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The Euro 2024 Energy Championship: Germany vs Hungary

June 17th, 2024
DE vs HU

With Euro 2024 now in full flow, our market experts for Germany and Hungary compare how the two energy markets are handling the challenge of negative prices caused by increased renewables, drawing some interesting parallels between their two football teams.

A tale of irony and hope:

In both football and energy trading, giants like Germany often dominate the landscape. Germany, much like its massive solar capacity, is the clear favourite for the UEFA Euro 2024 match. The German team, historically strong, mirrors their vast 414 GW solar capacity projected by 2050, showcasing consistent dominance and strategic prowess.

But football, like energy markets, can be full of surprises. Enter Hungary, a country showing remarkable growth in both renewable energy and football. Hungary's solar capacity, though smaller in absolute terms compared to Germany, has grown exponentially, much like their national football team. This rapid rise is akin to Hungary’s football renaissance, where they’ve consistently qualified for the UEFA Euro finals since 2016 — a feat not seen for almost 3 decades.

DE vs HU Installed Solar Capacity
Figure 1 - DE vs HU Installed Solar Capacity

The Hungarian team, with stars like Dominik Szoboszlai from Liverpool, symbolizes this newfound vigor. Szoboszlai’s skill on the field is reminiscent of Hungary’s Golden Team from the 1950s, led by the legendary Ferenc Puskás. Despite a heart-wrenching loss to West Germany in the 1954 World Cup final, the legacy of the Mighty Magyars remains a symbol of Hungary's potential to upset giants. 

On the German side, we have Toni Kroos, the maestro of midfield, fresh off another Champions League triumph with Real Madrid. Kroos represents the epitome of German football excellence – calm, composed, and capable of changing the course of a game with a single pass. He embodies the 'Giant' that Szoboszlai and the Hungarians need to overcome.

In the energy sector, the HUPX (Hungarian Power Exchange) versus EPEX SPOT (European Power Exchange) dynamic tells a similar story. In 2023, HUPX’s intraday market saw a 58% increase in traded volume, hitting 6.85 TWh for the year. This growth, driven by a 35% increase in photovoltaic generation, highlights Hungary’s rapid renewable energy expansion.

Meanwhile, EPEX SPOT's intraday market saw 15.12 TWh traded in August 2023 alone, up 40.9% from the previous year. While EPEX SPOT’s absolute volumes are much larger, Hungary’s HUPX market shows a faster growth rate, challenging more established markets.

Negative Prices: An Unusual Competition

Hungary has also entered the competition when it comes to negative pricing, something historically dominated by Germany. Frequent dips into negative pricing in Germany reflect its struggle to balance excess renewable energy supply with demand. Peaks in negative pricing hours have been seen on multiple occasions, including December 2017, January 2018, February 2020, and May 2024.

Negative Prices Across Europe to May 2024
Figure 2 - Negative Prices Across Europe to May 2024

Initially Hungary had fewer negative prices, but have since caught up their larger neighbours. Not only has the country experienced negative prices more frequently, but prices have also gone lower in certain periods. For instance, in July 2023, Hungary recorded an average negative price of -43.85 EUR/MWh, compared to Germany's -39.03 EUR/MWh. Hungary’s quest to not be left behind in this ironic competition clearly shows the challenges of integrating renewables into the grid.

Average hourly negative prices DE vs HU
Figure 3 - Average hourly negative prices DE vs HU

The Imbalance Irony

Both Germany and Hungary have faced extreme scenarios in their balancing and intraday markets. On June 3, 2024, Germany saw imbalance prices soar to a staggering 15,000 EUR/MWh due to a massive shortfall. Underperforming solar and wind, export limitations from France, and other grid constraints worsened the situation.

Not to be outdone, Hungary also experienced an extreme event on June 8, 2024. An early heatwave combined with missing flexibility sent imbalance prices soaring above 3,000 EUR/MWh, with intraday trades hitting the technical maximum of 9,999 EUR/MWh. Solar output halved, while demand jumped, leading to a tight system that couldn’t balance without external help.

A Line of Hope for Hungary

The resurgence of the Hungarian football team, reflected in their FIFA ranking improvements, provides hope for a possible victory against Germany. The team’s ranking has improved from 54th in 2016 to 32nd in 2023. This upward trajectory mirrors Hungary’s renewable energy advancements, symbolizing positive development and increased investment in talent.

As we approach June 19, 2024, Hungary’s football narrative parallels their energy sector’s trajectory. From 2022 onwards, Hungary’s solar capacity growth has been spectacular, much like their football team’s resilience and brilliance on the pitch. They have managed to hold their own against Germany, showcasing tactical acumen and sheer willpower.

This match is more than just a game; it’s a metaphor for the David vs. Goliath battle. Will Toni Kroos and Germany’s historical dominance prevail, or will Hungary, fuelled by recent successes and the spirit of Puskás, claim victory?

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