5 ms·

Day Ahead Market adventures: capacity restrictions and negative prices

45 points by NiekvdMaas 3y ago

neals 3y ago
Interesting read, I was wondering what happened that day. As an operator of a small network of fastchargers, we were delighted to have a purchase price of negative 20cent per kw. Which is huge.
- flipbrad 3y ago
  We often read (even in this blog post) that these wholesale prices often don't impact consumers (who tend to pay a more fixed rate), but how true is that of entities in your space - did you immediately profit from the reduced rates (to their full extent), or was that mostly absorbed by some other middleman, hedging, etc?
  - jonatron 3y ago
    As a consumer in the UK, the last time I got paid to use electricity was 11 April 2023. See https://agileprices.co.uk/ https://agileprices.co.uk/ for how much I got paid per kWh and when.
  - phicoh 3y ago
    There is one thing to keep in mind. Day-ahead prices are often quoted because they are public and objective. But day-ahead trading, at least in The Netherlands, is only about 30% of the electricity market. If you look at consumers, only a tiny minority has an electricity contract that is directly based on day-ahead prices.
  - neals 3y ago
    I'm afraid I'm the middleman here. Profit went straight to us, consumer still paid the 0.70/kw. I have to say that we are implementing dynamic pricing and want to have fixed margin of 0.30/kw, I believe we will be the first medium sized operators who will have full price transparency. We are going to be publishing 'tomorrows' prices on our website, even.
fboerman 3y ago
author of the post here, thanks for posting it here! If there are any questions feel free to ask!
- hakonjdjohnsen 3y ago
  You mention renewables and especially solar as a contributing factor to these negative prices when combined with capacity constraints. Can you explain how this works? A PV installation can easily start and stop production as long as the sun is shining, right? Then it seems like PV producers should bid to produce as much as possible whenever the price is positive, and not produce anything whenever the price is negative. Is this how they operate, and if so, how does this contribute to negative prices and not just to bringing the price towards 0?
  - rphilipsen 3y ago
    In theory yea, and where possible they will, but a lot of PV installations lack the ability or the incentive to curtail. Households are usually not exposed to spot price signals, so residential PV will always produce electricity (network permitting). Utility scale PV up to a few MW may not have the ability, or the operator may not have the option to curtail contracted.
    - neals 3y ago
      In our country, dynamic pricing is on the raise for consumers and many consumers already profited from these pricing.
  - pjc50 3y ago
    Certainly for wind operators in the UK, there is a "contract for difference" payment process such that they are not paid the spot price. Instead they're paid a guaranteed price within a range (i.e. the difference between the spot price and a benchmark). And there will be an agreement in place that if they're not allowed to export this power they will be paid for "curtailment".
  - fboerman 3y ago
londons_explore 3y ago
Futures trading generally interests me... Specifically, both electricity and gas have robust futures trading markets. And gas can be converted to electricity. So... In the ideal world, whenever the price of gas is higher than the price of electricity, gas generators should shut down - since there isn't money to be made. However, looking at market data for the UK, that only happens sometimes. There are plenty of generators who, according to spot market prices, shouldn't be operating, yet are. Obviously some gas generators might have purchased low priced gas futures, or have sold high priced electricity futures - making it profitable to operate. However, even gas generators in that position stand to profit more by shutting down and reselling the futures they have bought on the open market. It appears that even big companies make suboptimal market decisions on quite a frequent basis. I suspect the cause is general lack of business flexibility. If such inflexibility is widespread, it would be a good reason to disallow futures trading entirely - by forcing people to buy things as they use them, they are forced to notice that what they are about to do isn't profitable - and the futures market hides that from them.
- fboerman 3y ago
  it is very possible that such generators are commissioned by a TSO to keep running for grid stability, such as must runs and/or redispatch actions. In essence what you are describing is very much happening, at least on the continent where I am based.
- est31 3y ago
  For energy markets, and this includes gas and electricity, one must distinguish between the spot markets, and longer term agreements. The former ones have very high volatility during the day, while the latter ones base on long term contracts usually with fixed prices. The spot markets are generally only there to cover any additional demand that one didn't want to make long term commitments for, while the longer term contracts create the base load. That's why it's profitable to keep the gas turbines running. You must also consider the price of the turbine and surrounding infrastructure: if it can only run profitably 10% of the time it will be a much harder sell than running it 30%.
- rphilipsen 3y ago
Reason077 3y ago
Which country names their TSO “50HERTZ”? Haha! props to them!
- sigio 3y ago
  Wanted to know myself... so: 50Hertz Transmission GmbH, formerly named Vattenfall Europe Transmission, is one of four transmission system operators for electricity in Germany, and is wholly owned by Eurogrid GmbH
- silvester23 3y ago
  That is actually an occasional problem for us because identifiers, including Enum values in Python (and probably some other languages) cannot start with a digit.

45 points by NiekvdMaas 3y ago

Interesting read, I was wondering what happened that day. As an operator of a small network of fastchargers, we were delighted to have a purchase price of negative 20cent per kw. Which is huge.

flipbrad 3y ago
We often read (even in this blog post) that these wholesale prices often don't impact consumers (who tend to pay a more fixed rate), but how true is that of entities in your space - did you immediately profit from the reduced rates (to their full extent), or was that mostly absorbed by some other middleman, hedging, etc?
- jonatron 3y ago
  As a consumer in the UK, the last time I got paid to use electricity was 11 April 2023. See https://agileprices.co.uk/ https://agileprices.co.uk/ for how much I got paid per kWh and when.
- phicoh 3y ago
  There is one thing to keep in mind. Day-ahead prices are often quoted because they are public and objective. But day-ahead trading, at least in The Netherlands, is only about 30% of the electricity market. If you look at consumers, only a tiny minority has an electricity contract that is directly based on day-ahead prices.
- neals 3y ago
  I'm afraid I'm the middleman here. Profit went straight to us, consumer still paid the 0.70/kw. I have to say that we are implementing dynamic pricing and want to have fixed margin of 0.30/kw, I believe we will be the first medium sized operators who will have full price transparency. We are going to be publishing 'tomorrows' prices on our website, even.

fboerman 3y ago

author of the post here, thanks for posting it here! If there are any questions feel free to ask!

hakonjdjohnsen 3y ago
You mention renewables and especially solar as a contributing factor to these negative prices when combined with capacity constraints. Can you explain how this works? A PV installation can easily start and stop production as long as the sun is shining, right? Then it seems like PV producers should bid to produce as much as possible whenever the price is positive, and not produce anything whenever the price is negative. Is this how they operate, and if so, how does this contribute to negative prices and not just to bringing the price towards 0?
- rphilipsen 3y ago
  In theory yea, and where possible they will, but a lot of PV installations lack the ability or the incentive to curtail. Households are usually not exposed to spot price signals, so residential PV will always produce electricity (network permitting). Utility scale PV up to a few MW may not have the ability, or the operator may not have the option to curtail contracted.
  - neals 3y ago
    In our country, dynamic pricing is on the raise for consumers and many consumers already profited from these pricing.
- pjc50 3y ago
  Certainly for wind operators in the UK, there is a "contract for difference" payment process such that they are not paid the spot price. Instead they're paid a guaranteed price within a range (i.e. the difference between the spot price and a benchmark). And there will be an agreement in place that if they're not allowed to export this power they will be paid for "curtailment".
- fboerman 3y ago

londons_explore 3y ago

Futures trading generally interests me... Specifically, both electricity and gas have robust futures trading markets. And gas can be converted to electricity. So... In the ideal world, whenever the price of gas is higher than the price of electricity, gas generators should shut down - since there isn't money to be made. However, looking at market data for the UK, that only happens sometimes. There are plenty of generators who, according to spot market prices, shouldn't be operating, yet are. Obviously some gas generators might have purchased low priced gas futures, or have sold high priced electricity futures - making it profitable to operate. However, even gas generators in that position stand to profit more by shutting down and reselling the futures they have bought on the open market. It appears that even big companies make suboptimal market decisions on quite a frequent basis. I suspect the cause is general lack of business flexibility. If such inflexibility is widespread, it would be a good reason to disallow futures trading entirely - by forcing people to buy things as they use them, they are forced to notice that what they are about to do isn't profitable - and the futures market hides that from them.

fboerman 3y ago
it is very possible that such generators are commissioned by a TSO to keep running for grid stability, such as must runs and/or redispatch actions. In essence what you are describing is very much happening, at least on the continent where I am based.
est31 3y ago
For energy markets, and this includes gas and electricity, one must distinguish between the spot markets, and longer term agreements. The former ones have very high volatility during the day, while the latter ones base on long term contracts usually with fixed prices. The spot markets are generally only there to cover any additional demand that one didn't want to make long term commitments for, while the longer term contracts create the base load. That's why it's profitable to keep the gas turbines running. You must also consider the price of the turbine and surrounding infrastructure: if it can only run profitably 10% of the time it will be a much harder sell than running it 30%.
rphilipsen 3y ago

Reason077 3y ago

Which country names their TSO “50HERTZ”? Haha! props to them!

sigio 3y ago
Wanted to know myself... so: 50Hertz Transmission GmbH, formerly named Vattenfall Europe Transmission, is one of four transmission system operators for electricity in Germany, and is wholly owned by Eurogrid GmbH
silvester23 3y ago
That is actually an occasional problem for us because identifiers, including Enum values in Python (and probably some other languages) cannot start with a digit.