WEM Monthly Average Price History

This 3D image shows average period wholesale energy prices in the WA Wholesale Electricity Market (WEM) ... are they increasing? Are they here to stay? Are they a good or bad thing? ...is the market broken?

Negative prices - Causal factors:

1. Rooftop solar pushes down operational demand.
2. Generators bid to be dispatched on the lowest price for a smaller amount of energy.
3. Coal generators must stay operational 24/7, bidding negative prices to be dispatched.
4. Large-scale generation certificate (LGC) owners also bid in negative to receive LGCs, down to the level of $40-50 MWh.
5. AEMO moved to 5 minutes settlements on the 1st July 2021.

So, what is the direction of travel?

As coal exits and LGCs expire (nominally 2030), there will be fewer negative prices. As battery storage ramps up, it will flatten out day-night price volatility, smoothing operational demand and introducing a new 'baseload power 2.0'.

Are negative prices good or bad?

They are simply a feature of the market transition, encouraging battery storage investments, favoring first movers, and partially eating its own lunch.

Negative prices benefit users trading directly on the energy market, such as energy wholesalers, batteries, and heavy industry.

There is an optimal amount of storage to flatten operational demand and reduce shortage risk, though current incentives may not drive investment