4 ms·

> -dispatch costs are high because policy choices have created a physical reality that drives high constraints. You don't seem to understand what's driving the

by stymaar 2mo ago

> -dispatch costs are high because policy choices have created a physical reality that drives high constraints. You don't seem to understand what's driving the so-called re-dispatch costs in Germany so let me explain: when there's power consumption in the South, it is paid at the market price, when the "supplier" is located in the North (typically wind) and there's not enough network capacity to transfer the power to the consumer, the transport authority sends an order to the supplier not to produce the electricity, and instead pays a thermal power plant in the South (at a higher price than market price, by definition) to provide it instead. That's not a problem of physical realities driving constraints, that's the problem of a market that uses a very simplified model that simply can't deal with the complexity of the underlying phenomenon (we don't even have enough computing power to accurately model the electricity transport at national scale given how challenging the equations are, and even the lineralized version that are being used in practice are already very compute-intensive, it's entirely futile to expect to build a market that can efficiently reflect them).

ShadowOfThePit 2mo ago
Huh, did you get this example from an LLM, or is it the bog-standard way of explaining it? I asked ChatGPT to explain what a "copper plate" is because I was lazy, and it used 1:1 the exact same example as you did (Germany,wind generation in the north paying a thermal plant in the south)
- stymaar 2mo ago
  Nope, not LLM, and yes it's just the textbook example and that's why the LLM says the same thing (it's as if you were surprised someone explained distributed systems using Byzantine generals and the LLMs did the same).
chardz 2mo ago
Not pricing transmission in the price of EU power likely is more of a market design issue rather than a technical one given that the U.S markets have been doing this since they liberalized 30 years ago (though yes, everything will be priced according to linearized power flow in order to make things feasible to solve). Wonder if it’s more of a political question in the EU with how to handle cross border flows (even U.S markets have/have had issues with modeling this, see PJM/MISO seams modeling)
- stymaar 2mo ago
  It's not about border, I'm talking about power flow through Germany. And of course it's a market design issue, but as I said above, the problem is that you'll always face market design issues because the market designers face an impossible problem: you want to use a simple enough model and you're modeling an insanely complex problem for which any discrepancy between the model and reality will result in a catastrophic failure unless you have a central authority there to patch the holes. At the end of the day, it's always going to be a centrally-managed system (because you cannot afford blackouts) but with the central planner merely swallowing the cost of the economic inefficiency rather than preventing it.
  - chardz 2mo ago
    I mean, I guess I disagree that you need anything close to a perfect model. You will get many of the benefits of the correct solution by using linearized power flow with nodal pricing and explicitly modeling transmission constraints (and by extension, redispatch). Afaik, Germany doesn’t do this, but as you had described earlier, redispatch costs are physical in nature and obviously still exist, they just aren’t reflected in prices. This is very dumb. Suppose a new generator wants to know which is the best node to interconnect to. This should be obvious from nodal pricing, as you would simply check the node that has the highest INC redispatch/lowest congestion costs (the nodes in the south of Germany in your example). Similarly, the worst node to connect to will be the one with the highest DEC redispatch/highest congestion costs (the North). Instead, in the current german system, I would think you would need to do some contrived thing of figuring out which generators are getting the highest uplift payments, but this would be very imperfect as you would not know how sensitive a different node would be to the system redispatch (not to mention, this is assuming this information is even readily published). There’s really no excuse to not adopt nodal pricing over whatever exists for a centrally planned grid operator. I can only really imagine it’s a political issue.
    - stymaar 2mo ago
      > I mean, I guess I disagree that you need anything close to a perfect model. It's an adversarial setting, economic actors are incentivized to find any loophole and exploit them, so even if it doesn't need to be perfect it needs to be indistinguishable from perfection from the PoV of the market actors, otherwise the defects will be weaponized.
Mvandenbergh 2mo ago
I know how re-dispatch works. The issue is that the physical reality of the network and the location of generators and loads is fixed at time of [re-]dispatch. Regardless of how you reconfigure the dispatch mechanism, there is energy that cannot be moved through the network from the wind in the North to the load centres in the South. The only way to avoid that physical reality is to either massively increase the N-S transmission capacity or to put generation capacity closer to load. Once these generators have been placed where they are and pending extremely challenging network expansion being realised, it will always be the case that some party or set of parties bears the cost of the constraint. If you moved the ownership and control of the transmission network and all generators into a single operator that was responsible for optimising its operation in near-real-time and that bore all the costs within a single accounting perimeter, it would do more or less what the the existing market based mechanism does: turn off the wind generators and instruct the thermal plants in the South to run instead. Yes, it's true that in that case there would not be a "market price" paid to wind turbines that actually cannot run, nor would there be a higher re-dispatch price paid to the thermal generator. However the total system cost would still be the same. Even though the wind turbines would "lose" money because they can't run and the thermal plant wouldn't receive its market price for relieving the congestion. Of course you could argue that this efficient single operator simply wouldn't have built the wind assets in the first place in a location where they often couldn't run but that assumes that the same policy makers who created the current outcome wouldn't have engineered the exact same outcome through the direct control they presumably would have had of the integrated operator. I will note that many American utilities actually are vertically integrated like this (banned in the EU under the Third Energy Package) and they build in the exact same pattern and bear the constraint costs internally.
- stymaar 2mo ago
  > If you moved the ownership and control of the transmission network and all generators into a single operator that was responsible for optimising its operation in near-real-time and that bore all the costs within a single accounting perimeter, it would do more or less what the the existing market based mechanism does: turn off the wind generators and instruct the thermal plants in the South to run instead. But it wouldn't count a profit in the North and build yet another pointless wind turbine in the North. Whereas the current system, because it pays the Northern producer the market rate, for electricity that isn't needed, shape the grid in a nonsensical way! That's the core of the criticism. > Of course you could argue that this efficient single operator simply wouldn't have built the wind assets in the first place in a location where they often couldn't run but that assumes that the same policy makers who created the current outcome wouldn't have engineered the exact same outcome through the direct control they presumably would have had of the integrated operator. There's literally no reason to assume they would have done the same choice given they would have responded to completely different incentives (minimizing the total cost, instead of individual actors maximizing their profit under the artificial price scheme).

by stymaar 2mo ago

ShadowOfThePit 2mo ago

Huh, did you get this example from an LLM, or is it the bog-standard way of explaining it? I asked ChatGPT to explain what a "copper plate" is because I was lazy, and it used 1:1 the exact same example as you did (Germany,wind generation in the north paying a thermal plant in the south)

stymaar 2mo ago
Nope, not LLM, and yes it's just the textbook example and that's why the LLM says the same thing (it's as if you were surprised someone explained distributed systems using Byzantine generals and the LLMs did the same).

chardz 2mo ago

Not pricing transmission in the price of EU power likely is more of a market design issue rather than a technical one given that the U.S markets have been doing this since they liberalized 30 years ago (though yes, everything will be priced according to linearized power flow in order to make things feasible to solve). Wonder if it’s more of a political question in the EU with how to handle cross border flows (even U.S markets have/have had issues with modeling this, see PJM/MISO seams modeling)

stymaar 2mo ago
It's not about border, I'm talking about power flow through Germany. And of course it's a market design issue, but as I said above, the problem is that you'll always face market design issues because the market designers face an impossible problem: you want to use a simple enough model and you're modeling an insanely complex problem for which any discrepancy between the model and reality will result in a catastrophic failure unless you have a central authority there to patch the holes. At the end of the day, it's always going to be a centrally-managed system (because you cannot afford blackouts) but with the central planner merely swallowing the cost of the economic inefficiency rather than preventing it.
- chardz 2mo ago
  I mean, I guess I disagree that you need anything close to a perfect model. You will get many of the benefits of the correct solution by using linearized power flow with nodal pricing and explicitly modeling transmission constraints (and by extension, redispatch). Afaik, Germany doesn’t do this, but as you had described earlier, redispatch costs are physical in nature and obviously still exist, they just aren’t reflected in prices. This is very dumb. Suppose a new generator wants to know which is the best node to interconnect to. This should be obvious from nodal pricing, as you would simply check the node that has the highest INC redispatch/lowest congestion costs (the nodes in the south of Germany in your example). Similarly, the worst node to connect to will be the one with the highest DEC redispatch/highest congestion costs (the North). Instead, in the current german system, I would think you would need to do some contrived thing of figuring out which generators are getting the highest uplift payments, but this would be very imperfect as you would not know how sensitive a different node would be to the system redispatch (not to mention, this is assuming this information is even readily published). There’s really no excuse to not adopt nodal pricing over whatever exists for a centrally planned grid operator. I can only really imagine it’s a political issue.
  - stymaar 2mo ago
    > I mean, I guess I disagree that you need anything close to a perfect model. It's an adversarial setting, economic actors are incentivized to find any loophole and exploit them, so even if it doesn't need to be perfect it needs to be indistinguishable from perfection from the PoV of the market actors, otherwise the defects will be weaponized.

Mvandenbergh 2mo ago

I know how re-dispatch works. The issue is that the physical reality of the network and the location of generators and loads is fixed at time of [re-]dispatch. Regardless of how you reconfigure the dispatch mechanism, there is energy that cannot be moved through the network from the wind in the North to the load centres in the South. The only way to avoid that physical reality is to either massively increase the N-S transmission capacity or to put generation capacity closer to load. Once these generators have been placed where they are and pending extremely challenging network expansion being realised, it will always be the case that some party or set of parties bears the cost of the constraint. If you moved the ownership and control of the transmission network and all generators into a single operator that was responsible for optimising its operation in near-real-time and that bore all the costs within a single accounting perimeter, it would do more or less what the the existing market based mechanism does: turn off the wind generators and instruct the thermal plants in the South to run instead. Yes, it's true that in that case there would not be a "market price" paid to wind turbines that actually cannot run, nor would there be a higher re-dispatch price paid to the thermal generator. However the total system cost would still be the same. Even though the wind turbines would "lose" money because they can't run and the thermal plant wouldn't receive its market price for relieving the congestion. Of course you could argue that this efficient single operator simply wouldn't have built the wind assets in the first place in a location where they often couldn't run but that assumes that the same policy makers who created the current outcome wouldn't have engineered the exact same outcome through the direct control they presumably would have had of the integrated operator. I will note that many American utilities actually are vertically integrated like this (banned in the EU under the Third Energy Package) and they build in the exact same pattern and bear the constraint costs internally.

stymaar 2mo ago
> If you moved the ownership and control of the transmission network and all generators into a single operator that was responsible for optimising its operation in near-real-time and that bore all the costs within a single accounting perimeter, it would do more or less what the the existing market based mechanism does: turn off the wind generators and instruct the thermal plants in the South to run instead. But it wouldn't count a profit in the North and build yet another pointless wind turbine in the North. Whereas the current system, because it pays the Northern producer the market rate, for electricity that isn't needed, shape the grid in a nonsensical way! That's the core of the criticism. > Of course you could argue that this efficient single operator simply wouldn't have built the wind assets in the first place in a location where they often couldn't run but that assumes that the same policy makers who created the current outcome wouldn't have engineered the exact same outcome through the direct control they presumably would have had of the integrated operator. There's literally no reason to assume they would have done the same choice given they would have responded to completely different incentives (minimizing the total cost, instead of individual actors maximizing their profit under the artificial price scheme).