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Because if you factor in the cost of storage there might not be arbitrage.

by fisf 2y ago

hectormalot 2y ago
…yet. Negative energy prices are a relatively new phenomenon, and it attracts attention because of its counterintuitive nature (I can get paid to use electricity?!?). Yet, it doesn’t happen that often. If I look at the Dutch market, this mostly happens on sunny+windy Sundays. I think 2 things are happening that will make arbitrage feasible: 1. As solar production capacity increases, so will opportunities for arbitrage 2. As battery costs keep going down (capacity learning curve), so will the investment to do arbitrage. At some point the curves for (1) and (2) will cross convincingly enough that investing in storage is just good business, and people will invest. If it’s anything like solar (home batteries), adoption might actually go very quickly because decision making would be decentralized, small investments, and without permits.
- snapplebobapple 2y ago
  Your number 1 relies on producers not changing their behaviour, which is what negative pricingis designed to accomplish. It also relies on people so poorly taking advatange that the arb doesny dissapear. your 2 will probably happen at some point but its been forecast within the minimum likely range for arbitrage opportunities to cause widespread capital allo.ation to take advantage of the arbitrage that it has stunted investment in your 1. in short its questionable that arbitrage will sort this any time soon (although it will likely be accounted for in new projects that were happening anyway. That˙makes it something that will move the needle over decades, not years) sorting this soon needs another order of magnitude or two improvement in total cost of storage, ideally in a cheaper and less environmentally harmful chemistry that can also take advantage of the installed battery production capacity, or rethinking to make environmentally friendly demand generation (ie nuclear) cheaper and faster to deploy to provide the power when the solar can't.

Because if you factor in the cost of storage there might not be arbitrage.

by fisf 2y ago

Because if you factor in the cost of storage there might not be arbitrage.

…yet. Negative energy prices are a relatively new phenomenon, and it attracts attention because of its counterintuitive nature (I can get paid to use electricity?!?). Yet, it doesn’t happen that often. If I look at the Dutch market, this mostly happens on sunny+windy Sundays. I think 2 things are happening that will make arbitrage feasible: 1. As solar production capacity increases, so will opportunities for arbitrage 2. As battery costs keep going down (capacity learning curve), so will the investment to do arbitrage. At some point the curves for (1) and (2) will cross convincingly enough that investing in storage is just good business, and people will invest. If it’s anything like solar (home batteries), adoption might actually go very quickly because decision making would be decentralized, small investments, and without permits.

snapplebobapple 2y ago
Your number 1 relies on producers not changing their behaviour, which is what negative pricingis designed to accomplish. It also relies on people so poorly taking advatange that the arb doesny dissapear. your 2 will probably happen at some point but its been forecast within the minimum likely range for arbitrage opportunities to cause widespread capital allo.ation to take advantage of the arbitrage that it has stunted investment in your 1. in short its questionable that arbitrage will sort this any time soon (although it will likely be accounted for in new projects that were happening anyway. That˙makes it something that will move the needle over decades, not years) sorting this soon needs another order of magnitude or two improvement in total cost of storage, ideally in a cheaper and less environmentally harmful chemistry that can also take advantage of the installed battery production capacity, or rethinking to make environmentally friendly demand generation (ie nuclear) cheaper and faster to deploy to provide the power when the solar can't.