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Understanding the Dynamics of Negative Pricing and Price Volatility in Wholesale Energy Markets

As the energy transition accelerates, the wholesale energy markets are experiencing fascinating and complex shifts. Two emerging features in these markets are negative pricing and high price volatility. Both phenomena offer unique opportunities and challenges for energy users, traders, and investors, particularly in renewable energy and battery storage sectors. Let's explore these trends in more detail.

Negative Prices: A Side Effect of Renewable Energy Growth

Negative prices in wholesale markets are an emerging feature of the energy transition and a natural side effect of increasing levels of generation for variable renewable energy. They typically coincide with periods of overabundance of wind and solar generation and provide great buying opportunities for energy users and traders with the flexibility to make the most of them.

In the UK and Europe they’re still something of novelty and garner interest, at least amongst the energy nerds, when they crop up. For example, the Modo Energy guys recently noted that the GB market has already seen 66 hours of negative price so far in 2024, on the back of a tick over 100 hours in 2023. Sounds like a lot, but how do those figures compare to other markets?

Here we’ve plotted the cumulative hours of negative pricing since the start of 2023 for several markets where Gridcog is active. The comparison is pretty stark. Whilst GB had about four days of negative pricing in 2023, the National Electricity Market (NEM) in South Australia recorded over three months of negative pricing, with Victoria not far behind.

It’s worth remembering that Australia’s market has zonal pricing and it’s not a coincidence that the zones with the highest penetration of solar and wind are seeing the lion’s share of negative prices. With the GB market currently contemplating a shift to locational pricing under the REMA process, it’s not hard to imagine something similar happening in zones where renewable generation exceeds demand (Scotland, anyone?) if and when that change happens.

Another notable mention from the data is that Spain saw negative prices for the very first time in April 2024, welcome to the club 🇪🇸

High Price Volatility: A Boon for Battery Storage Investment

Another defining characteristic of wholesale energy markets in recent years is high price volatility. One measure of this volatility is the daily spread within a market—the difference between the lowest and highest prices in a trading day.

Energy arbitrage is an important part of the value stack for battery storage investment, so markets with volatile pricing are generally more attractive. Simply put, a battery can make money by buying (charging) when prices are low and selling (discharging) when prices are high. So which markets are showing most volatility and what might this mean for folks looking to invest in battery storage projects?

Here we’ve plotted the cumulative daily spreads for the last 12 months for several markets where Gridcog operates. We’re assuming you simply buy in the cheapest hour and sell in the most expensive, so a one-hour asset on a single daily cycle. All values are expressed in Euros to aid comparison.

🇦🇺 Australia’s National Electricity Market (NEM) leads the way with every pricing zone significantly higher than even the most expensive European market.

📈 Australia’s NEM markets are characterised by significant “steps” where spreads are elevated for relatively short periods of time.

⚡ Australia’s NEM markets are energy-only with a high price cap and low price floor and that’s reflected in much higher daily spreads.

🔀 GB and Spain were tracking closely until October 2023 since when GB has started to open up a gap.

Daily spreads within a single market don’t tell the whole story though. It’s “capture rates” that battery investors care about and those will be very different for a day-ahead market like the Netherlands, where traders can lock in prices well in advance and prepare their battery asset accordingly, than a real-time Spot market like Australia’s NEM, where traders must accept market risk or relinquish some revenue upside by trading financial products like ‘caps’.

A second confounding factor here is that unlike Australia's NEM, GB and European markets have more than one wholesale energy price. In these regions energy is traded over several different markets simultaneously, providing additional opportunities to capture spread. The second chart illustrates this behaviour using a single trading day from GB, May 14th 2024.

Here the spread available to a battery owner is increased by about 18% by buying in one market and selling in another.

Note: For GB and Euro markets we’re using hourly day-ahead prices. For markets that trade at a sub-hourly interval, like Australia’s NEM, pricing has been averaged to an hourly resolution.


Understanding negative pricing and price volatility is crucial for navigating the evolving landscape of wholesale energy markets. For energy users and traders, these trends present both challenges and opportunities. As markets continue to adapt to the influx of renewable energy, staying informed and flexible will be key to leveraging these dynamic conditions.

Stay tuned for more insights and data as we continue to monitor and analyse these exciting developments in energy markets around the world. If you'd like to discover how Gridcog can support your energy goals and help you thrive in this dynamic market environment, reach out to us today.

Pete Tickler
Chief Product Officer & Co-Founder
May 28, 2024
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