‍

Negative prices across the NEM have increased dramatically, growing from less than 1% of intervals in FY 2018/19(and heavily localised in South Australia) to 16% on average in FY 2023/24. The midday price plunge has deepened across QLD, SA, and VIC, and now, on any given day, there is a growing certainty of experiencing negative prices between 9 am and 3 pm. 

‍

Further inspection of the broader statistics reveals the scale of this transformation.SA has seen negative price intervals soar from 2.29% to 22.88% of all trading periods, while VIC and QLD have experienced 20-fold and 180-fold increases respectively. In raw numbers, QLD went from just 93 negative price intervals in FY 2018/19 to 15,801 in FY2023/24, while NSW - though still the least affected - jumped from a mere 7intervals to 7,059. These figures demonstrate that negative prices are no longer anomalies but structural features of the modern NEM.

‍

‍

‍

Looking more closely at hourly impacts, Queensland stands out dramatically with negative prices 66 times more likely during daylight hours – a remarkable increase from a ratio of 5.67 in FY 2018/19. This solar-driven phenomenon has created a stark division in the daily price cycle, with SA and VIC experiencing over 40%and 38% of daytime intervals at negative prices respectively. Perhaps most telling is NSW's position as an outlier; despite enormous growth (from virtually zero to 14.29% during solar hours), it remains significantly less affected than other states, hinting at specific supply-demand dynamics and transmission constraints at play.

‍

‍

Not surprisingly, negative prices have increased not only in frequency but intensity. Durations of negative price events now average between 50 to 65 minutes across QLD, SA, and VIC. The datapoints to a significant resistance to this trend in NSW, where negative price events occur in only 6.72% of intervals, with average durations of just 25minutes.

‍

Now, what about a hotly debated and often misinterpreted question: Are negative prices negative? This phenomenon, simplistically, sounds like the promise of renewables: abundant, free energy- heck, even better - consumers are paid to consume. Certainly, this is not the case and there are important economic implications for generators, particularly, the renewable generators we rely on to drive further decarbonisation of the grid. Negative prices impact captured prices, economic curtailment and diminishing revenues that affect disproportionately wind and solar generators. Yet, therein lie opportunities ahead of this problem.

The now-predictable daily price swings are, without doubt, the opportunity BESS are capitalising on. On average, QLD, NSW, and SA experience noon-to-evening differentials of $205-$300/MWh. Peaks in QLD are well above $360/MWh entering 6pm while midday prices often drop below zero. Storage is key to flattening the dreadful duck. Negative prices create demand from storage, which earns revenue while supporting grid stability.

Before diving into BESS figures, next week we will share some insights on the other end of the distribution: price spikes.

Until then, we'd love to hear thoughts from all NEM observers out there:

• Are negative prices mostly a sign of market failure or the market at work indeed and therefore, an opportunity?
• How long will we see negative prices? Will the increasing presence of BESS be enough to reverse this trend?
• What other forms of market participation are the most promising to benefit from, or seize the     opportunity presented by negative prices (e.g. VPPs, demand side response by large loads)?

‍