The NEM is one of the world's longest interconnected power systems, stretching from Port Douglas in Queensland to Port Lincoln in South Australia and across to Tasmania.
How the Spot Market Works
The NEM is a "gross pool" market. This means all electricity generated is sold into a central pool, and retailers buy from this pool to supply homes and businesses. The price is determined every 5 minutes based on supply and demand.
Generators submit bids saying how much power they can supply and at what price.
AEMO stacks these bids from cheapest to most expensive.
The cheapest generators are dispatched first. The price of the last generator needed to meet demand sets the "Spot Price" for everyone.
Understanding Negative Prices
Prices can drop below $0.00, meaning generators effectively pay the market to take their electricity. This phenomenon is becoming common due to the rapid uptake of rooftop solar.
Why stay online? Coal plants are expensive to turn off and restart, so they may pay negative prices to stay running during a sunny afternoon, knowing prices will rise when the sun sets.