Commercial curtailment: key catalyst for the energy transition

When the first solar panels appeared in my home country, the Netherlands, in 2016, few took them seriously. The climate was far from ideal, incentives were weak and real-time monitoring almost unheard of. Less than a decade later, solar production has soared well beyond what the grid can handle. Across Europe, we now face three fundamental challenges – oversupply of renewables, a surge in curtailment and record negative prices. 

Curtailment – switching off wind or solar – is increasing, driven by physical grid limits, price-driven shutdowns and the persistent need for services like frequency response, reserves and inertia. Even in power systems rushing to decarbonise, fossil generators still provide essential back-up and stability. Sometimes, that means even zero-carbon power is wasted. 

Grid congestion, especially in Germany and the Netherlands, brings acute problems as most renewables are built far from demand centres. In France, price-sensitive curtailment has accelerated, with both large offshore wind farms and even nuclear plants now adjusting output to manage price swings – unimaginable only a few years ago. Let’s focus on commercial, price-sensitive curtailment. 

Accurate modelling

The aforementioned changes in the market forced Montel Analytics to develop new models to forecast curtailment. Traditional price forecasts assumed wind and solar could consistently generate, but that assumption failed fast. In the intraday market, we have seen huge swings in imbalances as renewables switch back on whenever day-ahead prices rise above zero. Without spinning reserve from traditional generators, shifting power flows and weaker frequency stability drive up volatility in both intraday and balancing markets. 

Our first models focused on day-ahead price forecasts and deviations but they only gave answers after the fact – not much use for short-term traders or asset optimisers. We then turned to day-ahead bidding curves. We simplified our approach by analysing sell bids at zero or negative prices and excluding inflexible must-sell bids. This way, we could better estimate flexibility and curtailment. The resulting pattern predictions were far more accurate, even if auctions always have their blind spots.  

Market strain 

Why not simply switch off coal and gas instead of curtailing renewables? The answer lies in system realities. Fossil plants still provide grid stability, flexibility and essential “must-run” ancillary services – something renewables still struggle to match. The Spanish blackout on 28 April proved that system stability is never guaranteed – keeping the lights on requires a delicate mix of frequency control, ramping, reserves and redispatch. Cross-border flows also run up against real, sometimes hard limits. 

Nuclear assets, industrial combined heat and power (CHP) plants and various other must-run assets, contribute to baseload generation, serving various roles that wind and solar can’t easily replace. As renewables continue to proliferate, the need for system stability only increases. And when there’s a surplus, renewable power is inevitably discarded. 

The overall trend is clear – renewables’ share of the generation mix grows as fossil fuels continue to decline. This strains the market and leads to more price curtailment for increased green power. In the Netherlands, energy price swings have made net metering among the most effective government policies ever – now solar capacity is more than double average demand. 

Poor reputation

Curtailment has a justifiably poor reputation. It reflects market saturation, lower capture prices, reduced power purchase agreement (PPA) revenues and rising balancing costs. Some older PPAs even contain perverse incentives – fixed prices per MWh whether or not generation is needed. Why would you not produce if you have a sweet deal like that? 

Commercial curtailment happens when renewable output isn’t cleared by the power exchange, typically due to conditional bids or limit orders. No energy is supplied and no money changes hands – so there’s no direct system cost. If it was must-sell volume, prices would often have been lower, sometimes deeply negative, which rarely suits anyone. For flexible renewable generators, these curtailments can actually save money – they avoid paying to generate when prices are too low. The total savings per MWh are not increasing as fast as curtailed volumes, indicating that the savings per MWh are decreasing in key markets and prices don’t turn as negative as they did in the past. 

In contrast, curtailment for grid constraints (redispatch) adds significant costs for assets, operators and ultimately consumers. Commercial curtailment volumes are rising but the savings per MWh are not, suggesting more flexible renewables are entering the auctions.  

Obviously, these temporary surpluses are not intended nor desirable. However, I strongly believe commercial curtailment contributes to a further decarbonisation of Europe. Although assets ramp down during periods of surplus, there is more room for renewables in the market when demand is high and the surplus is not there. This is reflected in the overall decline in market share of fossil fuel generation across Europe. Now renewables have to find new ways to increase their revenues, so they can regain profitability. 

Flexibility, optionality, opportunity 

A generating asset can be likened to an option – you have the right but not the obligation to run. If the asset is “out of the money”, you don’t use it. If running partially delivers value, you scale back. Fossil plants have always worked this way – and now wind and solar must too. 

Curtailment is becoming a flexible tool. In Germany on 3 May, negative day-ahead prices caused solar to ramp down but as a shortage emerged, there were opportunities to sell at positive prices. The reverse happens as well – positive day-ahead is sometimes plunged into negative intraday, prompting solar to buy back the power it sold on the day-ahead market and ramp down. Flexibility, and options, are at the heart of future renewable profitability. 

As renewables mature, stacking revenues from several markets – day ahead, intraday, balancing, even ancillary services – is vital. The idea of a fixed “capture price” for wind and solar is fading – profit now hinges on active optimisation and novel strategies. 

Are batteries the answer? 

Batteries are often hailed as the answer to volatility, intermittency and grid management. In our small Dutch office, we have supported more than 100 battery business cases and more than EUR 1bn in investment. Yet, German commercial curtailments can top 28 GWh – to cover that, the country would need at least EUR 25bn of new battery investments. It will take time to build the required amount of flexibility, while demand for it keeps growing. Whatever we do build, the asset will make its own judgement about whether to absorb excess renewables or act on other opportunities. A battery, like any other asset, also weighs its options and stacks revenues across markets. 

Negative prices and the road ahead 

Negative prices are set to break more records in 2025. Already, most countries have outstripped 2024 totals. However, prices aren’t falling as deeply negative as some might expect – bidding behaviour has changed, helping mitigate extreme lows, except for severe surpluses like those on sunny public holidays. 

While renewables keep growing – despite a difficult PPA market and patchy wind tendering – the pool of flexible renewables is also increasing. This buys us time to secure more flexibility in general, whether via pumped hydropower, reservoirs or batteries. 

Looking ahead, curtailment in general will increase. Commercial curtailment will remain a catalyst for the energy transition. Even as renewables discover new revenue streams and become active in intraday markets, challenging conditions are set to remain. Commercial curtailment is a feature of a maturing market.  

Europe’s energy transition now rests on three essentials – functioning markets, consistent policy around renewables and storage and major investment in grid infrastructure. Curtailment is likely here to stay, but it is also a sign that the market is working. Flexibility, negative prices, curtailment and integrating more zero-emission power now go hand in hand – master these, and Europe’s energy transition will stay on course, whatever the future holds. 

This article originally appeared as a column on montelnews.com