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Unless you have a strong familiarity with ISO/FTR markets this article will be pretty opaque. The short version is that electricity delivery forecast is manage

by iaw 3y ago

Unless you have a strong familiarity with ISO/FTR markets this article will be pretty opaque. The short version is that electricity delivery forecast is managed by a financial optimization process. Market participants (generators, line owners, and consumers) basically buy and sell their electricity in advance. Sometimes as far ahead as 2 years, all the way up to the day before (at which time the real time market takes over IIRC). So in addition to the primary stakeholders you have financial participants that buy/sell electricity without having access to any apparatus for the generation/transmission/consumption. These participants sometimes have very manual processes for buying their contracts. My guess would be some poor fresh grad was under supervised and transposed the source and sink address. Instead of buying at 203.40 they sold at 203.40 by reversing the source and sink.

bongobingo1 3y ago
Without trying to fall too hard into a potential late-stage-capitalism hole, what is the advantages on trading like this? Beyond the advantages of making money on futures. I guess the buy/sell in advance lets generators etc fund projects ahead of time (maint, expansion, etc) instead of always living hand to mouth on "real time sold" and without having to land "huge multi-year contracts", so the market can be a bit more fluidly priced? (Maybe too fluidly in this case!)
- vGPU 3y ago
  The idea is to buffer changes in price. Started with crops originally iirc. Say I know I need 1 ton of seed for planting. It normally costs $5,000/ton. I am concerned that the rat epidemic might cause a seed shortage. It does. 1 ton of seed next year is worth $20,000. Because I purchased the future of 1 ton of seed for $5,000, I am not affected by this. Made up numbers obviously, as I know someone is just waiting to “well akshually” me.
  - burnerburnito 3y ago
    Question: how does that rat case actually work out followed through slightly more? If enough players bought at $5k/ton and the seed shortage increases prices due to scarcity, what happens when there's only enough seeds to meet 3/4ths of demand?
    - choilive 3y ago
      So that depends on a few things.. 1) If the contract is physically settled vs financially settled. 2) The existence of a clearinghouse - which is a middleman in charge of making sure both parties deliver on their contractual obligations. Virtually all futures contracts go through a clearinghouse. Lets assume that it is physically settled with no clearinghouse - what happens is the same as any other contract where the other party does not deliver on the terms of the contract (also known as FTD - failure to deliver). You sue them for the damages.
    - vGPU 3y ago
      In theory price v demand. Prices would increase until demand was reduced to the point that there was enough seed for everyone willing to pay the price. It also depends whether you’re trading future that settle for cash (you buy for 5k and they give you 20k cold hard cash) or whether they’re actually going to send a semi truck to your farm, in which case they should have been holding enough collateral for such an incident. Realistically, I believe most futures are cash settled and you’d probably be better off pocketing the extra 15k and spending 5k on planting a different crop this year.
- anon23 3y ago
  Because there is effectively no way to store energy at scale, prices are extremely volatile, like from $1 to $1000 in five minutes. If you want to buy a solar panel with a useful life of 10 years there’s basically no way to estimate how much revenue it will make. But if I promise to pay you $10 for that energy all year, you have some idea if your purchase makes sense.
- lukev 3y ago
  Yes, that's fundamentally it. By making the marking more liquid, different types of entities can adjust for their specific predictability/risk needs. Also note that though these markets are "free" they are still extremely highly regulated. I don't know much about the Finnish market but I've built trading algorithms for CAISO and PJM, and it is by no means a free-for-all. The rules about what types of entities can participate in which aspects of the market are quite strict and detailed. Especially post-ENRON there is a strong focus on avoiding even any possibility of appearance of market manipulation. Basically the guidance from our lawyers was: every trade needs to have a strong, explicable economic rationale (apart from the market.) In our case we didn't even want to use neural-network based trading algorithms, since they (at the time) weren't sufficiently explicable for us to have a "rationale" for a trade that might later be called into question.
  - doikor 3y ago
    The market is mainly regulated by having some restrictions on pricing by requiring the sellers to be able to prove that their price roughly matches your their costs + some profit margin (to stop a big player from buying all the cheap electricity and relisting it for massive profits) and forcing producers to put money into escrow/buy insurance for the case that they fail to deliver what they sold. This latter one led the government having to open a line of credit for tens of billions euros last winter when the prices were high just so the actual producers could afford to sell their (historically highly priced) electricity as the money you have to leave in escrow/insurance price is tied to the SPOT price.
- Aurornis 3y ago
  > Without trying to fall too hard into a potential late-stage-capitalism hole, what is the advantages on trading like this? Beyond the advantages of making money on futures Trying to view things as “late stage capitalism” isn’t a good way to really understand anything. It’s a cynical Reddit trope that assumes malice from the start, which doesn’t leave much room for a real explanation. The reality is that trading like this is a type of contract and it takes two parties to enter into the contract voluntarily. Nobody is forced to trade energy contracts this way, but it can be helpful for both parties to do things like lock in more predictable pricing, hedge certain types of risks, and agree to mutual contracts that benefit both parties’ businesses. Energy prices going negative sounds like something evil or malicious or “late stage capitalism” to the uninitiated, but even without trading errors there are legitimate reasons to have negative energy prices at certain times of day. For example, certain types of power plants like nuclear can’t quickly ramp up or down as demand changes. A power company might come out ahead by pricing power negative (that is, paying people to consume it) for certain night time hours if it allows them to keep the power plant at a higher, continuous output in preparation for peak times. Energy hungry industries such as aluminum manufacturing or other industrial processes might gladly adjust their production schedules to operate during these times to take advantage of the low or negative pricing. Everybody wins. There are numerous dynamics like this at play. It’s not a “late stage capitalism” thing, despite how some people like to sneer at anything they don’t understand. There are legitimate reasons to operate this as a market and let market participants work out optimal deals.
  - tomatocracy 3y ago
    The other main example of negative price offers into the market is renewables which receive some types of subsidy. For example, if you have a solar farm and receive $40/MWh subsidy, you might bid into the market at any price above -$40/MWh.
    - blitzar 3y ago
      Negative pricing also has an incentivising effect If your output regularly drops to low / negative levels - invest in storage and sell when the price is higher. If it occurs grid wide - interconnect to neighbouring grids.
- darthrupert 3y ago
  Like all market activity, the high-level point of all that activity is to derive the real price of the thing being traded. Without falling too far into the late stage central planning thing, this is the mechanism that has been absolutely broken (due to been poorly done by pathetic humans) in all previous attempts at communism. As a tangent, it would be interesting to see if non-pathetic modern computer systems could actually achieve to implement that mechanism successfully. But if sci-fi is to be believed, that could easily fall into another form of dystopia.
  - sidpatil 3y ago
    > As a tangent, it would be interesting to see if non-pathetic modern computer systems could actually achieve to implement that mechanism successfully. You might find this interesting: https://en.m.wikipedia.org/wiki/Project_Cybersyn https://en.m.wikipedia.org/wiki/Project_Cybersyn
- fulafel 3y ago
  Electricity market is interesting from a late stage capitalism perspective because it's so managed by regulations and transparent, and relatively pretty closed-world, and there's fast feedback. So many of the capitalism critiques don't work as well against it. Of course the fundamental problems of unfairness and poor people paying more for electricity than big industrial users can also be attributed to properties of how the market is managed and regulated by the public (the classic "critique of free market" -> "not free enough, ergo not fault of free markets" trope). Besides generation, this also enables pricing and funding of energy storage. Eg you could use historical data to see how profitably you could play production peaks and lows to charge/discharge battery storage, and use fairly well known risk management stats for the uncertainty factors.
- imtringued 3y ago
  Physical commodities cannot be delivered instantaneously, additionally there is no giant warehouse at the commodity exchange that stores the commodities. This means that what you are going to trade is a delivery contract. If you play a game like Prosperous Universe, there is no delivery problem on the central commodity exchanges and the commodity exchange has infinite storage capacity. When you buy something, you instantly receive the commodity. If you want to know why there are duration differences on the contract beyond the delivery itself, e.g. why someone would issue the contract 3 months or 6 months before delivery, then the reason is that they want to minimize income fluctuations or to pay off specific contracts. Similar to how businesses want to turn capex into opex at exactly the rate the money comes in, but this time the goal is for the income to arrive at the same time as the expenses.
  - crotchfire 3y ago
    > there is no giant warehouse at the commodity exchange that stores the commodities Actually for many commodities there is: https://www.cmegroup.com/trading/metals/base/base-metals-warehousing.html https://www.cmegroup.com/trading/metals/base/base-metals-war... But of course not for electricity.
throwaway55664 3y ago
Looking at the pricing curves it looks more like hourly vs cumulative screw-up. See how the supply keeps creeping forward: https://aggregated-market-data-latest.nordpoolgroup.com/AggregatedOrder_PriceCurves_FI.pdf https://aggregated-market-data-latest.nordpoolgroup.com/Aggr... (note: haven't found a permanent link to today's results, so that link is valid until 1200 UTC)
- hokkos 3y ago
  If you have the pdf of the 24, I would love to see it.

by iaw 3y ago

bongobingo1 3y ago

Without trying to fall too hard into a potential late-stage-capitalism hole, what is the advantages on trading like this? Beyond the advantages of making money on futures. I guess the buy/sell in advance lets generators etc fund projects ahead of time (maint, expansion, etc) instead of always living hand to mouth on "real time sold" and without having to land "huge multi-year contracts", so the market can be a bit more fluidly priced? (Maybe too fluidly in this case!)

vGPU 3y ago
The idea is to buffer changes in price. Started with crops originally iirc. Say I know I need 1 ton of seed for planting. It normally costs $5,000/ton. I am concerned that the rat epidemic might cause a seed shortage. It does. 1 ton of seed next year is worth $20,000. Because I purchased the future of 1 ton of seed for $5,000, I am not affected by this. Made up numbers obviously, as I know someone is just waiting to “well akshually” me.
- burnerburnito 3y ago
  Question: how does that rat case actually work out followed through slightly more? If enough players bought at $5k/ton and the seed shortage increases prices due to scarcity, what happens when there's only enough seeds to meet 3/4ths of demand?
  - choilive 3y ago
    So that depends on a few things.. 1) If the contract is physically settled vs financially settled. 2) The existence of a clearinghouse - which is a middleman in charge of making sure both parties deliver on their contractual obligations. Virtually all futures contracts go through a clearinghouse. Lets assume that it is physically settled with no clearinghouse - what happens is the same as any other contract where the other party does not deliver on the terms of the contract (also known as FTD - failure to deliver). You sue them for the damages.
  - vGPU 3y ago
    In theory price v demand. Prices would increase until demand was reduced to the point that there was enough seed for everyone willing to pay the price. It also depends whether you’re trading future that settle for cash (you buy for 5k and they give you 20k cold hard cash) or whether they’re actually going to send a semi truck to your farm, in which case they should have been holding enough collateral for such an incident. Realistically, I believe most futures are cash settled and you’d probably be better off pocketing the extra 15k and spending 5k on planting a different crop this year.
anon23 3y ago
Because there is effectively no way to store energy at scale, prices are extremely volatile, like from $1 to $1000 in five minutes. If you want to buy a solar panel with a useful life of 10 years there’s basically no way to estimate how much revenue it will make. But if I promise to pay you $10 for that energy all year, you have some idea if your purchase makes sense.
lukev 3y ago
Yes, that's fundamentally it. By making the marking more liquid, different types of entities can adjust for their specific predictability/risk needs. Also note that though these markets are "free" they are still extremely highly regulated. I don't know much about the Finnish market but I've built trading algorithms for CAISO and PJM, and it is by no means a free-for-all. The rules about what types of entities can participate in which aspects of the market are quite strict and detailed. Especially post-ENRON there is a strong focus on avoiding even any possibility of appearance of market manipulation. Basically the guidance from our lawyers was: every trade needs to have a strong, explicable economic rationale (apart from the market.) In our case we didn't even want to use neural-network based trading algorithms, since they (at the time) weren't sufficiently explicable for us to have a "rationale" for a trade that might later be called into question.
- doikor 3y ago
  The market is mainly regulated by having some restrictions on pricing by requiring the sellers to be able to prove that their price roughly matches your their costs + some profit margin (to stop a big player from buying all the cheap electricity and relisting it for massive profits) and forcing producers to put money into escrow/buy insurance for the case that they fail to deliver what they sold. This latter one led the government having to open a line of credit for tens of billions euros last winter when the prices were high just so the actual producers could afford to sell their (historically highly priced) electricity as the money you have to leave in escrow/insurance price is tied to the SPOT price.
Aurornis 3y ago
> Without trying to fall too hard into a potential late-stage-capitalism hole, what is the advantages on trading like this? Beyond the advantages of making money on futures Trying to view things as “late stage capitalism” isn’t a good way to really understand anything. It’s a cynical Reddit trope that assumes malice from the start, which doesn’t leave much room for a real explanation. The reality is that trading like this is a type of contract and it takes two parties to enter into the contract voluntarily. Nobody is forced to trade energy contracts this way, but it can be helpful for both parties to do things like lock in more predictable pricing, hedge certain types of risks, and agree to mutual contracts that benefit both parties’ businesses. Energy prices going negative sounds like something evil or malicious or “late stage capitalism” to the uninitiated, but even without trading errors there are legitimate reasons to have negative energy prices at certain times of day. For example, certain types of power plants like nuclear can’t quickly ramp up or down as demand changes. A power company might come out ahead by pricing power negative (that is, paying people to consume it) for certain night time hours if it allows them to keep the power plant at a higher, continuous output in preparation for peak times. Energy hungry industries such as aluminum manufacturing or other industrial processes might gladly adjust their production schedules to operate during these times to take advantage of the low or negative pricing. Everybody wins. There are numerous dynamics like this at play. It’s not a “late stage capitalism” thing, despite how some people like to sneer at anything they don’t understand. There are legitimate reasons to operate this as a market and let market participants work out optimal deals.
- tomatocracy 3y ago
  The other main example of negative price offers into the market is renewables which receive some types of subsidy. For example, if you have a solar farm and receive $40/MWh subsidy, you might bid into the market at any price above -$40/MWh.
  - blitzar 3y ago
    Negative pricing also has an incentivising effect If your output regularly drops to low / negative levels - invest in storage and sell when the price is higher. If it occurs grid wide - interconnect to neighbouring grids.
darthrupert 3y ago
Like all market activity, the high-level point of all that activity is to derive the real price of the thing being traded. Without falling too far into the late stage central planning thing, this is the mechanism that has been absolutely broken (due to been poorly done by pathetic humans) in all previous attempts at communism. As a tangent, it would be interesting to see if non-pathetic modern computer systems could actually achieve to implement that mechanism successfully. But if sci-fi is to be believed, that could easily fall into another form of dystopia.
- sidpatil 3y ago
  > As a tangent, it would be interesting to see if non-pathetic modern computer systems could actually achieve to implement that mechanism successfully. You might find this interesting: https://en.m.wikipedia.org/wiki/Project_Cybersyn https://en.m.wikipedia.org/wiki/Project_Cybersyn
fulafel 3y ago
Electricity market is interesting from a late stage capitalism perspective because it's so managed by regulations and transparent, and relatively pretty closed-world, and there's fast feedback. So many of the capitalism critiques don't work as well against it. Of course the fundamental problems of unfairness and poor people paying more for electricity than big industrial users can also be attributed to properties of how the market is managed and regulated by the public (the classic "critique of free market" -> "not free enough, ergo not fault of free markets" trope). Besides generation, this also enables pricing and funding of energy storage. Eg you could use historical data to see how profitably you could play production peaks and lows to charge/discharge battery storage, and use fairly well known risk management stats for the uncertainty factors.
imtringued 3y ago
Physical commodities cannot be delivered instantaneously, additionally there is no giant warehouse at the commodity exchange that stores the commodities. This means that what you are going to trade is a delivery contract. If you play a game like Prosperous Universe, there is no delivery problem on the central commodity exchanges and the commodity exchange has infinite storage capacity. When you buy something, you instantly receive the commodity. If you want to know why there are duration differences on the contract beyond the delivery itself, e.g. why someone would issue the contract 3 months or 6 months before delivery, then the reason is that they want to minimize income fluctuations or to pay off specific contracts. Similar to how businesses want to turn capex into opex at exactly the rate the money comes in, but this time the goal is for the income to arrive at the same time as the expenses.
- crotchfire 3y ago
  > there is no giant warehouse at the commodity exchange that stores the commodities Actually for many commodities there is: https://www.cmegroup.com/trading/metals/base/base-metals-warehousing.html https://www.cmegroup.com/trading/metals/base/base-metals-war... But of course not for electricity.

throwaway55664 3y ago

Looking at the pricing curves it looks more like hourly vs cumulative screw-up. See how the supply keeps creeping forward: https://aggregated-market-data-latest.nordpoolgroup.com/AggregatedOrder_PriceCurves_FI.pdf https://aggregated-market-data-latest.nordpoolgroup.com/Aggr... (note: haven't found a permanent link to today's results, so that link is valid until 1200 UTC)

hokkos 3y ago
If you have the pdf of the 24, I would love to see it.