Berkeley Lab study investigates how plentiful electricity turns wholesale prices negative in the US
- Dec 6, 2021 7:50 pm GMT
The year 2020 upended routines in nearly all aspects of our lives. In the realm of energy economics, we saw prices turn negative for U.S. crude oil, natural gas, and wholesale electricity. While negative prices were unprecedented for oil, similar conditions existed for natural gas in 2019, when pipeline capacity could not accommodate the rapid expansion of associated gas production in the Permian Basin. For electricity, which in comparison to oil and gas has negligible storage capacity, negative prices have been much more common and growing. Negative prices are interesting (and atypical for most commodities) because producers should theoretically cease production whenever sales prices fall below marginal production costs—let alone if negative prices require them to effectively pay (rather than be paid) to continue producing.
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