Miloš Mladenović (SEEPEX): What Do Negative Electricity Prices Bring to the Power Market?

Since the beginning of May this year, negative electricity prices have been recorded for the first time on the Serbian power exchange SEEPEX. These occur during certain hours when electricity production from solar capacities exceeds demand.

We spoke with Miloš Mladenović about what the introduction of negative prices means for the market, how it affects its development, and what changes it brings.

How will this affect citizens? Can they expect any benefits?

I would like to say that citizens can expect direct benefits, but the essence is that negative prices primarily relate to the wholesale electricity market. Still, indirect benefits are possible if suppliers, such as Elektroprivreda Srbije, which supplies households through regulated prices, or other industrial suppliers, develop adequate optimization models.

Negative prices are not only a challenge, but also a certain advantage, as they contribute to greater market depth and open space for new business models. This primarily refers to the use of battery energy storage systems, as well as the optimization of data center operations.

However, it should not be expected that negative prices will immediately lead to lower electricity prices for households.

What should future investors know?

There are several important things to keep in mind. First of all, negative prices are not new in the energy world — they are new to our market, but, for example, they first appeared in Germany back in 2006, although not to this extent.

Also, few people know that during the COVID-19 pandemic, the oil market experienced a situation where the price of a barrel of crude oil became negative. Therefore, negative prices are not a market anomaly, but rather a price signal reflecting market conditions. In the case of electricity, this is especially pronounced because electricity must either be consumed or stored at the moment it is produced.

This creates room for new business models. When it comes to solar energy, investors must understand that the “honeymoon period” is over. Feed-in tariffs are long gone, and I believe auction-based models are also nearing their end. As a result, new financing models will need to be developed, primarily those based on long-term corporate agreements. It has also become clear that, especially for solar power plants, it is necessary to think about installing storage capacities, because without them it is very difficult to achieve project profitability.

What benefits can large consumers have?

This represents a major opportunity for large industrial consumers. There is a lot of discussion about artificial intelligence, and we are also currently witnessing a certain hype around future large-scale data centers in our region. These large data centers, as significant electricity consumers, generally secure energy through long-term corporate PPA agreements, since electricity is one of their key resources.

Large companies such as Amazon, Google and Microsoft are already financing and developing their own power plants through such agreement models.

When it comes to large consumers with flexible consumption, such as data centers or crypto mining centers, they have the ability to adjust their electricity consumption practically within seconds — even milliseconds — in line with price signals on the electricity exchange.

That is why negative prices represent an additional opportunity for them — through long-term corporate PPA agreements, they can secure a favorable base electricity price while simultaneously optimizing their market position through active participation in the market and benefiting from negative, as well as low, electricity prices during nighttime off-peak periods and similar market situations.

Energy portal