1/16 An often discussed recent trend in electricity markets is the increased amount of negatively priced hours. Often, this increase is blamed on renewables. In fact, it is often caused by the inflexibility of bigger baseload units, like coal and nuclear plants..
2/16 Let's use an example to look at what's going on. It's the middle of a hot summer day, so operators are running all their resources. The price is equal to the last *marginal* unit. Marginal means a unit that can respond to price by increasing or decreasing output. 
3/16 As the day goes on, it cools off, and less electricity is needed. The NG combustion turbine is turned off and the combined cycle unit is ramped down to meet the lower level of demand. The new market price is $50/MWh, set by the NG CCGT unit, which is only 50% dispatched.
4/16 As day turns into night, electricity demand keeps falling. The NG CCGT is no longer needed, so it is turned off. Now, only 25% of the coal unit is needed, along with all the nuclear and wind to meet demand. But here we have a problem...
5/16 The coal unit cannot* (keep reading) be run be low 75%, according to its owners. We'll have to get the extra reductions from either the nuclear or wind units. But the nuclear unit cannot ramp down either and needs to run at 100%. So what's left? The wind unit.
6/16 Remember that definition of marginal from earlier? Here it is again: Marginal means a unit that can respond to price by increasing or decreasing output. Neither the coal plant nor the nuclear plant can respond to price by decreasing output to the necessary level...
7/16 That means the WIND unit becomes marginal (and price setting), because it is the only unit capable of dispatching down to the desired level. When that happens, the wind unit sets the price, EVEN THOUGH COAL AND NUCLEAR CONTINUE TO RUN.
8/16 So even though the coal unit, with an offer price of $40/MWh, continues to run, and even though the nuclear unit, with an offer price of $20/MWh, continues to run, the wind unit gets ramped down and sets the price at -$10/MWh.
9/16 Why does this matter? Well, if the coal unit were capable of ramping down further, it could keep the price higher. For example, if the coal plant is able to ramp down far enough to accommodate the lower level of demand, it remains marginal and sets the price at $40/MWh
10/16 So in practice, one way to alleviate negative pricing is to run thermal units more flexibly, since that allows those units to set price and remain marginal. This also applies to units that are self-scheduled, which typically cannot set price.
11/16 But the real point here, is that it is unfair to point to renewables and blame them alone for negative pricing. While there are times when negatively priced renewables are meeting 100% of supply and setting price, it's often the case that other thermal units are online too.
12/16 And there is ample evidence showing how gas and coal units in particular tend to overstate how low they can safely operate (asterisk earlier). When they overstate minimum run rates, they make more negatively priced renewables "marginal" and drive down the price.
13/16 If there is one takeaway, it is this: the more flexible the resources on the system, the less negative pricing there is. Highly inflexible systems will incur higher shares of negatively priced hours. This creates an incentive to run units flexibly, which is a good thing...
14/16 For more information, check out some of these links:
aweablog.org/negative-price…
aweablog.org/renewables-gri…
sierraclub.org/sites/www.sier…
aweablog.org/negative-price…
aweablog.org/renewables-gri…
sierraclub.org/sites/www.sier…
15/16 Some folks are likely to point out that unit commitment makes this more complicated, because some of the online thermal units are needed in future periods. I hear you. But it's well documented that generators routinely overstate minimum run rates, limiting flexibility.
16/16 And self-scheduling just makes this worse. Grid operators should do all they can to verify minimum run rate values, and to the extent possible, limit self-scheduling of thermal resources. Not doing so significantly reduces the operational flexibility of the system. /endrant
