Negative Electricity Prices
Definition
A negative electricity price means a generator pays to deliver power at that time and place, and a buyer is paid to take it. It happens when supply exceeds what the grid can absorb, from system-wide oversupply or local congestion. EIA explains that negative prices 'usually result when generators with high shut-down or restart costs must compete with other generators to avoid operating below equipment minimum ratings or shutting down completely.' Generators paid per MWh produced, through tax credits or certificates, can also bid below zero.
Why it matters
Negative prices hit merchant revenue directly and test how contracts allocate risk. Their frequency depends on location, local transmission and how much similar generation connects nearby. Investors should check the negative-price terms in a project's PPA, how curtailment is compensated, and how many negative-price hours the projection assumes at the project's own node.
Common misconceptions
- •Negative prices are not a market error; they reflect costs and incentives to keep producing.
- •A fixed-price PPA does not always protect against them; read the curtailment and negative-price clauses.
- •Hub prices can be positive while a project's node is negative.
- •The label is only a starting point. Investor outcomes usually depend on the governing documents, cash-flow priority, valuation policy, disclosure quality, and manager discretion surrounding the term, not just the shorthand definition used in marketing materials.
Technical details
Data points
CAISO curtailed 3.4 million MWh of utility-scale wind and solar in 2024, up 29% from 2023; solar was 93% (EIA).
Solar curtailment rates in 2024: ERCOT 7.1%, CAISO 3.7%, SPP 2.8% (Berkeley Lab).
Decision to produce at a negative price (illustrative)
Market price at the node: minus $10 per MWh.
Production-based incentive worth $25 per MWh: net $15, so producing pays.
Merchant project with no incentive: net minus $10, so curtailing pays.
Contract terms can change both answers.
How investors apply the term
Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.
The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.
Frequently asked questions
- Can a generator lose money by producing electricity?
- Yes, if the market price is negative and nothing else it earns per MWh offsets it. Whether it does depends on its contracts and incentives: a project paid a fixed price per MWh by an offtaker, or earning a production-based tax credit or certificate, may still gain from producing at a moderately negative price; a merchant project without those payments loses on every MWh.
- Who curtails during negative prices?
- Projects whose net value of producing is below zero, and those ordered to by the grid operator. EIA says CAISO reduces wind and solar output 'either through price signals or, rarely, through an order.' SB Energy attributes part of the gap between its solar portfolio's capacity and output to 'curtailment ordered by grid operators during periods of transmission congestion or negative pricing.'
- How do contracts treat negative-price hours?
- Contracts differ: some pay the project for curtailed energy, some exclude negative-price hours from payment, and in a virtual PPA settled against a negative hub price the buyer pays the strike plus the amount below zero. The project's own node price can differ from the settlement price too.
- Where are negative prices common?
- Where generation clusters and demand or transmission is limited. EIA reported in 2017 that in March, CAISO midday prices were 'frequently at or below $0.' Enlight cites areas of Europe with extensive solar where peak production 'can cause supply to exceed demand, resulting in negative prices.' Constellation notes the effect on baseload plants: periods of negative pricing mean 'loss of revenue for baseload generating plants such as our nuclear plants.'