Gas and Coal Economics, page-31

Prices can go down in a tight market especially if more expensive baseload is dispatched via the market, but pricing is via a CFD.

For example - when we wanted Huntley in NZ baseloaded (it took a long time to restart - so it it was not dispatched it was running on hot reserve). The output was sold via a CFD to the retail arm or to industrial users - so the price received was not sensitive to the wholesale market. As a result the output was offered into the market at NIL (a situation you claim is impossible/not rational).

WESM allows negative pricing which would possibly come into effect when all the contracted capacity is trying to be dispatched.

In the situation where the hydro storage was available, we would use the storage to take out the peaks - bidding that into the market at a price more than what it would cost to for the gas cost to Otahuhu, but just below the price at which they would fire it up. If the load demanded was more than we could supply, we would offer at a higher price, indicating to Ohahuhu they could set the price - which they would do.

The net result was generally a lower spot price, to which we had no exposure, with spikes on which we made money.

In a market with a lot of lot of solar and a lot of contracted/dedicated supply I would expect the spot price to be low - even if the market was constrained - but where suppliers would seek capacity payments from buyers outside/or around the WESM.