Economists think in terms of supply and demand. Saying it drives prices down or negative is a perfectly good explanation of a flaw in the system, especially if you’re someone on the operating side.
Both generation and consumption of electricity have a supply and demand. This is perfectly accepted in many other markets as well. We also had negative oil prices during the first Covid spike because the excavation cannot be stopped immediately. Certain industries like foundries also struggle with fully shutting down and restarting operations so sometimes they rather sell at a loss than stop operations. Farmers sell at a loss when the market is saturated just to sell somewhere and in other years they make a good profit on the same produce (assuming they actually have market power and aren’t wrung dry by intermediate traders).
In terms of energy per capital investment and running costs solar power is among the cheapest energy sources, cheaper than fossils and much cheaper than nuclear power. So it is profitable overall to run solar power, even if sometimes the price is negative.
But the point is that it is not even a flaw from an economic perspective. There is demand both for short term flexible and long term stable energy production and energy consumption in the grid. If you assume prices to be a suitable instrument, which most economists do, then the negative price of the production is a positive price for the short term consumption.
Economists think in terms of supply and demand. Saying it drives prices down or negative is a perfectly good explanation of a flaw in the system, especially if you’re someone on the operating side.
Why is it a flaw from an economic perspective?
Both generation and consumption of electricity have a supply and demand. This is perfectly accepted in many other markets as well. We also had negative oil prices during the first Covid spike because the excavation cannot be stopped immediately. Certain industries like foundries also struggle with fully shutting down and restarting operations so sometimes they rather sell at a loss than stop operations. Farmers sell at a loss when the market is saturated just to sell somewhere and in other years they make a good profit on the same produce (assuming they actually have market power and aren’t wrung dry by intermediate traders).
In terms of energy per capital investment and running costs solar power is among the cheapest energy sources, cheaper than fossils and much cheaper than nuclear power. So it is profitable overall to run solar power, even if sometimes the price is negative.
Nobody here is suggesting that we should avoid solar power because of this.
But the point is that it is not even a flaw from an economic perspective. There is demand both for short term flexible and long term stable energy production and energy consumption in the grid. If you assume prices to be a suitable instrument, which most economists do, then the negative price of the production is a positive price for the short term consumption.
Boy do I hate economists.
Why? Economists ≠ capitalists.