Navigating negative electricity prices and the future of French renewables

Are negative electricity prices a threat to renewable energy, or simply a catalyst for smarter project design?

In 2025, France experienced over 500 hours of negative electricity prices. Most of these instances occurred during the spring and summer months, landing in the middle of peak solar production hours. For renewable energy developers, this trend is impossible to ignore. AFRY projects that the frequency of negative prices will continue to rise, with a peak in 2028, before gradual regulatory changes help stabilize the market.

While this rapid growth of negative prices might seem daunting, it is actually a clear signal that our energy system is maturing. It highlights a massive opportunity for the industry to adapt, innovate, and build more resilient assets. By understanding the root causes of these price drops and anticipating upcoming regulatory shifts, developers can secure their revenue streams and lead the next wave of the energy transition.

What is driving negative electricity prices?

To adapt to the market, we first need to understand why prices drop below zero. On the French day-ahead market, negative prices do not happen by accident. They occur because certain producers actively bid at negative prices. This behavior is primarily driven by two factors:

• Renewable assets under Feed-in Tariffs (FiT) or old Contract-for-Difference (CfD)¹: Many older solar and wind installations operate under FiT contracts. Because these producers are paid a guaranteed rate regardless of market conditions, they have no incentive to curtail their production when demand drops. To ensure they are dispatched first in the merit order, they often bid at the legal market minimum (€-500/MWh), driving prices down.
• Inertial thermal plants: Large thermal power plants, such as nuclear facilities, have high technical and operational costs associated with ramping production up and down. For these operators, it is often more cost-effective to sell electricity at a loss for a few hours than to completely shut down and restart a reactor. However, these plants sell most of their output on long-term markets rather than on the day-ahead market and are therefore less affected by negative prices.

Meanwhile, renewable assets operating under newer CfD mechanisms bid at or near zero, as their contracts incentivize them to halt production when prices turn negative.

The real impact on current CfD revenues

If you operate a solar or wind plant under a current French CfD, your contract requires you to curtail production during hours with negative prices. If you follow this rule, the government compensates you for the lost generation.

Currently, the revenue impact of this curtailment is relatively manageable. For solar photovoltaic (PV) plants, the current regulation includes an annual franchise where the first 15 hours of negative prices are uncompensated. Across a full year, this typically results in a minor revenue loss of around 0.5 percent. There are some operational frustrations, such as cash flow constraints because negative price compensation is paid out at the end of the year, but the core business model remains secure.

However, as the number of negative price hours climbs well past 500, the French Energy Regulatory Commission (CRE) is exploring new frameworks that could drastically alter this dynamic for future projects.

Evolving regulations and the shift to energy storage

As the cost of supporting renewables faces increased political scrutiny, the CRE is proposing changes to better expose new renewable assets to market signals. For developers planning their future pipelines, one specific proposal stands out: altering how negative price hours are compensated.

The CRE is exploring a shift from the current 15-hour annual franchise to a two-hour daily uncompensated window. Under this proposed rule, a solar plant would receive no compensation for the first two hours of negative prices every single day.

For a standalone solar PV project, the financial impact of this change would be severe. AFRY estimates that this two-hour daily penalty could result in a 40 to 45 percent loss in revenues for solar assets without storage capabilities.

Turning regulatory challenges into strategic advantages

We do not have to view these proposed changes as a roadblock. Instead, we can see them as a clear, deliberate incentive to modernize our energy infrastructure.

The proposed two-hour daily penalty would be specifically designed to encourage developers to integrate Battery Energy Storage Systems (BESS) into their new projects. By adding a two-hour BESS to a solar asset, you can seamlessly shift your production. Instead of curtailing and losing revenue during the uncompensated negative price hours, you simply charge your battery. Later in the day, when market prices recover, you discharge that energy onto the grid.

Collocating solar PV with battery storage will likely become a fundamental requirement for remaining competitive in future CfD auctions. Standalone solar projects will struggle to absorb a >40 percent revenue hit, giving hybrid Solar PV + BESS models a chance to compete despite higher Capex.

Secure your project pipeline

The transition toward hybrid solar and storage projects is an exciting evolution for the French renewable sector. It promises a more stable grid, smarter asset management, and resilient business models.

To stay ahead of the curve, developers must actively track these regulatory shifts and begin designing their future pipelines with BESS capabilities in mind. Navigating these changes requires precise, hourly price projections and complex asset modeling.

We encourage you to evaluate your current portfolios and future developments today. Contact AFRY to leverage our advanced market modeling tools, and let us help you optimize your renewable assets for the market of tomorrow.