Not All Energy Is Equal
From the white paper: off-peak power, inflexible generators, negative prices, and grid ramps created by wind and solar.
Electricity prices are cheaper than ever, but not always
As with any commodity, electricity prices drop when demand decreases. Demand is much lower during off-peak hours such as nights and weekends. When demand is low, only the least expensive generators will be running.
Inflexible generators create supply imbalances
The cheapest generators to operate are often inflexible and not suitable for following demand. Coal and nuclear plants can be expensive or impossible to cycle off and on. When there is a surplus, wholesale prices fall until enough generators reduce output; prices can become negative when taking excess energy costs less than shutting down and restarting a plant.
Wind and solar can compound those imbalances. They have no incremental fuel cost, but their availability and intensity are not controllable. Solar production may peak before peak demand, while wind may be strongest at night when demand is low.
Peak hours are different
Intermittent generation can also increase the ramps that grid operators must follow with dispatchable resources. Those ramping plants are often expensive and inefficient, and operators pay a premium for capacity that may run infrequently.
This article is drawn directly from pages 3–6 of the 2015 white paper. Its examples and market figures are historical and are presented in that context.
A day of negative wholesale prices
Germany, Sunday 11 May 2014
The paper reproduced twenty-four hourly prices. They crossed below zero repeatedly from hour 7, then fell sharply in the afternoon before recovering.