When my colleagues and I developed the theory of real time electricity prices back in the dark ages (1982), we were amused to see that our equations allowed for the optimal price to be negative. Power companies would pay consumers to use more electricity! At the time, we thought it was a paradoxical case that was unlikely in practice, except possibly in the middle of the night in systems with lots of nuclear units.
Fast forward 30 years, and negative prices are a regular occurrence in real systems, including in Texas and California. And now they are even happing in the middle of the day. But there is still a puzzle: why don’t generators stop generating the moment the price goes negative?
Several blog posts from Berkeley’s great Energy Institute, and my response to one of them, show that real power systems can have a lot of unanticipated phenomena. Take together, these probably explain these apparently strange behaviors.
Source: Is Solar Really the Reason for Negative Electricity Prices? – Energy Institute Blog. and from Catherine Wolfram, Is the Duck Sinking?