Electricity Spot Price Negative as Solar Impacts Market
Thanks to Australia’s commercial and rooftop solar power, some state electricity prices were ‘negative’ from July to September.
The National Electricity Market (NEM) recorded close to zero and even negative spot prices at midday in Queensland and South Australia.
The spot price indicates electricity demand, telling generators how much electricity is needed for every half hour period. When the spot price is high, demand is high and vice versa.
Queensland’s July-Sept spot price was zero or negative 4.5% of the time, compared to 0.1% of the time last year. In South Australia, the spot price was zero or negative 8.3% of the time, compared with 3.1% in 2018.
How can electricity cost ‘nothing’?
The bad news for electricity customers is they won’t benefit from these record low spot prices. Retailers buy their electricity from generators under fixed wholesale contracts in advance. Spot prices would have to be low for a long time to change the retail tariff.
But where do these negative prices come from? The answer that is coal-fired stations don’t want to shut down because of the cost of starting up again. They’re willing to pay the grid operator to take their electricity rather than shut down, which results in a negative spot price.
Coal is still by far the biggest source of energy for electricity production in Australia. But during the day, household and large-scale commercial solar is powering homes and businesses. Not to mention the electricity coming into the grid from wind farms. So demand drops and so does the spot price.
In Tasmania, spot prices go negative because of the huge amount of hydroelectricity the state produces.
How to avoid wholesale contract prices
One way to avoid paying high electricity prices is to stop using electricity! Another way is to install solar panels and stop paying for electricity — during the day at least.
As Christmas approaches, there are solar rebates available to cut the cost of solar system installations. Installing a good quality solar system gives an immediate reduction in the cost of electricity, because you’re no longer paying retail prices for power during the day. Add a battery, and after dark power prices also plummet.
If you would like to install a solar power system, chat with one of Solaray’s solar experts for advice on how to cut electricity bills this summer.