Solar has become the cheapest way to produce electricity, and its price continues to fall. The world is building plants as fast as it can, but that has also made the price of energy more volatile. In many markets so much is produced that prices are increasingly entering negative territory. The phenomenon itself pushes its solution, an accelerated deployment of batteries.
In the US, electricity companies will install about 43 gigawatts (GW) of new solar capacity this year, according to the country's Energy Information Administration (EIA). It is about three and a half times the new wind capacity of 2026 and almost seven times that of natural gas. Furthermore, its advantages do not stop growing. Building a gas plant costs approximately three times as much as it did in 2022, and the wait to get a new turbine is five years or more. The price of solar continues to fall and projects can start immediately. This logic is repeated all over the world.
Solar production follows the path of the sun. If many panels are installed, there is abundant electricity during the day. If more are installed, there may be leftovers. It is a problem, because electrical networks must balance supply and demand at all times. However, things get complicated when price is used as a tool to reduce supply.
Running a solar or wind plant costs almost nothing. Thanks to incentives and tax credits, producers can make money even with a price of zero. Nuclear and coal plants, on the other hand, are difficult and expensive to shut down and restart, so it is often cheaper for them to take temporary losses and continue operating. The result is that the price has to become negative to withdraw supply and match the market when three things coincide: a lot of sun or wind, low demand and saturated transport lines leaving the area.
It is something increasingly common, especially in sunny markets. Both California and South Australia recorded negative wholesale prices 20% of the time in the first half of the year, according to the International Energy Agency (IEA). Spain was only a little behind. Even cloudy places like New England have negative prices more often.
This can cause problems. The profitability of cheap and clean energy projects falls, slowing their deployment. Nuclear and coal plants provide a stable supply whatever the weather, but because they cannot be easily shut down, they absorb losses when prices are negative. Additionally, supply volatility can complicate network management. In France, the grid operator can already require EDF to keep nuclear reactors running at a loss to preserve system stability, and the company receives compensation for this.
There are several solutions. Green energy incentive programs can be designed more carefully. In Germany, for example, new solar projects stop receiving subsidies when prices are negative for more than 15 minutes. Demand can also be shifted, encouraging consumers to charge their electric cars and use appliances when there is excess energy. Some areas of sunny Australia already offer consumers free electricity for three hours a day.
Building more transportation lines is usually a better option. By connecting two zones, both win, because the time and moments of production differ from one to the other. Denmark, for example, generates 60% of its electricity with wind, and when it has excess it exports it to Germany, Sweden and the United Kingdom. A line construction campaign in the US would greatly benefit companies such as MasTec and Quanta Services.
But that takes years. In the United States you have to cross many jurisdictions and obtain many permits, and that is why very little is built. In 2025, just over 640 kilometers were completed. The Department of Energy estimates that about 8,000 new kilometers of high-voltage lines would be needed per year.
Storage changes the equation. Batteries have been in the grid for years, mainly to avoid small fluctuations in supply that can cause damage. The collapse in prices, however, has made them more attractive. The cost of batteries has fallen more than 90% in three decades, and the price per kilowatt hour fell another 8% last year, according to BloombergNEF. Now the leftover electricity can be saved for when it is missing. The idea is simple. The batteries are charged when the megawatt hour costs, for example, 26 euros, and are discharged when it costs 87. The owner keeps the difference, once the energy lost when charging, amortization and other costs are deducted. The cheaper the electricity, the more attractive arbitrage is. And the best thing, obviously, is to charge for taking it.
The result is a massive battery surge. In the US, storage grew an average of around 70% annually over the last three years. Just look at Texas, the state that installed the most photovoltaics and batteries last year. Storing cheap solar energy and selling it when prices rise has made electricity cheaper. This summer there was record demand during an eight-day heat wave. Even so, the average price remained below 31 euros per megawatt hour, compared to around 175 euros in a similar period of time in 2023, according to researcher Corey Balgeman, of Grid Flexibility. Plus, batteries save a lot of money by reducing winter price spikes.
The storage also makes Texas' grid, which has a history of spectacular failures, more reliable. In 2023 there were 13 emergencies declared due to a shortage of available power, and none in 2025 or 2026.
The batteries are also versatile. They allow you to get more out of the infrastructure that already exists. As the electricity supply must always cover the demand, there are expensive power plants that are idle and are hardly used. In 2021, so-called peak plants generated 3% of annual net electricity, but represented 19% of generation capacity, according to the US Government Accountability Office (GAO). Batteries are being replaced more and more.
Likewise, transportation lines are designed for times of peak demand and may remain unused the rest of the time. Batteries can be charged through underused lines and discharged at a higher rate in the area when the line is saturated.
Other uses are likely to emerge as solar and battery prices fall, as manufacturers gain scale and researchers continually improve the technology. These advances make them attractive for new markets and for uses that are not evident today. Electric companies such as Vistra, Engie or NextEra Energy could end up installing even more. NextEra, for its part, plans to deploy up to 43 GW of new battery storage through 2032 to drive revenue growth.
In fact, negative prices can create bewildering opportunities and dilemmas. Sometimes, owners already pay to discharge the batteries to recharge them when prices are even more negative. The problem is that the battery owner can lose money if his forecast fails. You can also get into trouble with regulators, because selling electricity when it's cheap and purposely withholding it when the price rises is often illegal.
Who benefits? Manufacturers find it difficult to make money due to excess investment and price wars. Chinese companies such as Sungrow, CATL and BYD dominate the production of battery storage systems, but their stock prices have not moved for five years. Tesla has fared better, although its operating profit has fallen three years in a row. The winners could instead be consumers and businesses that use electricity, who will have contained prices and stronger networks.
