Climate Cooperation China
On behalf of the International Climate Initiative (IKI)

Shandong spot power market dipped below zero during the national holiday in May

The Shandong electricity spot market saw negative prices for 22 consecutive hours (20:00; 1 May – 17:00; 2 May) during national holidays in May 2023. The spot power price fluctuated drastically from 1047.51 RMB/MWh to -85 RMB/MWh (see figure below). The combination of reduced demand due to the holiday break and an excess supply of renewable energy were the main factors contributing to the occurrence of negative spot prices.

 

Source: Shandong Power Exchange Centre

However, experts argue that the impact of the negative spot price is limited, as only a small portion (around 5-6%) of the electricity is traded on the spot market. Buyers are only required to pay the price difference between the mid-to-long term contract and the spot price. Despite this, negative spot prices were observed at the real-time market where buyers only pay the price difference to the day-ahead market. Generators also receive compensation for maintaining sufficient generation capacity. Therefore, in practice, the generators do not have to pay money for selling their electricity. The occurrence of negative prices is also an indicator that the electricity system needs to become more flexible.

 

Further Information

Further Information

 

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