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Not really looking to press this; it seems like you know more about the economics of energy production than I do. But, some examples of why I wonder if it's thi

Not really looking to press this; it seems like you know more about the economics of energy production than I do. But, some examples of why I wonder if it's this simple: - Part of redistributing less time-sensitive forms of consumption around the grid/clock is demonstrating quantity and stability of cheap power at those times. One possibility is the producer is just being subsidized or obligated into production they wouldn't undertake without a distortion. But it seems like low/negative prices are also how you'd prove the supply. - In responsive real-time energy markets, driving prices down should force higher-cost producers to reduce output. Over time, that signal should take less-competitive producers completely offline. It's not obvious to me that they're ignoring market signals if their strategic decision-making function could more complicated than just "produce when the rate is profitable."

roenxi 7y ago
Press away if you feel like it. The things you are talking about here seem to be details of very short term decision making. There are a lot of complications in the small picture, and unless one of us works in an actual power plant we are probably going to get them wrong. But the big picture has some basic balance laws that have to hold: a company cannot consistently give away product for free and stay in business. Even if it is theoretically possible, it just happens to be a well known fact that that isn't how electricity markets work for any of the participants. The electricity isn't a by-product or anything strange; this is electricity produced to be be sold for money. We know that the average price has to be positive. Therefore it is misleading to point out "renewables have been causing power prices to occasionally fall to $0" as though that were any sort of positive. The falls to $0 are balanced by rises to some larger positive number so that over the full year the total price is positive. These falls do represent an opportunity, but they represent an opportunity that nobody is taking advantage of yet. Those prices signal strongly that there is energy being produced that isn't useful to anybody (or they would, y'know, be willing to pay for it). When somebody finds a use for this power that is presently being basically dumped then prices will rise to some low-but-positive value and that will probably be a very good sign. Some people have pointed out that maybe there are subsides for renewables; in which case governments are paying renewables to produce something nobody is using which is also not a positive for renewables. The big issue is we've seen exactly this situation play out in Germany. The game changes slightly from normal because we know that the renewable producers don't have the sort of control over when they supply powers as conventional power; periods of 0 wholesale prices leading to anomalously high retail prices at the end of the year as the intermediaries deal with the problem of uncontrolled generation. Those $0 prices are a likely a tell that things are getting expensive. They are not a good sign. Hopefully they are a neutral sign.

roenxi 7y ago

Press away if you feel like it. The things you are talking about here seem to be details of very short term decision making. There are a lot of complications in the small picture, and unless one of us works in an actual power plant we are probably going to get them wrong. But the big picture has some basic balance laws that have to hold: a company cannot consistently give away product for free and stay in business. Even if it is theoretically possible, it just happens to be a well known fact that that isn't how electricity markets work for any of the participants. The electricity isn't a by-product or anything strange; this is electricity produced to be be sold for money. We know that the average price has to be positive. Therefore it is misleading to point out "renewables have been causing power prices to occasionally fall to $0" as though that were any sort of positive. The falls to $0 are balanced by rises to some larger positive number so that over the full year the total price is positive. These falls do represent an opportunity, but they represent an opportunity that nobody is taking advantage of yet. Those prices signal strongly that there is energy being produced that isn't useful to anybody (or they would, y'know, be willing to pay for it). When somebody finds a use for this power that is presently being basically dumped then prices will rise to some low-but-positive value and that will probably be a very good sign. Some people have pointed out that maybe there are subsides for renewables; in which case governments are paying renewables to produce something nobody is using which is also not a positive for renewables. The big issue is we've seen exactly this situation play out in Germany. The game changes slightly from normal because we know that the renewable producers don't have the sort of control over when they supply powers as conventional power; periods of 0 wholesale prices leading to anomalously high retail prices at the end of the year as the intermediaries deal with the problem of uncontrolled generation. Those $0 prices are a likely a tell that things are getting expensive. They are not a good sign. Hopefully they are a neutral sign.