On the 2nd and 3rd of February this year prices spiked in South Australia and Victoria in the afternoon (the events of February 3rd can be seen in a video in a previous article – Playback of high prices in SA and VIC). Coinciding with these spikes, the Tasmania pool price went negative, close to the Market Floor Price (-$1000/MWh). In this article we take a look at the effects and possible causes of the negative prices.

For AEMO’s summary of the events, see the Pricing Event Reports for the 2nd and 3rd of February (at the bottom of the page).

The graph below shows the two occurrences of negative prices in Tasmania (click to view full size):

The following analysis was put together using our latest version of NEM-Review (v6) to gather data, perform some calculations and generate graphs.

Please note that this analysis is based only on the spot market and does not take into account any contracts Hydro Tasmania or AETV Power may have in place.

Tuesday 2nd February

As a result of the very low negative prices (reaching down to -$999/MWh) the average pool price for the 2nd was -$44/MWh, and the Tasmanian generators made negative total revenues for the day.

TAS Daily Average Pool Price	-$44/MWh
TAS Daily Average Demand	1,099MW
TAS Daily Total Demand	26,373MWh
Hydro Tasmania Daily Total Revenue	-$2,132,831
AETV Power Daily Total Revenue	-$97,887
Basslink Daily Total Revenue	$2,474,951

Note that Basslink’s revenues are around $2.5M, boosted by exporting to Victoria while the pool price there was high and the Tasmanian pool price was negative.

The following table shows the approximate revenues earned by Hydro Tasmania, AETV Power and Basslink during the Dispatch Intervals (half hour periods) in which the Tasmanian pool price was negative (13:00-17:00 and 18:00-18:30). Basslink buys power from Tasmania (at the TAS pool price) and sells to Victoria (at the VIC pool price). Hence the revenue earned by Basslink in each half hour can be approximately calculated as:

Basslink Revenue = ((Basslink Exports x VIC pool price) – (Basslink Exports x TAS pool price)) / 2

Note: the division by 2 gives the total revenue for the half hour (as opposed to a whole hour)

Dispatch Interval	TAS Pool Price ($/MWh)	VIC Pool Price ($/MWh)	TAS Demand (MW)	Basslink Exports (MW)	Hydro Revenue ($)	AETV Revenue ($)	Basslink Revenue ($)
13:00	-339	27	1,169	332	-226,291	-22,205	60,769
13:30	-1	28	1,251	424	-500	-41	5,972
14:00	-1	32	1,123	289	-450	-45	4,719
14:30	-669	76	1,184	500	-511,857	-41,807	186,210
15:00	-999	188	1,260	594	-852,479	-62,478	352,827
15:30	-999	502	1,247	594	-845,676	-62,478	445,990
16:00	-35	1,413	1,252	547	-30,437	-777	396,099
16:30	-98	3,555	1,254	543	-85,650	-439	991,689
17:00	-31	23	1,248	546	-27,272	-78	14,810
18:00	-1	41	1,101	0	-400	-5	0
18:30	-1	26	1,107	79	-428	-2	1,064
Total			6,598MWh	2,224MWh	-$2,581,442	-$190,354	$2,460,150

We can see that Hydro Tasmania made revenues of approximately -$2.47M as a result of generators bidding negative. However, Basslink’s revenues were close to $2.47M from exporting to Victoria during the price spike.

Hydro Tasmania is paid the trading revenues from Basslink (under a financial agreement with the owner of the interconnector). As such, Hydro Tasmania can make a profit by having generators bid negative if the prices in VIC are sufficiently high that the revenues from Basslink can cover generator losses. Negative bids ensure that Basslink is preferentially dispatched in Victoria before local generators that are offering higher prices. As the higher bidding generators must also be dispatched to meet the demand, the price in VIC is set according to these higher bids.

As these numbers above are approximate it is unclear exactly what the outcome was for Hydro Tasmania in this particular situation.

And why did the AETV generators bid negative? We have not found any data to explain this, so are uncertain as to why this was the case.

Wednesday 3rd February

The same situation between Tasmania and Victoria, as seen on the 2nd, re-occurred at about the same time on the following day.

TAS Daily Average Pool Price	-$76
TAS Daily Average Demand	1,078MW
TAS Daily Total Demand	25,873MWh
Hydro Tasmania Daily Total Revenue	-$3,620,574
AETV Power Daily Total Revenue	-$22,524
Basslink Daily Total Revenue	$3,389,928

The table below shows the Hydro Tasmania, AETV and Basslink revenues for negative priced dispatch intervals on the 3rd of February.

Dispatch Interval	TAS Pool Price ($/MWh)	VIC Pool Price ($/MWh)	TAS Demand (MW)	Basslink Exports (MW)	Hydro Revenue ($)	AETV Revenue ($)	Basslink Revenue ($)
11:30	-10	51	1091	0	-4192	-605	0
12:00	-10	57	1088	0	-4407	-605	0
12:30	-175	68	1089	0	-78394	-10918	0
13:00	-517	90	1154	144	-293960	-32289	43681
14:00	-196	587	1214	401	-142312	-12229	157010
14:30	-383	1034	1229	579	-317644	-23936	410166
15:00	-362	306	1221	577	-316052	-4711	192805
15:30	-991	2170	1242	549	-872676	0	867791
16:00	-985	2177	1261	549	-876870	0	867977
16:30	-906	1552	1271	555	-813788	0	682273
17:00	-284	319	1293	546	-256467	0	164600
Total			6,577MWh	1,950MWh	-$3,976,762	-$85,294	$3,386,302

Again, Hydro Tasmania generators totalled negative revenues in the millions (this time close to $4M) during the half hours where the pool price was negative, and Basslink made positive revenues in the same order of magnitude.

It is also worth nothing that there was a spike in the Raise 6 second FCAS price in Tasmania on both days (for 1/2 hour each) that will have impacted on revenue positions, although the spikes were not coincident with the negative prices, and would not have made too much difference to revenues.