Negative Electricity Price
A negative electricity price means generators pay to deliver power. It happens when supply from inflexible or subsidised sources, such as wind and solar on a sunny, windy day, exceeds demand and shutting down is more costly than paying buyers.
Sometimes generators pay to get rid of electricity. It sounds absurd until you add up what it costs to shut a plant down or give up a subsidy.
- Category
- Commodities, Energy and Carbon
- Reading time
- 3 min
- Also called
- Negative power price, Sub-zero power price, Negative LMP
- Updated
Negative prices in plain words
Some generators, such as nuclear, hydro and wind, cannot or prefer not to cut output when demand is too low to absorb it.1
They may sell at a loss to avoid shutdown and restart costs.1
Wind generators earning a production tax credit may sell at negative prices to keep producing.2
How a negative price forms
High inflexible supply
Wind, solar, nuclear or hydro output is high.
Low demand
Demand cannot absorb it.1
Cost of stopping
Plants with high shut-down or restart costs compete to keep running.3
Subsidy incentive
A credit like $22/MWh makes selling below zero still worthwhile.2
Price clears below zero
Bids fall below zero so generators pay to deliver.
Short-lived
Such conditions usually last only short periods.2
Worked examples
Example 1 — Subsidised wind
+$1,200Hypothetical price −$10/MWh, credit $22/MWh, output 100 MWh.
| Market payment | 100 × −$10 = −$1,000 |
| Credit | 100 × $22 = $2,200 |
| Net | −$1,000 + $2,200 = $1,200 |
The credit explains why wind may keep selling at negative prices.2
Example 2 — Avoiding restart
Run: $2,000 cheaperPrice −$5/MWh for 4 hours at 200 MW; a restart costs $6,000.
| Cost of running | 200 × 4 × $5 = $4,000 |
| Cost of stopping | $6,000 |
| Saving by running | $6,000 − $4,000 = $2,000 |
Selling at a loss can avoid shutdown and restart costs.1
Example 3 — Consumer side
Paid $150A hypothetical flexible load uses 10 MWh at −$15/MWh.
| Payment received | 10 × $15 = $150 |
Negative prices are more frequent where wind and solar are high, creating chances for flexible demand.4
Negative vs very low positive prices
| Aspect | Negative price | Low positive price |
|---|---|---|
| Who pays | Generator pays buyer | Buyer pays generator |
| Typical cause | Inflexible supply and subsidies | Ample cheap supply |
| Duration | Usually short | Can last longer |
| Opportunity | Storage and flexible load get paid | Cheap charging |
Why traders care
Storage
Charging when paid to.
Flexible industry
Shifting demand into negative hours.
Renewable revenues
Modelling lost value during negatives.
Spread trading
Pricing peak/off-peak Volatility.
Advantages and disadvantages
Advantages
- Signals oversupply clearly.
- Rewards flexible demand and storage.
- Encourages better grid planning.
Disadvantages
- Erodes renewable revenues.
- Hard to forecast by location.
- Can reflect transmission limits.
- Subsidy design can distort bids.
Going deeper
Read as far as you need. Each level builds on the one before it.
Common mistakes
Thinking it's an error
It's a real market outcome.
Retail confusion
Assuming households always benefit.
Ignoring location
Treating negatives as system-wide.
Overestimating duration
They're usually brief.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Negative prices mean generators pay to deliver.
- Inflexible supply and low demand cause them.
- Subsidies and restart costs keep bids below zero.
- They're usually short and local.
- Storage and flexible load can profit.
Frequently asked questions
Do I get paid at home?
Are negative prices becoming more common?
Can futures be negative?
Further learning
- Spot Trading
Where these prices appear.
- Volatility
Price swings in power.
- Hedging
Protecting generator revenue.
- Mean Reversion
Why prices snap back.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- U.S. Energy Information Administration. Negative prices in wholesale electricity markets indicate supply inflexibilities (opens in a new tab) Checked .
- U.S. Energy Information Administration. Negative wholesale electricity prices occur in RTOs (opens in a new tab) Checked .
- U.S. Energy Information Administration. Rising solar generation in California coincides with negative wholesale electricity prices (opens in a new tab) Checked .
- U.S. Department of Energy. Wind Is Changing Pricing Patterns in Wholesale Power Markets (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.