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> It’s left the utilities complaining that they can’t earn the returns they expected for their investment in generation capacity. Good. That's a well functioni

> It’s left the utilities complaining that they can’t earn the returns they expected for their investment in generation capacity. Good. That's a well functioning market economy. Those who make poor investment choices need to feel the sting of losses else the market fails to work correctly.

perl4ever 8y ago
I think that negative prices are prima facie evidence of a market economy not functioning "well". Negative prices seem to me to be to be equivalent to fines for doing things that aren't socially useful. If they proliferate, that's a suggestion something is out of whack.
- bjoernw 8y ago
  Only if they stay negative
  - perl4ever 8y ago
    That's reasonable. The headline says it's spreading though.
    - xigma 8y ago
      It's spreading because the market is oversatured with renewables because of government subsidies. A sound investor would stop (or go bankrupt) when the negatives outweigh the positives.
      - perl4ever 8y ago
        Subsidies seem to be on the decline. In fact, I was just reading that due to the Chinese government cutting back, people are predicting PV prices will plummet in the next year.
    - Dylan16807 8y ago
      In this case "spreading" means "happening more often". And you could have a stable rational market where power prices go negative for an hour every day.
- deleted 8y ago
  [deleted]
- pitaj 8y ago
  It's certainly not a free market economy because almost every electricity utility is a state monopoly.
  - WalterBright 8y ago
    When markets get "out of whack" it's almost certainly due to government regulation. In this case, it's the government setting fixed electric rates for consumers.
    - Install_Gentoo 8y ago
      It's always the government and them dang corporate subsidies. Everything would work out fine if every aspect of our lives are dominated by fiefdoms of companies battling out against each other. On a less sarcastic note, companies/corporations failing to the point where government has to bail them out at all is sign that this system is not working.
- blihp 8y ago
  It depends on whether or not someone is able to demand delivery at that price and what other forces are in play. i.e. presumably there are regulatory requirements that some minimal amount of capacity must be available as generators typically can't quickly spin up based on the whims of the sun/wind... but what if the generator provides it and there are no takers which a zero/negative price would indicate? Of course that's not sustainable for long it becomes a persistent situation: at some point the generator must be subsidized, or can absorb a loss over brief periods for the 'privilege' of being a provider the rest of the time, or goes bankrupt. Running parts of businesses at a loss isn't unheard of provided the governments responsible for overseeing it are OK with and/or mandate it (a wide variety of services to rural customers here in the U.S. comes to mind) and the impacted business makes up for the loss elsewhere.
  - perl4ever 8y ago
    "Running parts of businesses at a loss isn't unheard of" A negative price seems fundamentally different than just running at a loss though.
- amluto 8y ago
  I admit I’m confused by negative pricing. Presumably solar can be curtailed for free. But with something like wind, I think production is all or none, and switching back and forth is a bit slow. It’s more economical to pay a tiny amount to get someone to dump the power. On a smaller scale, it’s common for off-grid hydro to have a giant heater waste power as needed.
- bluGill 8y ago
  Negative prices a perfectly possible in the ideal free market. The market of course requires the overall prices be positive, but given the very low ongoing costs of wind/solar it makes sense to build even if prices are sometimes negative - the alternative is to shutdown, but then the wind/solar operator needs to do something with that power, which in itself has costs. So long as the times the times of positive prices balance out you are fine with some negative. In addition, there is probably some advantage to encouraging other parties to develop uses for cheap power as part of long term planning. Of course as others point out nothing is every an ideal market.
- fogetti 8y ago
  You are right, although it's not clear for me if you refer to the old/traditional coal plants or not. If you refer to the coal plants I agree, the 'negative prices are prima facie evidence of' coal plants 'not functioning "well"'.
jartelt 8y ago
Exactly - this will finally make them think twice about installing more generation capacity and will force them to consider installing battery storage or other solutions to fix issues on the grid. These non-generation solutions exist, but utilities love to just install more generation because it's in their playbook and they don't want to innovate.
- citrablue 8y ago
  > utilities love to just install more generation because it's in their playbook and they don't want to innovate. I'm curious, how did you reach this conclusion?
  - jartelt 8y ago
    Utilities make a guaranteed rate of return (up to 10%) when they build new generation plants and when they build new transmission lines. This is payed for by rate basing the new costs to customers. The system works great for utilities because they know how to build these plants/wires and the get paid regardless of whether they are truly needed or not. Local governments and state regulators have finally started to push back against and are now forcing utilities to consider new solutions to grid congestion. https://www.utilitydive.com/news/non-wires-alternatives-whats-up-next-in-utility-business-model-evolution/446933/ https://www.utilitydive.com/news/non-wires-alternatives-what...
bhuga 8y ago
For many utilities, it's not as simple as that. They're heavily regulated and their prices are generally set, capped or otherwise limited to give them a certain percentage profit. They often have to get price increases approved by their regulators. If they have debt outstanding on underperforming gas power plants, they may need to make this argument publicly so they can adjust pricing.
- twunde 8y ago
  You're referring to distributors, the energy companies that are responsible for managing the wires/gas pipes to your house (Think ConEd, EverSource, etc). This effects the energy generators, which don't have prices regulated but are still regulated by FERC.
rwcarlsen 8y ago
Low/negative prices (caused largely by various regulation/policies) have been putting a lot of economic pressure on existing nuclear power generation - sometimes causing it to close [1]. Generation that is largely replaced by natural gas plants. So maybe this very non-free-market state is actually not helping make forward progress on what many would consider to be one of the most important issues relating to energy - climate change. [1] https://www.forbes.com/sites/jamesconca/2016/05/16/natural-gas-is-replacing-nuclear-power-not-renewables/#4215755ccdb6 https://www.forbes.com/sites/jamesconca/2016/05/16/natural-g...
- nostrademons 8y ago
  An energy industry where the bulk of energy production is wind & solar with natural gas plants to handle peak demand spikes is significantly more environmentally friendly than an industry where the bulk of production is oil & coal with a few nuclear plants thrown in.
  - darawk 8y ago
    Yes, but we want the coal to be displaced. Not the nuclear.
    - nostrademons 8y ago
      Coal already has been displaced. The reason there's less of a downturn is because there's a lot less of it to begin with: https://www.iso-ne.com/about/key-stats/resource-mix/ https://www.iso-ne.com/about/key-stats/resource-mix/ There's 20x more nuclear than coal energy in New England. Proportionally, the drop in coal energy (~50%) was a lot more than the drop in nuclear energy (~15%).
  - rwcarlsen 8y ago
    Neither of the alternatives you propose are what we currently have or are where we are currently heading (IMO). As long as we are speculating - I think a future with good storage tech and 100% solar+wind would be better than one with gas plants thrown in the mix. If climate change is as big a deal as people claim, than why would we sacrifice existing non-carbon-emitting capacity for natural gas? We don't currently have anything remotely resembling a largely renewable grid nor the technology to even accomplish it at scale.
milcron 8y ago
Electricity isn't a great market. End-users with solar power are allowed to use the grid as a perfectly free battery, which is why everyone is dumping power on the grid at high noon.
- whatsstolat 8y ago
  Where I live its about 25c (of Australian Dollar) for 1kwh but you only get 7c back. So a real battery would be much preferable.
  - rwcarlsen 8y ago
    Due to subsidies, in the US people dumping home solar into the grid usually get back more than the market rate.
    - tensecondflash 8y ago
      I don't think that's the case. Depending on where you are, you either get paid retail or wholesale rates, and still have to pay some monthly service fee regardless of surplus or deficit. I've never heard of any utility in the US buying solar production at more than retail rates.
      - mmt 8y ago
        > I've never heard of any utility in the US buying solar production at more than retail rates. That doesn't refute the parent's claim of it being greater than the market rate. The residential retail rate [1] usually doesn't change, except on a long time scale, after regulatory approval, while the market rate changes intra-day, based on supply and demand. If peak sun doesn't correspond to peak demand (and, from what I've read, it doesn't), those periods are where the utility could be taking a huge loss. For example, if PG&E has a customer in the top marginal usage tier is "selling" power at 25c/kWh when the wholesale market is selling it at 4c, that's a pretty tremendous loss. [1] Often not even a single rate but a tiered one, so a heavy residential user could be "selling back" power at a particularly high retail rate, much higher than average.
cmsonger 8y ago
> Good. That's a well functioning market economy. Those who make poor investment choices need to feel the sting of losses else the market fails to work correctly. Unless it affects grid reliability. Energy is not just a market. It's something that underpins modern society and the modern economy. I, for one, do not want my power to go out at 7pm because demand is peaking, traditional plants had to close, and the sun is going down.
- jfrankamp 8y ago
  You've defined a rapid peaker plant, which no one is implying we should lose. The destruction of the market for this type of bad-actor legacy baseload is a market opportunity for those who can provide the services you're talking about. Whoever can provide it should earn a premium for doing it.
rayiner 8y ago
Investment into traditional generating capacity is not a "poor investment choice." To the contrary, it's a necessary one. For better or worse, a fundamental premise of modern electric grids is that they should be able to meet all needs essentially 100% of the time. Electrical markets are then built on top of that basic guarantee. With current technology, that means you need sufficient generating capacity from traditional sources to cover nearly 100% of your peak capacity needs--otherwise, on a day where the wind isn't blowing and the sun isn't shining, you can't produce enough electricity. Current renewables subsidies results in a broken market structure: the market needs conventional generators, but the subsidization of renewables makes it unattractive to build those generators. A "well functioning market economy" does not eliminate incentives to produce products that people need.
- jfrankamp 8y ago
  There are two things happening, both because of the negative externalities that traditional sources produce, but aren't factored in to prices. One is subsidies, the other is source prioritization both of which favor renewables. Plants that can provide that peaker gap on windless+cloudy days should be rewarded by the market by very high kwh purchase prices, but that's all. The current benefits that renewables receive are aligned with the true costs. Alternatively you could replace the prioritization and subsidies with a heavy carbon tax on traditional sources but the result would be the same.
  - _Tev 8y ago
    > The current benefits that renewables receive are aligned with the true costs. So energy storage / building heavily underutilized plants is free in this theory?
    - jfrankamp 8y ago
      No, it comes at a severe cost. The upside is that it removes the negative externalities of legacy plants.
infogulch 8y ago
Not only is this good, this is great! Hitting negative energy rates just incentivizes more and better storage technologies to accelerate. We need more grid-storage online fast and nothing could incentivize storage tech more than being paid both ways for electricity management. Get paid for storing it during the day and get paid for delivering it at night. It's not the best case for power plants right now, but once this new grid storage market settles the double-incentive will go away and things will even out a lot more.
ars 8y ago
> Good. That's a well functioning market economy. Those who make poor investment choices need to feel the sting of losses else the market fails to work correctly. You say that - up until the day there is a brownout on a cloudy, yet boiling hot day, because there is little sun and no wind, and no one wants to build non-economical power plants.
- maerF0x0 8y ago
  FTR i also believe there should non-regulated prices. If the price on that day goes up to $1/kwhr (or whatever) so be it. The market prices incentivises the right solutions to problems eg: batteries and home generators for cloudy days for those who _must_ have power, but those who see the price is $1/hr will turn off their TV or dishwasher etc. or maybe consumers will start to buy contracts from plants like "I will use 1K of continuous power if you provide it at 16c an hr"
GuB-42 8y ago
It is well functioning economy, but is it good for the environment, CO2 emissions in particular? Because with negative electricity prices, the obvious "good" investment is in peaking power plants. And considering that the best spots for hydro are already well exploited, it means fossil fuel. Natural gas is the best but newer coal plants, like the one they are building in Germany can do that to some extent.

perl4ever 8y ago

I think that negative prices are prima facie evidence of a market economy not functioning "well". Negative prices seem to me to be to be equivalent to fines for doing things that aren't socially useful. If they proliferate, that's a suggestion something is out of whack.

bjoernw 8y ago
Only if they stay negative
- perl4ever 8y ago
  That's reasonable. The headline says it's spreading though.
  - xigma 8y ago
    It's spreading because the market is oversatured with renewables because of government subsidies. A sound investor would stop (or go bankrupt) when the negatives outweigh the positives.
    - perl4ever 8y ago
      Subsidies seem to be on the decline. In fact, I was just reading that due to the Chinese government cutting back, people are predicting PV prices will plummet in the next year.
  - Dylan16807 8y ago
    In this case "spreading" means "happening more often". And you could have a stable rational market where power prices go negative for an hour every day.
deleted 8y ago
[deleted]
pitaj 8y ago
It's certainly not a free market economy because almost every electricity utility is a state monopoly.
- WalterBright 8y ago
  When markets get "out of whack" it's almost certainly due to government regulation. In this case, it's the government setting fixed electric rates for consumers.
  - Install_Gentoo 8y ago
    It's always the government and them dang corporate subsidies. Everything would work out fine if every aspect of our lives are dominated by fiefdoms of companies battling out against each other. On a less sarcastic note, companies/corporations failing to the point where government has to bail them out at all is sign that this system is not working.
blihp 8y ago
It depends on whether or not someone is able to demand delivery at that price and what other forces are in play. i.e. presumably there are regulatory requirements that some minimal amount of capacity must be available as generators typically can't quickly spin up based on the whims of the sun/wind... but what if the generator provides it and there are no takers which a zero/negative price would indicate? Of course that's not sustainable for long it becomes a persistent situation: at some point the generator must be subsidized, or can absorb a loss over brief periods for the 'privilege' of being a provider the rest of the time, or goes bankrupt. Running parts of businesses at a loss isn't unheard of provided the governments responsible for overseeing it are OK with and/or mandate it (a wide variety of services to rural customers here in the U.S. comes to mind) and the impacted business makes up for the loss elsewhere.
- perl4ever 8y ago
  "Running parts of businesses at a loss isn't unheard of" A negative price seems fundamentally different than just running at a loss though.
amluto 8y ago
I admit I’m confused by negative pricing. Presumably solar can be curtailed for free. But with something like wind, I think production is all or none, and switching back and forth is a bit slow. It’s more economical to pay a tiny amount to get someone to dump the power. On a smaller scale, it’s common for off-grid hydro to have a giant heater waste power as needed.
bluGill 8y ago
Negative prices a perfectly possible in the ideal free market. The market of course requires the overall prices be positive, but given the very low ongoing costs of wind/solar it makes sense to build even if prices are sometimes negative - the alternative is to shutdown, but then the wind/solar operator needs to do something with that power, which in itself has costs. So long as the times the times of positive prices balance out you are fine with some negative. In addition, there is probably some advantage to encouraging other parties to develop uses for cheap power as part of long term planning. Of course as others point out nothing is every an ideal market.
fogetti 8y ago
You are right, although it's not clear for me if you refer to the old/traditional coal plants or not. If you refer to the coal plants I agree, the 'negative prices are prima facie evidence of' coal plants 'not functioning "well"'.

jartelt 8y ago

Exactly - this will finally make them think twice about installing more generation capacity and will force them to consider installing battery storage or other solutions to fix issues on the grid. These non-generation solutions exist, but utilities love to just install more generation because it's in their playbook and they don't want to innovate.

citrablue 8y ago
> utilities love to just install more generation because it's in their playbook and they don't want to innovate. I'm curious, how did you reach this conclusion?
- jartelt 8y ago
  Utilities make a guaranteed rate of return (up to 10%) when they build new generation plants and when they build new transmission lines. This is payed for by rate basing the new costs to customers. The system works great for utilities because they know how to build these plants/wires and the get paid regardless of whether they are truly needed or not. Local governments and state regulators have finally started to push back against and are now forcing utilities to consider new solutions to grid congestion. https://www.utilitydive.com/news/non-wires-alternatives-whats-up-next-in-utility-business-model-evolution/446933/ https://www.utilitydive.com/news/non-wires-alternatives-what...

bhuga 8y ago

For many utilities, it's not as simple as that. They're heavily regulated and their prices are generally set, capped or otherwise limited to give them a certain percentage profit. They often have to get price increases approved by their regulators. If they have debt outstanding on underperforming gas power plants, they may need to make this argument publicly so they can adjust pricing.

twunde 8y ago
You're referring to distributors, the energy companies that are responsible for managing the wires/gas pipes to your house (Think ConEd, EverSource, etc). This effects the energy generators, which don't have prices regulated but are still regulated by FERC.

rwcarlsen 8y ago

Low/negative prices (caused largely by various regulation/policies) have been putting a lot of economic pressure on existing nuclear power generation - sometimes causing it to close [1]. Generation that is largely replaced by natural gas plants. So maybe this very non-free-market state is actually not helping make forward progress on what many would consider to be one of the most important issues relating to energy - climate change. [1] https://www.forbes.com/sites/jamesconca/2016/05/16/natural-gas-is-replacing-nuclear-power-not-renewables/#4215755ccdb6 https://www.forbes.com/sites/jamesconca/2016/05/16/natural-g...

nostrademons 8y ago
An energy industry where the bulk of energy production is wind & solar with natural gas plants to handle peak demand spikes is significantly more environmentally friendly than an industry where the bulk of production is oil & coal with a few nuclear plants thrown in.
- darawk 8y ago
  Yes, but we want the coal to be displaced. Not the nuclear.
  - nostrademons 8y ago
    Coal already has been displaced. The reason there's less of a downturn is because there's a lot less of it to begin with: https://www.iso-ne.com/about/key-stats/resource-mix/ https://www.iso-ne.com/about/key-stats/resource-mix/ There's 20x more nuclear than coal energy in New England. Proportionally, the drop in coal energy (~50%) was a lot more than the drop in nuclear energy (~15%).
- rwcarlsen 8y ago
  Neither of the alternatives you propose are what we currently have or are where we are currently heading (IMO). As long as we are speculating - I think a future with good storage tech and 100% solar+wind would be better than one with gas plants thrown in the mix. If climate change is as big a deal as people claim, than why would we sacrifice existing non-carbon-emitting capacity for natural gas? We don't currently have anything remotely resembling a largely renewable grid nor the technology to even accomplish it at scale.

milcron 8y ago

Electricity isn't a great market. End-users with solar power are allowed to use the grid as a perfectly free battery, which is why everyone is dumping power on the grid at high noon.

whatsstolat 8y ago
Where I live its about 25c (of Australian Dollar) for 1kwh but you only get 7c back. So a real battery would be much preferable.
- rwcarlsen 8y ago
  Due to subsidies, in the US people dumping home solar into the grid usually get back more than the market rate.
  - tensecondflash 8y ago
    I don't think that's the case. Depending on where you are, you either get paid retail or wholesale rates, and still have to pay some monthly service fee regardless of surplus or deficit. I've never heard of any utility in the US buying solar production at more than retail rates.
    - mmt 8y ago
      > I've never heard of any utility in the US buying solar production at more than retail rates. That doesn't refute the parent's claim of it being greater than the market rate. The residential retail rate [1] usually doesn't change, except on a long time scale, after regulatory approval, while the market rate changes intra-day, based on supply and demand. If peak sun doesn't correspond to peak demand (and, from what I've read, it doesn't), those periods are where the utility could be taking a huge loss. For example, if PG&E has a customer in the top marginal usage tier is "selling" power at 25c/kWh when the wholesale market is selling it at 4c, that's a pretty tremendous loss. [1] Often not even a single rate but a tiered one, so a heavy residential user could be "selling back" power at a particularly high retail rate, much higher than average.

cmsonger 8y ago

> Good. That's a well functioning market economy. Those who make poor investment choices need to feel the sting of losses else the market fails to work correctly. Unless it affects grid reliability. Energy is not just a market. It's something that underpins modern society and the modern economy. I, for one, do not want my power to go out at 7pm because demand is peaking, traditional plants had to close, and the sun is going down.

jfrankamp 8y ago
You've defined a rapid peaker plant, which no one is implying we should lose. The destruction of the market for this type of bad-actor legacy baseload is a market opportunity for those who can provide the services you're talking about. Whoever can provide it should earn a premium for doing it.

rayiner 8y ago

Investment into traditional generating capacity is not a "poor investment choice." To the contrary, it's a necessary one. For better or worse, a fundamental premise of modern electric grids is that they should be able to meet all needs essentially 100% of the time. Electrical markets are then built on top of that basic guarantee. With current technology, that means you need sufficient generating capacity from traditional sources to cover nearly 100% of your peak capacity needs--otherwise, on a day where the wind isn't blowing and the sun isn't shining, you can't produce enough electricity. Current renewables subsidies results in a broken market structure: the market needs conventional generators, but the subsidization of renewables makes it unattractive to build those generators. A "well functioning market economy" does not eliminate incentives to produce products that people need.

jfrankamp 8y ago
There are two things happening, both because of the negative externalities that traditional sources produce, but aren't factored in to prices. One is subsidies, the other is source prioritization both of which favor renewables. Plants that can provide that peaker gap on windless+cloudy days should be rewarded by the market by very high kwh purchase prices, but that's all. The current benefits that renewables receive are aligned with the true costs. Alternatively you could replace the prioritization and subsidies with a heavy carbon tax on traditional sources but the result would be the same.
- _Tev 8y ago
  > The current benefits that renewables receive are aligned with the true costs. So energy storage / building heavily underutilized plants is free in this theory?
  - jfrankamp 8y ago
    No, it comes at a severe cost. The upside is that it removes the negative externalities of legacy plants.

infogulch 8y ago

Not only is this good, this is great! Hitting negative energy rates just incentivizes more and better storage technologies to accelerate. We need more grid-storage online fast and nothing could incentivize storage tech more than being paid both ways for electricity management. Get paid for storing it during the day and get paid for delivering it at night. It's not the best case for power plants right now, but once this new grid storage market settles the double-incentive will go away and things will even out a lot more.

ars 8y ago

> Good. That's a well functioning market economy. Those who make poor investment choices need to feel the sting of losses else the market fails to work correctly. You say that - up until the day there is a brownout on a cloudy, yet boiling hot day, because there is little sun and no wind, and no one wants to build non-economical power plants.

maerF0x0 8y ago
FTR i also believe there should non-regulated prices. If the price on that day goes up to $1/kwhr (or whatever) so be it. The market prices incentivises the right solutions to problems eg: batteries and home generators for cloudy days for those who _must_ have power, but those who see the price is $1/hr will turn off their TV or dishwasher etc. or maybe consumers will start to buy contracts from plants like "I will use 1K of continuous power if you provide it at 16c an hr"

GuB-42 8y ago

It is well functioning economy, but is it good for the environment, CO2 emissions in particular? Because with negative electricity prices, the obvious "good" investment is in peaking power plants. And considering that the best spots for hydro are already well exploited, it means fossil fuel. Natural gas is the best but newer coal plants, like the one they are building in Germany can do that to some extent.