California Produced So Much Solar Power That Prices Went Negative
California is one of the few places on Earth where, at least for a few hours, electricity prices have become negative. According to the US Energy Information Administration (EIA), on 11th of March, between the hours of 8 am and 2 pm, prices for electricity went at or below $0 per MWh.
One of the reasons here is that this time of day sees the least energy consumption and thus, the demand is at its lowest. Secondly, and this is the most important part, is that during these hours, nearly 40 percent of all electricity coming into the grid were from solar farms. It is also important to note here that these solar farms in California expanded by almost 50 percent in 2016 alone. As a point of comparison, California was producing less than one GW back in 2007, and as of the end of 2016, it was producing 14 GW of electricity from solar power.
However, even with this negative price for several hours, doesn’t mean that consumers will start receiving money from the producers. The retail prices for electricity are based on an average cost, and only several hours of negative cost will eventually mean a slightly cheaper energy bill. When this trend will become predominant, then things will definitely change.
Being still in the first quarter of the year, with overall temperatures not being as high as in mid-summer, a day of bright sunshine coupled with a relatively low demand for electricity can drive the prices down, even below zero.
“Electricity demand in California tends to peak during the summer months,” the EIA said.
“However, in late winter and early spring, demand is at its annual minimum, but solar output, while not at its highest, is increasing as the days grow longer and the sun gets higher in the sky.
“Although the sun is at a similar angle in September and October, electricity demand is still relatively high, leading to lower solar generation shares than seen in March.
This, of course, doesn’t mean that this event was a fluke. By comparison, the same period of time in between 2013 and 2015, average hourly prices varied in between $14/MWh to $45/MWh.
“Negative prices usually result when generators with high shut-down or restart costs must compete with other generators to avoid operating below equipment minimum ratings or shutting down completely.”