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Negative power prices are not in and of themselves a good thing for consumers. Obviously, that power still costs money to generate. But, if the means of produc

Negative power prices are not in and of themselves a good thing for consumers. Obviously, that power still costs money to generate. But, if the means of production (e.g. wind) is overall still a win and power only goes negative for short periods, if consumers can respond and sink that power more cheaply than the producer can dial back & protect the grid in the process, it might be the best solution for everyone.

rayiner 9y ago
It's good to have a system where negative prices exist, so that demand can attempt to sink excess supply. But that doesn't mean that it's actually a good thing when prices go negative, as the article implies. That means that demand isn't adequately sinking the excess supply, and the grid is asking for a correction. Aside from the potential for grid stability, if it happens often, that means that you've wasted resources building too much generation capacity.
- avar 9y ago
  It doesn't mean that you've built too much capacity, it means that the producer estimates that his cost of shutting down some of the capacity is higher than just paying to offload the excess capacity and continuing to run at 100%. That's an important distinction because you're always going to need more capacity, simply because peak use over the day tends to be 2x-3x more than during off-peak. Whether negative prices are bad for producers depends entirely on the details of their setup. If they run a coal plant it's obviously mostly bad, since they're paying consumers to take their electricity while they're having to pay for coal. But it's not necessarily going to be the case with other forms of production, e.g. what's the marginal cost of continuing to run a wind farm at 100% capacity v.s. shutting part of it down? Maybe shutting it down is expensive for some reason, and at that point you can just pay consumers to act as a heatsink, and make up the difference during the day. Now, everything I've read on the topic suggests that excess negative prices are a bad thing today, but that's not some fundamental law. E.g. let's say that fusion once invented is going to be ridiculously expensive to start up and stop, and can only run at either 0% or 100%, but it'll be cheap to just keep it running once it's started up. Then you'd expect that there would be negative prices for around half the day, and for both the producers and consumers to be happy with that arrangement, since the alternative for the producer would be to buy a massive heat sink farm to burn off the excess capacity during the night. Instead they could use the same money as a price signal to consumers to use their existing heatsinks, e.g. running their heating during the night.
  - shagie 9y ago
    Following up on this... From https://www.forbes.com/sites/jonbruner/2011/10/20/the-high-stakes-math-behind-the-wests-greatest-river/ https://www.forbes.com/sites/jonbruner/2011/10/20/the-high-s... > At issue is what happens when too much electricity is on offer. The enormous supply of hydroelectricity during spring runoff can push electricity prices to zero—the BPA gives away electricity to local utilities for free when it’s forced to produce more than it wants to. Since wind producers enjoy production subsidies, they can push rates below zero, effectively paying other utilities to switch off their generators. The key bit in that passage: effectively paying other utilities to switch off their generators It is possible to turn off wind turbines (though they get annoyed at this because of clean energy subsidies) or send water over a spillway of a run of the river dam (with some environmental consequences). There is a neat visualization with that peak demand - https://www.youtube.com/watch?v=jvnaiHFT6nQ https://www.youtube.com/watch?v=jvnaiHFT6nQ - its the visualization of the Columbia river being sent down stream (right to left) through each dam (white bars). The management of "turning on some power for peak noon consumption" begins at 5:00 am as the uppermost dams start releasing more water downstream. So, if the wind picks up in a few hours unexpectedly, the hydro system pays negative (thats at issue in the article) to have the wind power turn off because they can't really stop the river (especially if its a spring high water event in there too).
- Reason077 9y ago
  "if it happens often, that means that you've wasted resources building too much generation capacity." It's not wasted capacity. It's the nature of wind turbines that in order to have enough to supply a grid on an average wind day, you're going to have an excess of energy production on a really windy day. Wind turbines are relatively cheap, so to some extent it may be cheaper to build more of them than to build energy storage capacity, even if it means that there is an excess of energy at times.
dennisdamenace 9y ago
The article doesn’t mention this but I will guess this is the real time market, or spot market. In off peak hours and especially at such high prices, you are taking about very little actual energy. Most of it would have been purchased in the day ahead market. This happens all the time in US markets - especially where there is wind. It is done as a price signal to producers to either ramp down or consumers to buy a bit more. The ideal winner here is pump storage. But they may have already schedule themselves in the day ahead market and have no extra storage. The market is far more complicated than the article let’s on.

rayiner 9y ago

It's good to have a system where negative prices exist, so that demand can attempt to sink excess supply. But that doesn't mean that it's actually a good thing when prices go negative, as the article implies. That means that demand isn't adequately sinking the excess supply, and the grid is asking for a correction. Aside from the potential for grid stability, if it happens often, that means that you've wasted resources building too much generation capacity.

avar 9y ago
It doesn't mean that you've built too much capacity, it means that the producer estimates that his cost of shutting down some of the capacity is higher than just paying to offload the excess capacity and continuing to run at 100%. That's an important distinction because you're always going to need more capacity, simply because peak use over the day tends to be 2x-3x more than during off-peak. Whether negative prices are bad for producers depends entirely on the details of their setup. If they run a coal plant it's obviously mostly bad, since they're paying consumers to take their electricity while they're having to pay for coal. But it's not necessarily going to be the case with other forms of production, e.g. what's the marginal cost of continuing to run a wind farm at 100% capacity v.s. shutting part of it down? Maybe shutting it down is expensive for some reason, and at that point you can just pay consumers to act as a heatsink, and make up the difference during the day. Now, everything I've read on the topic suggests that excess negative prices are a bad thing today, but that's not some fundamental law. E.g. let's say that fusion once invented is going to be ridiculously expensive to start up and stop, and can only run at either 0% or 100%, but it'll be cheap to just keep it running once it's started up. Then you'd expect that there would be negative prices for around half the day, and for both the producers and consumers to be happy with that arrangement, since the alternative for the producer would be to buy a massive heat sink farm to burn off the excess capacity during the night. Instead they could use the same money as a price signal to consumers to use their existing heatsinks, e.g. running their heating during the night.
- shagie 9y ago
  Following up on this... From https://www.forbes.com/sites/jonbruner/2011/10/20/the-high-stakes-math-behind-the-wests-greatest-river/ https://www.forbes.com/sites/jonbruner/2011/10/20/the-high-s... > At issue is what happens when too much electricity is on offer. The enormous supply of hydroelectricity during spring runoff can push electricity prices to zero—the BPA gives away electricity to local utilities for free when it’s forced to produce more than it wants to. Since wind producers enjoy production subsidies, they can push rates below zero, effectively paying other utilities to switch off their generators. The key bit in that passage: effectively paying other utilities to switch off their generators It is possible to turn off wind turbines (though they get annoyed at this because of clean energy subsidies) or send water over a spillway of a run of the river dam (with some environmental consequences). There is a neat visualization with that peak demand - https://www.youtube.com/watch?v=jvnaiHFT6nQ https://www.youtube.com/watch?v=jvnaiHFT6nQ - its the visualization of the Columbia river being sent down stream (right to left) through each dam (white bars). The management of "turning on some power for peak noon consumption" begins at 5:00 am as the uppermost dams start releasing more water downstream. So, if the wind picks up in a few hours unexpectedly, the hydro system pays negative (thats at issue in the article) to have the wind power turn off because they can't really stop the river (especially if its a spring high water event in there too).
Reason077 9y ago
"if it happens often, that means that you've wasted resources building too much generation capacity." It's not wasted capacity. It's the nature of wind turbines that in order to have enough to supply a grid on an average wind day, you're going to have an excess of energy production on a really windy day. Wind turbines are relatively cheap, so to some extent it may be cheaper to build more of them than to build energy storage capacity, even if it means that there is an excess of energy at times.

dennisdamenace 9y ago

The article doesn’t mention this but I will guess this is the real time market, or spot market. In off peak hours and especially at such high prices, you are taking about very little actual energy. Most of it would have been purchased in the day ahead market. This happens all the time in US markets - especially where there is wind. It is done as a price signal to producers to either ramp down or consumers to buy a bit more. The ideal winner here is pump storage. But they may have already schedule themselves in the day ahead market and have no extra storage. The market is far more complicated than the article let’s on.