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Negative prices in wholesale electricity markets indicate supply inflexibilities

TODAY IN ENERGY: Thursday, February 23, 2012

Negative prices in wholesale electricity markets indicate supply inflexibilities

Wholesale electricity markets sometimes result in prices below zero. That is, sellers pay buyers to take the power. This situation arises because certain types of generators, such as nuclear, hydroelectric, and wind, cannot or prefer not to reduce output for short periods of time when demand is insufficient to absorb their output. Sometimes buyers can be induced to take the power when they are paid to do so.

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