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So an incredibly cheap source of supply exceeded the demand, and the market rules and some trips caused cascading failures. Why is the problem the cheap source

So an incredibly cheap source of supply exceeded the demand, and the market rules and some trips caused cascading failures. Why is the problem the cheap source of supply rather than the market rules and incentives that made everything act the way it did? Your comment suggests move back to good ol' expensive fossil generation instead of looking at how to bring the market rules up to date with evolving technologies.

martinald 1y ago
Because the only reason that solar is still generating power at negative prices is because they are getting subsidies to do it. Otherwise they would disconnect themselves apart from in extreme scenarios (control system down or something), and I bet when you are paying many tens of thousands of euro an hour you'd get someone to fix/manually turn it off sharpish. Looks like there are a multitude of schemes of various vintages in Spain, which tl;dr basically give you a guaranteed price per MWh you generate. So imagine you get a 100eur/MWh subsidy for a (legacy) solar plant. The market price is €-20/MWh. You will still continue to produce power until the price reaches -100MW/h. Even worse are some contracts for difference (poorly thought through) which give you a guaranteed price regardless of what the market is at. So even if the price was -1,000eur/MWh the government or grid operator would still give you your €50/MWh (and the subsidy would be 1,050/MWh!). The problem is if you reform this (and it is happening worldwide) solar is much, much less appealing. Because suddenly your solar plant which was getting (say) a guaranteed 70/MWh all year round suddenly does not make money for 6 months of the year at least at peak sun hours. On top of all this, you have a lot of domestic solar in places like Spain. The grid operator _cannot_ control these assets in nearly all circumstances. They will continue to dump power into the grid regardless of the market price. This again will change but it requires an awful lot of work to retrofit invertors with remote control capability OR a lot of public backlash for charging end customers who bought solar in "good faith" now getting hit with peak time negative prices (so they change their behaviour). I think my core message would be _any_ negative power prices is a sign of market failure. Acceptable in rare extreme occurrences, but the fact most of europe has highly negative prices very frequently is telling you the grid and market design is not able to handle what is going on.
- Maxion 1y ago
  > Because the only reason that solar is still generating power at negative prices is because they are getting subsidies to do it. This massively simplifies reality. E.g. in Finland where I live we also have issues with negative power prices. A few years ago we had some really low prices. It turns out, a fair bit of wind power producers never opted to add to their windmills any remote shutdown possibility, nor did they have the ability to monitor prices and react to them automatically. I.e. they just kept generating no matter the price, and had offers in at the network level at the lowest permissable price. Since then, when they lost a non-insignifcant amount of money by running at negative prices, they've started installing control electronics in windmills and building IT systems and prediction algorithms to be able to react to this. In the EU it is not as simple as "turning off when the prices are negative" since producers offer a certain capacity to the grid in an auction system the day before. You have to predict the weather + overall demand and set your offer accordingly.
  - eldaisfish 1y ago
    I used to design wind turbines for a living. Any wind turbine made in the last fifteen years has the capability for remote shutdown. This is not an option, this is basic functionality. Please can you share a source that explains your info?
    - martinald 1y ago
      I don't think it's right at all at least to any systemic level. It's because Finland has a load of nuclear (~50% of all generation esp after the EPR opened) and also a lot of wind power. Nuclear is not well suited at all to being curtailed, I also suspect it would be worth paying negative prices to avoid it to a certain level - the French reactor cracking problems (earlier design though) are hypothesized from what I read to becaused by a lot of demand curtailment putting stress on the various metals as they heat and cool frequently because of reducing output.
fuoqi 1y ago
>Why is the problem the cheap source of supply rather than the market rules and incentives that made everything act the way it did? I explicitly mentioned this line of argument in the GP. The problem is that renewables only sometimes cheap and plentiful and often not when we want it. Even without accounting for the politically-driven preferential treatment covered in the sibling comment, from the purely technical point of view intermittency above certain threshold wreaks havoc in the traditional grid architecture designed for the traditional easily controlled "rotating" generation. It becomes really hard to manage the grid with existing tools when you have too much of intermittent highly distributed generation and in the extreme it leads to collapses like this. As I wrote, yes, you could upgrade the grid, increase transmission redundancy, add battery/pumped/flywheel storage, introduce "smart" tools to manage the grid, and do a plethora of other things to accommodate renewables. Hell, you could even migrate the grid to DC! But the cost of doing it is substantial. It's effectively a form of externalities of renewable generation, which are not accounted for in naive "cheap" $/kW metrics. Properly accounting for those externalities and adding them to the cost of renewable generation is possible, but politically unappealing. >Your comment suggests move back to good ol' expensive fossil generation instead of looking at how to bring the market rules up to date with evolving technologies. No, I believe we should remove the politically motivated shoehorning of renewables at the cost of grid stability. There should be a limit on how much intermittent generation we can have depending on the preparedness of the grid and we should pay less for power from such sources, not guarantee purchase from them! As you say, we should have proper incentives structure which accounts for various externalities (including CO2 emissions!). We need to remove the existing subsudies on renewables which made sense in the early days, but not now. Let the generation sources play at the even field.
- eldaisfish 1y ago
  a couple of things to add to an excellent explanation. I'm glad people are coming around to accepting that renewable energy has problems. We have some solutions to these problems but we do not have experience with them. I agree entirely - the externalities of renewable energy are significant and are not paid for by the source of the problem - the renewable generators themselves. Just as one example, what is the solution to an extended wind drought, say of a week or ten days? All the batteries in the world could not store enough energy for that. A major challenge with renewable energy is that it is intermittent and variable but also unpredictable. it is impossible to predict wind speeds more than 24 or 36 hours out and even those predictions are often inaccurate. just building more wind turbines or solar panels won't cut it. There is also the reluctance of grid operators to use the capacity available in renewable energy generators. The majority of wind turbines are capable of active and reactive power control but most grid operators either don't use this capacity or use it minimally. A distribution connected wind turbine could do wonders for reactive power control but this is rarely done. More grid operators should pay for reactive power, like the UK is starting to do. This should also be sourced from EVs and small solar inverters.
mousethatroared 1y ago
Because the law mandates that renewables must be bought. Thats why prices fall negative.

martinald 1y ago

Because the only reason that solar is still generating power at negative prices is because they are getting subsidies to do it. Otherwise they would disconnect themselves apart from in extreme scenarios (control system down or something), and I bet when you are paying many tens of thousands of euro an hour you'd get someone to fix/manually turn it off sharpish. Looks like there are a multitude of schemes of various vintages in Spain, which tl;dr basically give you a guaranteed price per MWh you generate. So imagine you get a 100eur/MWh subsidy for a (legacy) solar plant. The market price is €-20/MWh. You will still continue to produce power until the price reaches -100MW/h. Even worse are some contracts for difference (poorly thought through) which give you a guaranteed price regardless of what the market is at. So even if the price was -1,000eur/MWh the government or grid operator would still give you your €50/MWh (and the subsidy would be 1,050/MWh!). The problem is if you reform this (and it is happening worldwide) solar is much, much less appealing. Because suddenly your solar plant which was getting (say) a guaranteed 70/MWh all year round suddenly does not make money for 6 months of the year at least at peak sun hours. On top of all this, you have a lot of domestic solar in places like Spain. The grid operator _cannot_ control these assets in nearly all circumstances. They will continue to dump power into the grid regardless of the market price. This again will change but it requires an awful lot of work to retrofit invertors with remote control capability OR a lot of public backlash for charging end customers who bought solar in "good faith" now getting hit with peak time negative prices (so they change their behaviour). I think my core message would be _any_ negative power prices is a sign of market failure. Acceptable in rare extreme occurrences, but the fact most of europe has highly negative prices very frequently is telling you the grid and market design is not able to handle what is going on.

Maxion 1y ago
> Because the only reason that solar is still generating power at negative prices is because they are getting subsidies to do it. This massively simplifies reality. E.g. in Finland where I live we also have issues with negative power prices. A few years ago we had some really low prices. It turns out, a fair bit of wind power producers never opted to add to their windmills any remote shutdown possibility, nor did they have the ability to monitor prices and react to them automatically. I.e. they just kept generating no matter the price, and had offers in at the network level at the lowest permissable price. Since then, when they lost a non-insignifcant amount of money by running at negative prices, they've started installing control electronics in windmills and building IT systems and prediction algorithms to be able to react to this. In the EU it is not as simple as "turning off when the prices are negative" since producers offer a certain capacity to the grid in an auction system the day before. You have to predict the weather + overall demand and set your offer accordingly.
- eldaisfish 1y ago
  I used to design wind turbines for a living. Any wind turbine made in the last fifteen years has the capability for remote shutdown. This is not an option, this is basic functionality. Please can you share a source that explains your info?
  - martinald 1y ago
    I don't think it's right at all at least to any systemic level. It's because Finland has a load of nuclear (~50% of all generation esp after the EPR opened) and also a lot of wind power. Nuclear is not well suited at all to being curtailed, I also suspect it would be worth paying negative prices to avoid it to a certain level - the French reactor cracking problems (earlier design though) are hypothesized from what I read to becaused by a lot of demand curtailment putting stress on the various metals as they heat and cool frequently because of reducing output.

fuoqi 1y ago

>Why is the problem the cheap source of supply rather than the market rules and incentives that made everything act the way it did? I explicitly mentioned this line of argument in the GP. The problem is that renewables only sometimes cheap and plentiful and often not when we want it. Even without accounting for the politically-driven preferential treatment covered in the sibling comment, from the purely technical point of view intermittency above certain threshold wreaks havoc in the traditional grid architecture designed for the traditional easily controlled "rotating" generation. It becomes really hard to manage the grid with existing tools when you have too much of intermittent highly distributed generation and in the extreme it leads to collapses like this. As I wrote, yes, you could upgrade the grid, increase transmission redundancy, add battery/pumped/flywheel storage, introduce "smart" tools to manage the grid, and do a plethora of other things to accommodate renewables. Hell, you could even migrate the grid to DC! But the cost of doing it is substantial. It's effectively a form of externalities of renewable generation, which are not accounted for in naive "cheap" $/kW metrics. Properly accounting for those externalities and adding them to the cost of renewable generation is possible, but politically unappealing. >Your comment suggests move back to good ol' expensive fossil generation instead of looking at how to bring the market rules up to date with evolving technologies. No, I believe we should remove the politically motivated shoehorning of renewables at the cost of grid stability. There should be a limit on how much intermittent generation we can have depending on the preparedness of the grid and we should pay less for power from such sources, not guarantee purchase from them! As you say, we should have proper incentives structure which accounts for various externalities (including CO2 emissions!). We need to remove the existing subsudies on renewables which made sense in the early days, but not now. Let the generation sources play at the even field.

eldaisfish 1y ago
a couple of things to add to an excellent explanation. I'm glad people are coming around to accepting that renewable energy has problems. We have some solutions to these problems but we do not have experience with them. I agree entirely - the externalities of renewable energy are significant and are not paid for by the source of the problem - the renewable generators themselves. Just as one example, what is the solution to an extended wind drought, say of a week or ten days? All the batteries in the world could not store enough energy for that. A major challenge with renewable energy is that it is intermittent and variable but also unpredictable. it is impossible to predict wind speeds more than 24 or 36 hours out and even those predictions are often inaccurate. just building more wind turbines or solar panels won't cut it. There is also the reluctance of grid operators to use the capacity available in renewable energy generators. The majority of wind turbines are capable of active and reactive power control but most grid operators either don't use this capacity or use it minimally. A distribution connected wind turbine could do wonders for reactive power control but this is rarely done. More grid operators should pay for reactive power, like the UK is starting to do. This should also be sourced from EVs and small solar inverters.

mousethatroared 1y ago

Because the law mandates that renewables must be bought. Thats why prices fall negative.