Do negative wholesale energy prices offer a problem or potential?
So far in 2024, the UK has experienced over 149 hours of negative wholesale electricity prices, with this predicted to reach 1,000 hours by 2027. It’s a striking paradox — too much renewable energy, but not enough infrastructure capacity to deliver it. As renewable energy surges, these negative prices aren't just anomalies; they are signals that our energy system needs to adapt, fast. Christopher Carver, the engineering director at energy specialist Tepeo, believes the solution lies in technologies like heat batteries.
Negative prices are becoming a hallmark of large-scale renewable energy deployment. But what exactly are negative electricity prices, and why do they happen? Several factors contribute to this phenomenon, including subsidies for energy producers, which encourage continuous renewable power generation even when demand and prices are low. Another key factor is grid imbalance: when there’s not enough demand, grid operators must incentivise consumers or energy storage providers to absorb the surplus energy or risk having to spill it — otherwise known as curtailment.
One major challenge posed by negative pricing is its impact on the profitability of renewable energy investments. Prolonged periods of low or negative prices can undermine future projects. Since investors and developers rely on stable returns to justify building new infrastructure, frequent negative prices create uncertainty for businesses dependent on predictable revenue from electricity generation.
Addressing this issue is crucial for maintaining the momentum of decarbonisation. If renewable energy projects become too financially unstable, the rate of new installations could slow down, threatening progress toward Net Zero.
Harnessing excess energy
However, negative energy prices also present an opportunity to rethink how we manage energy generation and consumption. As we decarbonise the grid, integrating renewable energy at scale requires flexibility in how we generate, use and store power.
Energy storage systems play a critical role by decoupling energy demand from generation. They allow surplus energy produced during periods of low demand to be stored and used when demand rises. While "grid-scale" storage, enough to power entire towns or cities, has more than doubled in the past year, the UK still lags behind where it needs to be. The National Grid has stated that 50gw of storage is needed by 2050, but as of May 2024, the UK only had 3.5gw of operational battery storage capacity.
The ability to store and shift energy is essential for balancing the grid, especially as more intermittent renewable sources are introduced. But what about technologies that operate on a smaller, domestic scale?
Small scale, big impact
A heat battery is a device that stores energy to be used later for heating. Unlike conventional batteries that store electricity, a heat battery absorbs and holds thermal energy, making it an efficient way to manage heating in homes.
Heat batteries can help balance the grid by disconnecting energy consumption from heat demand. Tepeo’s ZEB, for example, can store up to 40kWh of thermal energy when electricity is cheapest and greenest, for instance, when there is excess renewables generation, releasing the heat when it’s actually needed. The ZEB also features a smart algorithm that constantly monitors grid frequency, with the capability to pause charging when frequency drops. It can also respond to dynamic price signals reflecting the actual system costs of electricity.
The recent Neat Heat trials, conducted with UK Power Networks (UKPN) and OVO Energy, showcased the ZEB’s potential to provide grid flexibility while reducing carbon emissions from home heating. This is just one example of how demand-side management technologies can unlock the value of negative electricity prices, allowing consumers to use cleaner, cheaper energy when it’s most abundant.
The role of policy in heat battery adoption
While technologies like heat batteries offer promising solutions, their full potential will only be realised with the right policy support. Several measures could help accelerate the transition, such as expanding the Boiler Upgrade Scheme (BUS) to cover a wider range of low-carbon technologies. Additionally, recognising the carbon-saving benefits of flexible electrical heating systems in building regulations, such as SAP for Energy Performance Certificates, would further incentivise adoption.
Another key policy shift would be to extend VAT relief on Energy Saving Materials (ESMs) to include heat batteries. Tepeo, alongside OVO, Centrica New Business and Net Zero, and EON, recently co-signed a letter urging the government to grant heat batteries the same VAT relief as other low-carbon technologies.
These policy changes, combined with continued investment in innovation, are essential for enabling heat batteries and similar technologies to play a key role in the UK’s journey to Net Zero.
Turning negative prices into positive change
Negative wholesale electricity prices are not just a challenge; they’re a sign that we’re moving in the right direction toward a low-carbon, sustainable energy system. By embracing these price dynamics and investing in flexible technologies that can store and manage surplus energy, we can ensure the continued expansion of renewables and the decarbonisation of home heating.
Tepeo is committed to being part of this transition. Through our work on intelligent heat batteries and partnerships with industry and policymakers, we aim to help build a more sustainable energy future.
To learn more visit www.tepeo.com.
