The impact of renewables on the incidents of negative prices in the energy spot markets

In this paper we analyze the impact of growing renewable energy generation on the instances of negative day-ahead auction prices. We perform a simulation that is based on the real-world day-ahead wholesale supply and demand curves from the German-Luxembourg coupled market to gain insights about which developments in instances of negative market clearing prices could be expected in the short to middle term period with more intermittent energy in the system. This is achieved through transforming the real-world supply curves to include more renewable generation and recalculating the market clearing prices. The results of the spatial analysis suggest that keeping the strong fiscal support for renewables, auction design, and marginal cost bidding in place unchanged would gradually lead to more instances of negative prices in the coming years. Conclusively, we discuss the implications of the observed phenomena on the energy policy. •Current bidding setup on the day-ahead auction motivates negative bidding behavior.•More VRE leads to more negative prices in the current DA market state.•Usage of the supply and demand curves to recalculate market clearing prices.•New signals of power market inefficiencies and need in energy policy adjustments.•Empirical confirmation of the merit order effect using real market data.