I know that countries with large renewable power generation often end up with negative power prices, but how does that work when the power is distributed/sold to other nations or native consumers?
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If a positive price means I have to pay you money then a negative price just means you have to pay me. These countries are producing too much electricity and have to pay someone to take it. This really only works due to government subsidies. Even if nobody actually wants the power I can still get $50 from the government to produce it, then pay $10 for someone else to get rid of it for me.
The same way they work for other things. The garbage market, for example. Your household garbage has negative value. Not only do you not want it, but neither does anybody else. So you (or your town) pay someone to take it and dispose of it properly.
In theory, power prices work the same way You are paid to take this pesky extra electricity (although often, they just don’t charge).
If a positive price means I have to pay you money then a negative price just means you have to pay me. These countries are producing too much electricity and have to pay someone to take it. This really only works due to government subsidies. Even if nobody actually wants the power I can still get $50 from the government to produce it, then pay $10 for someone else to get rid of it for me.
If a positive price means I have to pay you money then a negative price just means you have to pay me. These countries are producing too much electricity and have to pay someone to take it. This really only works due to government subsidies. Even if nobody actually wants the power I can still get $50 from the government to produce it, then pay $10 for someone else to get rid of it for me.
The same way they work for other things. The garbage market, for example. Your household garbage has negative value. Not only do you not want it, but neither does anybody else. So you (or your town) pay someone to take it and dispose of it properly.
In theory, power prices work the same way You are paid to take this pesky extra electricity (although often, they just don’t charge).
So other people have explained what that means (you need to pay people to take the energy)
But energy is obviously useful so I’ll try and cover why people might not want to take that energy.
First off. Having “too much” power can actually damage the electrical grid. So that’s where the negative value and harm come from. If you produce energy that you can normally sell for say $200 per mwh but that energy would cause more than $200 of damage to the grid then well…there you go. Negative value.
Now…why can’t you just sell it to someone else? That’s because unless the infrastructure is already there then it’s really really expensive if not impossible to transport the energy. So the cost of transporting it might be higher than the price people are willing to buy the energy for. So in order to “get rid of” the energy you have to pay someone. One example I can think of is an island over in Scotland where they have more energy than they can use that and if they wanted to be able to sell it to the mainland it would cost about $300-400 million to build the infrastructure to allow them to do that (called an “interconnector” if you are interested in learning more). Some quick back-of-the-napkin math indicates that would take about 1-5 years to pay for by selling that excess power after the interconnect is built.
Also, I’d like to point out that is basically only ever applies to electrical energy (fossil fuels are almost never negative value except for futures for a few days back during the you know what)
The same way they work for other things. The garbage market, for example. Your household garbage has negative value. Not only do you not want it, but neither does anybody else. So you (or your town) pay someone to take it and dispose of it properly.
In theory, power prices work the same way You are paid to take this pesky extra electricity (although often, they just don’t charge).
So other people have explained what that means (you need to pay people to take the energy)
But energy is obviously useful so I’ll try and cover why people might not want to take that energy.
First off. Having “too much” power can actually damage the electrical grid. So that’s where the negative value and harm come from. If you produce energy that you can normally sell for say $200 per mwh but that energy would cause more than $200 of damage to the grid then well…there you go. Negative value.
Now…why can’t you just sell it to someone else? That’s because unless the infrastructure is already there then it’s really really expensive if not impossible to transport the energy. So the cost of transporting it might be higher than the price people are willing to buy the energy for. So in order to “get rid of” the energy you have to pay someone. One example I can think of is an island over in Scotland where they have more energy than they can use that and if they wanted to be able to sell it to the mainland it would cost about $300-400 million to build the infrastructure to allow them to do that (called an “interconnector” if you are interested in learning more). Some quick back-of-the-napkin math indicates that would take about 1-5 years to pay for by selling that excess power after the interconnect is built.
Also, I’d like to point out that is basically only ever applies to electrical energy (fossil fuels are almost never negative value except for futures for a few days back during the you know what)
So other people have explained what that means (you need to pay people to take the energy)
But energy is obviously useful so I’ll try and cover why people might not want to take that energy.
First off. Having “too much” power can actually damage the electrical grid. So that’s where the negative value and harm come from. If you produce energy that you can normally sell for say $200 per mwh but that energy would cause more than $200 of damage to the grid then well…there you go. Negative value.
Now…why can’t you just sell it to someone else? That’s because unless the infrastructure is already there then it’s really really expensive if not impossible to transport the energy. So the cost of transporting it might be higher than the price people are willing to buy the energy for. So in order to “get rid of” the energy you have to pay someone. One example I can think of is an island over in Scotland where they have more energy than they can use that and if they wanted to be able to sell it to the mainland it would cost about $300-400 million to build the infrastructure to allow them to do that (called an “interconnector” if you are interested in learning more). Some quick back-of-the-napkin math indicates that would take about 1-5 years to pay for by selling that excess power after the interconnect is built.
Also, I’d like to point out that is basically only ever applies to electrical energy (fossil fuels are almost never negative value except for futures for a few days back during the you know what)
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