Negative prices: A “gift” to industry to shift demand and make new products

The head of energy at Telstra, one of the country’s largest electricity consumers, says the growth of negative pricing events on Australia’s main grid is not the problem it is often portrayed as, and should be viewed as a “gift” to business that invites them to be flexible with demand.

The Australian Energy Market Operator this week noted that negative pricing events make up one in five trading intervals as the growth of renewables, and particularly solar in the middle of the day, when supply can exceed demand by a huge margin and generators bid low to ensure they are dispatched.

The result is often heavy curtailment of utility scale wind and solar, and is either seen as a price signal for storage, a disaster for proposed new investment, or the reality of a new grid paradigm where the focus shifts to demand management rather than only supply.

“What is most interesting to me at the moment is that all of the things that are pointed out as challenges of the energy transition, are in fact gifts,” Ben Burge, the head of Telstra Energy, said in a panel discussion at the All Energy Conference in Melbourne.

Burge says Telstra is well on track to sign up enough wind and solar to equate to its annual electricity use by 2025, and is now looking at how to switch demand profiles so it can turn electricity into other useful products at very low price.

“We’re looking at that gift of curtailment,” he said. “What is the opportunity?”

Bitcoin mining, he noted, is energy intensive and can be time sensitive (although some new developments suggest it could be more flexible than thought).

But he said other AI applications were a lot more flexible. “All of a sudden, we’ve got mega watt hours of energy being converted into petaflops (a measure of computer calculations).”

Burge says Telstra is now thinking about where to locate such data centres to best take advantage of the negative prices. He’s think about reference nodes and seizing on the dislocation between reference nodes, or state markets – some of them constrained by the lack of capacity on transmission lines.

The view by Burge is significant. Telstra consumes an estimated one per cent of Australia’s total electricity consumption, and other big users are also looking, where they can, to time shift production to take advantage of low prices and avoid high prices.

“Media is a really important part of this. We still see stories where it’s like, Boral has to shut down or turn down its production of cement due to spot prices and energy.

“Now I kind of sit there and go, ‘Well, hang on. Was that a bad news story? Doesn’t it reflect the reality of not just being able to use electricity whenever you want, regardless of the true marginal cost that is involved in supplying.