricity, starting with the cheapest priced suppliers. The price paid for the last 1%, is the price we pay for ALL the delivered electricity.
Example, we can cover 90% of our needs with solar powered at 0.01 euro / KWH. The next 5% is from wind at 0.10 euro / KWH. The last 5% comes from coal at 0.50 euro / KWH. In this example, we pay 0.50 euro / KWH for ALL electricity, even for solar electricity !!
This was designed with the purpose to stimulate renewable energy. You get paid a premium price for it, lowering the ROI and therefore making it a more attractive investment.
Electricity isn't something you just can store without significant loss/cost and you can't just pump it into the network. Shutting down a power plant isn't cheap, so better to sell at a loss then to pay a big price shutting down your production (and starting it up afterwards which can take time in some cases). It is a bit more complex than this, but selling at a slight loss is offset by higher prices at other moments. And more and more home owners have systems in place allowing them to disconnect from the grid when delivering negative-values electricity from their own solar panels.
Some posts talk about it becoming a financial interesting situation to waste electricity when prices are negative. This is seldom the case, as traditionally we had fixed price contracts (multi-year contracts) or dynamic contracts (adjusted every month). Hence we wouldn't benefit from temporary negative prices at all. There is now a push for dynamic contracts, i.e. you pay what you consume for the price set that hour of the day. This stimulates consumers to change their behavior by e.g. charging their EV after midnight or during sunny periods. This to balance the well known 'duck-shape'.
Btw, even when prices are negative, this doesn't mean electricity is earning you money or is free of charge. We still pay taxes and transportation costs. Not sure about other parts in Europe, but where I live the energy provider and the network provider are different entities. We are still paying for the delivery of energy which often offsets any negative pricing.
Hope this clarifies a bit more how prices set in large parts of Europe.