Germany's Solar Surplus Sends Energy Prices Plummeting

The Oversupply Dilemma: Last year witnessed a record wave of solar installations in Germany, resulting in a surplus of solar capacity. As of the end of 2023, the total solar capacity in the country reached a staggering 81.7 gigawatts, while the demand load only stood at 52.2 gigawatts. This disparity is further exacerbated during the summer season, characterized by peak solar production and lower energy demand. Consequently, Germany's solar industry is struggling to find a balance between inventory and consumption. Consumer Impact: While the low energy prices may seem beneficial for consumers, the reality is more nuanced. Consumers typically consume more energy during non-solar hours, meaning they don't fully benefit from the low prices offered during surplus periods. Moreover, if the profitability of solar installations continues to decline, it could potentially hinder the expansion of solar energy in Germany. To overcome this challenge, the focus is shifting towards investing in batteries and grid infrastructure to optimize the utilization of the excess energy. The Way Forward: SEB chief commodities analyst Bjarne Schieldrop suggests that unless new installations are incentivized through subsidies or power purchase agreements, the profitability of the solar industry may suffer. However, he believes that as the availability of "free power" exhausts over time, solar-hour-power prices will rise again, paving the way for renewed growth in solar power capacity. Germany's experience with solar oversupply is not unique, as the European market as a whole has faced similar challenges due to the rapid installation of solar and wind capacity.