Australia Wholesale Market Prices go Consistently Negative During Daytime as Solar Surges

As solar and wind energy become cheaper and cheaper and more prolific across the world in terms of projects getting built, the power market and pricing is changing radically. Australia has been the rooftop solar capital of the world for quite a while now. The country is also now seeing major utility-scale solar and wind projects getting installed due to its vast renewable energy sources in terms of land and solar/wind resources. These are leading to high amounts of renewable energy getting installed. The daytime prices of electricity in Australian wholesale markets are seeing massive declines due to the abundance of solar power during the daytime. This has led to the South Australian electricity prices going consistently negative during the daytime while other markets like Victoria and New South Wales are also seeing price decline of more than 50%. The phenomenon of negative daytime prices in the power markets was seen in Germany first where huge amounts of subsidized solar and wind energy got installed. Now we are seeing this phenomenon in other parts of the world as well.

The reason for negative prices is that solar and wind energy do not depend on fossil fuel sources for generating energy. They continue to generate power as long as there is solar radiation in the daytime and the wind blows. You cannot cut their costs as they have no fuel or variable costs like the fossil fuel plants which depend on coal or gas. This kind of negative pricing puts huge pressure on fossil fuel plants that cannot sell their power during the daytime in the spot markets. This also leads to more grid imbalance as there is a lower capacity of baseload power to balance during evening and nighttime when there is no solar power. The grid balancing charges increase and this makes storage an attractive option for power market operators as compared to keeping gas and coal plants running at very low utilization which increases their costs.