Australian Chart of the week | Supply creates its own demand: negative pricing in the NEM

In the National Electricity Market (NEM), generators offer the prices at which they are willing to supply electricity to the system operator – the Australian Energy Market Operator (AEMO) – who in turn matches these offers with demand on a least-cost merit order basis. The offer price of the last MW of supply that matches demand then sets the market price.

However, at certain periods through the day, the market is over-supplied relative to demand and generators compete for dispatch by submitting negative-priced offers which is increasingly setting the market price during these periods. In this ‘Chart of the week’, we investigate how negative prices have been trending through the years and provide commentary on what these trends mean for the NEM and its respective regions.

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