California sun produces so much power that electricity prices turn negative

'In March, during the hours of 8am to 2pm, system average hourly prices were frequently at or below $0 per megawatt-hour'

Surfer Cole Clisby rides his surfboard off the top of a wave as the sun sets off the shores of Leucadia, California (Reuters)

"Yeah, they're out there havin' fun, In the warm California sun," sang The Rivieras in their 1964 hit.

And it could not be more apt today as the sun in the state was so strong – and the number of solar farms so large – that electricity prices in the state have begun turning negative on the main power exchange, the US Energy Information Administration (EIA) has revealed.

Solar made up a record figure of nearly 40 per cent of the electricity sent to the grid in the California Independent System Operator’s (CAISO’s) territory for a few hours on 11 March, after utility-scale solar farms grew by almost 50 per cent in 2016, the EIA said on its website.

Graphs showing solar energy production and electricity prices, which drop below zero around mid-day, in California on 11 March (US EIS)

However, as the Quartz website pointed out, negative wholesale prices do not translate into an unexpected windfall for consumers.

This is because retail prices are based on the average cost, so people might get slightly cheaper electricity but not an actual cash payment as a result of prices becoming negative for a few hours.

The EIA said: “The large and growing amount of solar generation has occasionally driven power prices on the CAISO power exchange during late winter and early spring daylight hours to very low, and sometimes negative, prices.

“However, consumers in California continue to pay average retail electricity prices that are among the highest in the nation.”

Solar capacity in the state has grown rapidly in the last few years.

There was less than one gigawatt in 2007, but nearly 14GW by the end of last year.

At this time of year, the large amounts of sunlight and the relatively low demand can produce too much electricity around the middle of the day.

“Electricity demand in California tends to peak during the summer months,” the EIA said.

“However, in late winter and early spring, demand is at its annual minimum, but solar output, while not at its highest, is increasing as the days grow longer and the sun gets higher in the sky.

“Although the sun is at a similar angle in September and October, electricity demand is still relatively high, leading to lower solar generation shares than seen in March.

“Consequently, power prices … were substantially lower in March compared with other times of the year or even March of last year.

“In March, during the hours of 8am to 2pm, system average hourly prices were frequently at or below $0 per megawatthour.

“In contrast, average hourly prices in March 2013–15 during this time of day ranged from $14/MWh to $45/MWh.

“Negative prices usually result when generators with high shut-down or restart costs must compete with other generators to avoid operating below equipment minimum ratings or shutting down completely.”