* German law to prioritise green energy power weighs on prices
* Growing wind capacity to cause negative prices more often
* Germany and surrounding markets saw negative prices at Christmas
* Traders happy with higher price volatility
By Karolin Schaps and Vera Eckert
LONDON/FRANKFURT, Jan 9 North Europe's devastating storms sent wind turbines spinning and helped strengthen a new winter phenomenon for the region - negative electricity prices.
Damaging for utilities losing money making electricity, delighting traders who cash in on price swings, they will not, however, mean cheap power for households.
A raft of elements to subsidise the green energy boom make up half of most consumer power bills, shielding them from immediate wholesale market price swings.
Over the Christmas holiday, which typically causes a drop in energy demand, wholesale electricity prices in Germany, the Nordic region, the Czech Republic and Slovakia turned negative on excessive renewable energy production and mild weather.
Wind and rain bring out the best in renewable energy from turbines and hydro power, a major source of Nordic electricity. Calm weather hampers green energy output.
Meteorologists say mild and wet weather could continue until March.
When renewable energy output is higher than necessary, as in stormy weather, producers face negative market prices because electricity cannot be stored in high volumes.
"I think negative prices will become more common with more wind farms being built. With more wind farms the chances of having supply outstripping demand are higher and this is the cause of the negative prices," said one European power trader.
Power producers with a diverse plant portfolio are able to lower output from other stations such as gas-fired plants to alleviate the impact of high renewable energy production.
"Utilities will learn from (negative prices) and will maximise their flexibility options so they don't lose money," a central European power trader said.
Utilities in Germany, including RWE and E.ON , EnBW and Vattenfall, are able to deal with short-term swings in power prices, but they have been hit hard by the overall drop in wholesale prices due to renewable energy growth.
In Germany, Europe's largest renewable power producer, negative prices have appeared more often in recent years, mainly because its renewable energy law requires that green power must be given priority on the network even when supply outstrips demand.
German wind power output in December was the second-highest monthly generation figure ever, statistics from Muenster-based renewable energy research institute IWR showed.
Berlin's strategy is to build many more renewable energy projects to help wean it off nuclear plants, some of which it shut down following Japan's Fukushima disaster.
Renewable power capacity and output has also grown elsewhere, especially in northern Europe, as governments support green energy growth through generous subsidy regimes in a bid to lower carbon emissions.
Germany's role as a benchmark electricity market in the region and its growing power links to neighbouring markets mean its price fluctuations are echoed in surrounding countries, as markets move increasingly in tandem.
On Dec. 24, 2013, when industrial and business power demand dropped sharply, the price of German power for intra-day delivery fell to an average of -35.45 euros per megawatt-hour (MWh) between 0000 and 0600 in the morning, touching lows of -62.03/MWh halfway through that period.
German power traders said prices fell this low due to huge wind power production, at times exceeding 20 gigawatts or two thirds of capacity, that was coupled with mild weather.
Small changes in temperature levels can cause sharp swings in energy demand while dangerous wind speeds have no additional benefit. Wind turbines have an automatic break which is triggered when speeds become too strong and pose a threat to the blades' safety.
In Denmark and Sweden, strong winds also caused negative prices on Christmas Eve, with contracts in western Demark falling to -6.28 euros/MWh as wind farms generated near full capacity.
The Elbas intraday market for the Nordic, German and Estonian markets offered by the Nordpool Spot exchange saw the average price drop to a low of -30 euros/MWh during one hour on Dec. 25. (Additional reporting by Michael Kahn in Prague, Oleg Vukmanovic in London and Nerijus Adomaitis in Oslo, editing by William Hardy)