When the next megawatt is worth less than zero

Market question. How can a generator rationally offer below zero, and why can high renewable output produce either curtailment, a negative price, or neither?

Step 1

Allow signed offers before explaining signed prices

A negative offer means a resource is willing, under the applicable rules and conditions, to pay to remain dispatched for the next increment. Possible incentives can include avoiding shutdown and restart costs, honoring operating constraints, preserving intertemporal value, or retaining production-linked revenue. Which consideration is permitted in an offer is market-specific.

A negative settlement price is a market outcome at a location and interval. It can be set or shaped by negative offers, but also by transmission, losses, system constraints, adders, and pricing rules. Offer and settlement price have the same units but are not the same object.

Worked example

A signed synthetic offer stack

Low-load signed offer stack
Block	Available capacity	Offer
Wind	80 MW	−$20/MWh
Inflexible thermal block	60 MW	−$5/MWh
Flexible gas	100 MW	$40/MWh

At 100 MW demand, wind dispatches 80 MW and the inflexible block dispatches 20 MW. The inflexible block is marginal, so the uniform-price teaching model clears at −$5/MWh. Flexible gas is backed down to zero.

80 MW wind + 20 MW inflexible = 100 MW; modeled price = −$5/MWh

Negative clearing-price example

If demand rises to 150 MW, all 80 MW of wind and 60 MW of inflexible capacity run, then gas supplies 10 MW. Gas becomes marginal and the modeled price is $40/MWh. Renewable output is still high, but price is positive.

System demand 100 MW

-$5/MWh clearing price. Inflexible thermal block is marginal.100 MW dispatched from 240 MW available.

Pause and predict

Demand falls from 100 MW to 60 MW with offers unchanged. Which block backs down first in the signed stack?

Step 2

Locate the system-minimum condition

Low net load leaves less room for flexible conventional output, storage charging, exports, and other balancing actions. A teaching system minimum represents the aggregate output or operating floor that cannot be reduced within the simplified interval. When net load falls below that assumption, the engine reports potential curtailment:

potential curtailment = max(0, system minimum − net load)

Teaching potential-curtailment condition

In the registered spring hour at 12:00, synthetic load is 820 MW, wind is 300 MW, and solar is 450 MW. Net load is 70 MW. With a 120 MW system-minimum assumption, potential curtailment is 50 MW:

net load = 820 − 300 − 450 = 70 MW; potential curtailment = 120 − 70 = 50 MW

Spring low-net-load calculation

Load — solid line
Wind — dashed line
Solar — dotted line
Net load — dash-dot line

Renewable scale 100%Load scale 100%System-minimum assumption 120 MW

Preset conditions

Hourly values shown in the chart
Hour	Load	Wind	Solar	Net load	Ramp	Potential curtailment
00:00	680 MW	260 MW	0 MW	420 MW	—	0 MW
01:00	650 MW	250 MW	0 MW	400 MW	-20 MW	0 MW
02:00	620 MW	240 MW	0 MW	380 MW	-20 MW	0 MW
03:00	600 MW	230 MW	0 MW	370 MW	-10 MW	0 MW
04:00	590 MW	220 MW	0 MW	370 MW	0 MW	0 MW
05:00	610 MW	230 MW	0 MW	380 MW	10 MW	0 MW
06:00	650 MW	250 MW	0 MW	400 MW	20 MW	0 MW
07:00	700 MW	280 MW	40 MW	380 MW	-20 MW	0 MW
08:00	750 MW	300 MW	120 MW	330 MW	-50 MW	0 MW
09:00	780 MW	320 MW	220 MW	240 MW	-90 MW	0 MW
10:00	800 MW	330 MW	320 MW	150 MW	-90 MW	0 MW
11:00	810 MW	320 MW	400 MW	90 MW	-60 MW	30 MW
12:00	820 MW	300 MW	450 MW	70 MW	-20 MW	50 MW
13:00	830 MW	280 MW	430 MW	120 MW	50 MW	0 MW
14:00	850 MW	260 MW	350 MW	240 MW	120 MW	0 MW
15:00	880 MW	250 MW	240 MW	390 MW	150 MW	0 MW
16:00	930 MW	240 MW	120 MW	570 MW	180 MW	0 MW
17:00	1,000 MW	230 MW	40 MW	730 MW	160 MW	0 MW
18:00	1,080 MW	240 MW	0 MW	840 MW	110 MW	0 MW
19:00	1,100 MW	250 MW	0 MW	850 MW	10 MW	0 MW
20:00	1,040 MW	270 MW	0 MW	770 MW	-80 MW	0 MW
21:00	940 MW	290 MW	0 MW	650 MW	-120 MW	0 MW
22:00	830 MW	300 MW	0 MW	530 MW	-120 MW	0 MW
23:00	740 MW	280 MW	0 MW	460 MW	-70 MW	0 MW

Minimum net load: 70 MW. Maximum upward ramp: 180 MW. System-minimum assumption is crossed; potential curtailment reaches 50 MW.Crossing the system-minimum assumption marks a potential curtailment condition, not an ISO dispatch conclusion.

The 50 MW result is a condition indicator, not an ISO instruction. Actual resolution could involve renewable curtailment, thermal decommitment or redispatch, storage charging, exports, demand response, transmission actions, or other market/operator tools. Timing, topology, ramping, and resource-specific limits decide which action is feasible.

Curtailment and negative price can separate

Curtailment can occur because energy cannot be delivered through a constraint even while another location has a positive price. A negative price can occur without renewable generation when inflexible supply and low load create surplus conditions. High renewables raise the likelihood of low residual demand in some systems, but they are neither necessary nor sufficient for a negative price.

Step 3

Build a causal test instead of a renewable shortcut

Use four questions:

Quantity: Is load or net load low relative to available and minimum output?
Offers: Which accepted block has the highest signed offer at the margin?
Feasibility: Can surplus energy move, be stored, or be absorbed, or is transmission/operational flexibility binding?
Settlement: Which location, interval, adders, losses, corrections, and market rules define the published price?

ERCOT publishes market prices, while NREL's scenario research documents the need for flexibility and curtailment in high-renewable systems. Neither source turns a renewable-output percentage into a deterministic price rule. A causal analysis needs the contemporaneous offer stack and operational constraints.

Apply the mechanism

Using the signed stack, state dispatch and price at 100 MW, 60 MW, and 150 MW demand. Then use the spring hour values to calculate potential curtailment and explain why neither high renewables nor a negative offer guarantees a negative settlement price.

Your response

Takeaways

Offers are signed finite economic inputs; demand and capacity remain non-negative physical inputs.
In the signed stack, 100 MW demand clears at −$5/MWh, 60 MW at −$20/MWh, and 150 MW at $40/MWh.
The spring hour has 70 MW net load against a 120 MW system minimum, indicating 50 MW of potential curtailment.
Negative offers, negative settlement prices, and curtailment are related but distinct; renewables guarantee none of them.

Selected sources

Sources and model boundaries

Federal Energy Regulatory Commission: Energy PrimerRetrieved 2026-08-03.
A broad federal primer; it does not substitute for market-specific tariff and operating-rule analysis.
National Renewable Energy Laboratory: Renewable Electricity Futures StudyRetrieved 2026-08-03.
Scenario-based integration research; it supports curtailment and flexibility concepts but is not a forecast, a price-formation rule, or ERCOT operating guidance.
ERCOT: Market PricesObserved: Operating day 2026-01-24; corrected RTM files approved 2026-06-01.Retrieved 2026-08-03.
ERCOT publishes observed prices and correction archives. January 24, 2026 analysis must use corrected RTM files; prices alone do not reconstruct dispatch, offers, constraints, losses, adders, or settlements.