
Power Worth Less Than Zero Spreads as Green Energy Floods the Grid - bumholio
https://www.bloomberg.com/news/articles/2018-08-06/negative-prices-in-power-market-as-wind-solar-cut-electricity
======
DoctorOetker
I don't truly understand this "problem". I understand storing the energy in
batteries is currently very expensive economically and materially.

However I believe there are plenty of "goods" (irrespective of if they are
bulk materials, or partially processed products) which have a high processing
energy per volume ratio (this does not need to be recoverable stored energy).

Allow me to give an example: currently we have a drought in Belgium (or at
least Flanders). We are not landlocked, there is plenty of water in the sea.
Desalination is energy intensive. Instead of only looking at energy storage,
why can't we increase the processing capacity (more desalination sites capable
of working in parallel), and desalinate say sea water during the energy flood?
I don't expect this to be an ideal real world example, only a pattern for
identifying such examples: any product (could be composite parts, or bulk
material) which is relatively compact and has some high energy per product
volume processinng step. Just do the process (desalination, welding some part
to another part...) when the sun shines, and store them for later.

Products with very high _step energy density_ are good candidates for storing,
and could help flatten daily variations, and perhaps even seasonal variations!

Now some companies would prefer avoiding risk if they don't have guaranteed
orders far enough into the future, then perhaps there should be a market for
insurance or loans, so that the company is encouraged to take the risk,
instead of wasting the cheap energy...

~~~
floatrock
Capital costs vs. marginal costs.

You're going to build a $100M desalination plant and run it for three hours a
day? That's a ton of money sitting idle most of the day, far more than what is
recovered with zero operating costs.

(This is called the utilization factor -- how long a piece of equipment is
used vs. staying idle)

Ideally you want useful processes with low capital costs and expensive
marginal/energy costs. Desalination is not one of those.

~~~
eloff
Desalinization isn't a good example for the reasons you say, but theptip
writes below that heating water in residential and commercial settings might
be better. Since water once heated stays hot for a good while in the insulated
storage tank. Also buildings can be heated with hot water instead of forced
air, typically through pipes in the floor. Which is nicer because it keeps
your feet toasty and doesn't dry out the room so badly.

A freezer is possibly another such use case, if it keeps the temperature to
within +/\- X degrees of the set temperature, it can delay kicking in during
periods of expensive electricity, and over-cool during periods of cheap
electricity.

I could load the washer or dryer and program it to run it when it's cheapest
if I'm not in a hurry.

Charging an electric car could work the same way.

Air conditioners are a huge deal, my single biggest electricity consumer. In a
world where things were smarter they would chill coolant/water/ice during
times of cheap electricity, and that would be used to cool during the hot
evenings.

The problem is I have no way to take advantage of any of that. The electric
grid isn't giving me feedback on the spot price of electricity (and in many
places they don't even break it down on the bill, showing just one value for
$/kwH for the entire month - that's what my bill looks like.)

Even if that problem is resolved, my appliances are too dumb to take advantage
of that information to optimize my costs.

The grid needs to convey the realtime pricing information to customers, and
then smarter appliances will be developed to take advantage of that
information. The market may be able to do a surprisingly effective job of
moderating demand itself if both the information and the means to apply it are
available.

~~~
ksolanki
This is insightful. The solution is probably to have a spot market for
electricity that is accessible via an API so that smart AC or fridge or
electric car charger can make use of it.

This will encourage market for devices that can utilize the lower spot prices
dynamically and keep the things more efficient overall (in steady state).

~~~
bacon_waffle
We've got these in New Zealand - once you have a "smart meter" (which I
believe most homes now have), then you can pick an electricity retailer like
[https://www.flickelectric.co.nz](https://www.flickelectric.co.nz) that bills
you according to the current price. Flick provides an API to allow you to turn
on/off loads when you see fit.

~~~
mprovost
Even before smart metres, NZ has had a ripple control system since the 1950s
which sends signals over the electric lines to your circuit breaker so the
utility could remotely turn domestic hot water heaters off during periods of
high demand. The technology is pretty simple, you could reverse it to turn
appliances on when power is below cost.

[http://www.oriongroup.co.nz/customers/load-management-and-
ho...](http://www.oriongroup.co.nz/customers/load-management-and-hot-water-
control)

~~~
bacon_waffle
Yes, in my house that is implemented as a ripple control "receiver", which
switches on a circuit that has its own meter. The receiver is a rather simple
thing I think; basically a high pass filter connected to the mains, with the
filter output driving the coil in a relay. It audibly hums when ripple is on.
Every couple months, the meter reader comes by and records the total amp*hours
consumed at "night rate" and "normal rate".

So, it's important to note that the old system doesn't allow one to run the
heat pump both whenever it's wanted, and also on the lower price ripple-
controlled power. Similarly in the other direction, it doesn't make sense to
use ripple control to decide when to feed back in to the grid if you have
generating capacity from PV or whatever.

------
maerF0x0
> It’s left the utilities complaining that they can’t earn the returns they
> expected for their investment in generation capacity.

Good. That's a well functioning market economy. Those who make poor investment
choices need to feel the sting of losses else the market fails to work
correctly.

~~~
perl4ever
I think that negative prices are prima facie evidence of a market economy not
functioning "well".

Negative prices seem to me to be to be equivalent to fines for doing things
that aren't socially useful. If they proliferate, that's a suggestion
something is out of whack.

~~~
pitaj
It's certainly not a free market economy because almost every electricity
utility is a state monopoly.

~~~
WalterBright
When markets get "out of whack" it's almost certainly due to government
regulation. In this case, it's the government setting fixed electric rates for
consumers.

------
WalterBright
I'll suggest again that the solution to this is to charge variable prices to
the consumer based on the supply. For example, I pay exactly the same rate,
24/7\. Of course this will result in a mismatch of supply and demand.

A _lot_ of electricity demand can be shifted to when the supply is cheapest.

When the supply varies wildly, like solar and wind do, there's a giant
impedance mismatch when demand is charged a fixed price.

~~~
nine_k
Night rates are a thing in some countries. I'm not sure it's implemented
anywhere in the US, though.

~~~
toast0
Time of use metering is an available option in some parts of the US, and I
think mandatory in some places as well. I've also seen some tarriffs
residences can opt into with a lower base rate, and a much higher peak rate,
with some sort of real time indication that a peak will be coming in the next
hour or day, depending on the system.

Of course, commercial/institutional energy users have had demand adjustment
programs in return for lower base rates for a lot longer.

------
notatoad
This seems like an opportunity for all that currently-useless "smart home"
tech that companies are so eager to sell. I don't need smartphone
notifications from my internet connected washing machine to tell me when the
laundry is done, because i know when i started it. But if i could load the
washing machine and tell it to switch on when the cost of electricity dropped
below a certain threshold, and it would actually save me money, then suddenly
the smart home would actually be providing some value.

unfortunately, as far as i know not only is there no consumer tech that does
this, but energy companies don't make real-time pricing available to all but
the largest consumers.

~~~
caf
At least for the specific case of washing you can get most of the benefit by
moving to a time-of-use tariff and scheduling the washing machine to run
during the off peak time.

(Washing machines do seem to use a surprisingly large amount of energy,
particularly the ones that heat the water internally).

~~~
carlmr
With a quick search I can't find any energy company in my area offering time-
of-use tariffs. I remember in the 90s it used to be standard to have a cheaper
night tariff. But there's nothing that actually does impedance matching
through financial incentives.

By the second spot rates might be slightly too volatile for the average
consumer to use, but what you could have is smart pricing mechanisms where you
can e.g. lock in a rate for the next 1 or 2h and then your washing machine
waits for the expected best rate in the day and with maybe a timeout when it
starts anyway (if you need it).

That way you could usually get good rates when you start your washing machine
in the morning and it waits a few hours, depending on price history.

This is just a case of simple enough statistics that they can be calculated on
the smalles microcontrollers available. Those are already in most home
appliances. If you now add Wifi capabilities (which also a lot of home
appliances have), you could get the communication done.

For any smart appliance the marginal cost to implement this is zero. The
investment cost is only the software.

You'd still need a company offering this.

~~~
caf
If your energy retailers aren't offering a simple TOU tariff, I feel like an
automatic auction system is going to be several bridges too far for them.

You should try writing to them and asking if they have any plans for TOU -
they might not realise there's any demand for it.

------
talltimtom
I find it funny that there is an ongoing discussion of how much electricity
bitcoin mining wastes and another ongoing discussion of how to store free
electricity.

The answer is simple! Mine bitcoins when electricity is free and use the
bitcoins to buy power when prices go up! I call the scheme cryprographic
energy storage. I am current looking into creating an ICO at $10 billion
valuation. /s

~~~
swarnie_
You've added a /s but some mad man is already pitching this somewhere in the
valley and it probably being taken seriously

------
ZeroGravitas
Price signals that go negative seem to really freak people out, but the real
transition point is when the price dips below the marginal cost.

If you're burning 1 dollar of fuel to generate one dollar worth of electricity
then anything less is a signal to switch off. If your boiler has physical
reasons for not turning off and on sharply then you can find yourself eating a
loss in the short term to make money on average even with positive prices.
Which puts a monetary price on flexibility or integrated storage.

~~~
caf
There is another transition point at zero price, though - that's where it
starts to make sense to vent the steam to the atmosphere instead of running it
through the turbine.

~~~
TheCoelacanth
Is there zero cost involved in safely venting the steam? I wouldn't think so.
It's probably not a very high cost, but I can't imagine it's actually zero.

------
alexeckermann
Some insight into the change year-on-year to the South Australian negative
pricing; the change may be due to more active management by AEMO (Australian
Energy Market Operator). Wind is now mostly curtailed at ~1.2GW and a minimum
quantity of synchronised gas generators operating. This was in response to a
system security scare in 2016 where the entire state experienced a 'Black
System' event where we lost all power -- lights out in the entire state. That
was caused by a storm taking out some primary transmission lines on top of a
less-than-ideal market generation mix causing a chain of events but it put
focus and revealed the bigger security issue everyone ignored -- higher risk
figures were reported but nobody cared until it was a problem.

Whilst we have enough wind and solar to take the state to 100% renewable (at
times) it is not secure enough to provide industrial contracts or services
like FCAS (Frequency Control Ancillary Service). With dwindling industrial
contracts for energy providers the generation market has gotten smaller,
primarily supplying domestic load/customers. That on top of a privatised
market lacking responsibility for planning ahead has left the local market in
a flux. The spot market has become so unreliable that some businesses have
opted for their own on-site diesel generation.

One may assume that this would mean our power prices are pretty low. But that
isn't the case. It has been said we have some of the highest electricity
prices in the world. In context, this has been because of waining industrial
load contracts and profit focussed privatised generators. We just also happen
to have a high-wind generator mix.

So whilst living in a state with a high % of renewables is great, the lack of
planning in a privatised market has left everything a bit messed up.
Businesses looking outside the highly variable spot market into the hands of
fossil fuel generators, domestic customers paying some of the highest power
prices in the world, and nobody is really responsible/accountable for keeping
the lights on.

------
rwcarlsen
Negative energy prices have been a not uncommon occurrence in various places
in the US and EU for a while. They are not necessarily a good thing. They
occur due to a combination of how generating sources are managed/dispatched
[1] and because of policies that make it possible for (some) generating
facilities to still make a profit while bidding to provide electricity at a
negative cost (literally paying the recipient to take the electricity). This
is not necessarily a good thing and can actually lead to increased carbon
footprints of our energy generation mix along with other not necessarily good
outcomes [2].

[1]
[https://www.eia.gov/todayinenergy/detail.php?id=7590](https://www.eia.gov/todayinenergy/detail.php?id=7590)

[2]
[https://ieeexplore.ieee.org/document/6917222/](https://ieeexplore.ieee.org/document/6917222/)

~~~
talltimtom
> They are not necessarily a good thing

Indeed. I would even go as far as to say they are never a good thing. They
indicate that the plants are having to spend money to keep things running, and
that extra cost is carried over to the very same consumers who for short
periods get “free” power or get paid to absorb the load. And since the
scenario of having negative prices is far from efficient the total cost is
still positive. So unless you have a very unusual completely selective
powerusage you end up paying more net than if the prices had remained positive
but slightly lower throughout.

------
CapitalistCartr
I wonder if there's a way to remove CO2 from the air with surplus electricity
without a half-billion dollar plant. That would be a win for everyone. It
operates when the wholesale price of electicity drops below its threshold,
perhaps only 4-6 hours per day, so would have to be a pretty cheap fixed cost.

~~~
tantalor
Yes its called a grow light they cost about $7 at home depot. It doesn't
matter what you grow; weeds will work.

~~~
logfromblammo
A bioreactor full of algae is a bit more efficient. You can even pump CO2
exhaust from your power plant directly into it.

Then you can sell the glop.

~~~
tantalor
Now _that 's_ soylent.

------
komali2
>It’s left the utilities complaining that they can’t earn the returns they
expected for their investment in generation capacity.

The "solution" to this "problem" is, rather than investing in a green
production method, to desperately cling to existing investments by sending
lobbyists to the government to convince them that Clean Coal is the future.

I love the line at the end of "The Big Short," I can't remember it verbatim
but it was something along the lines of how "once again, like we've always
done, we're going to seek out the short term gains and cripple long term ones,
for no good reason."

~~~
downandout
I know you’re being facetious, but it seems to me that the actual solution for
these companies’ financial woes would be to simply charge more for energy from
their traditional plants when there is demand for it, just as suppliers of any
other commodity do. If there are regulations in individual jurisdictions
preventing them from doing this, those regulations should be relaxed. The
reality is that we are still dependent on traditional energy sources
sometimes. Therefore, these plants and the companies that own them have to be
able to charge enough stay in business until we don’t need them anymore.

------
OliverJones
Interesting that the utilities with fixed sunk costs are feeling a pinch from
renewables.

I suppose some of them will take the bailout path (companies keep profits,
taxpayers or ratepayers shoulder losses).

Traditional utility economics guarantees a return on capital, and imposes
ratesetting in return for geographic monopolies. The real story here is the
upending of that model as carbon-based fuel loses its deathgrip over the grid.
A consequence of this is less economy-of-scale advantage for vast generation
plants. Small distributed generation is more attractive than it was a
generation ago.

But every market has its quirks. The Texas grid system doesn't have any way to
export power to other markets. And West Texas is a windy place. So they find
themselves with excess capacity sometimes.

I wonder if any grid operators will respond to these price signals by
developing smart grids: by realizing that their future lies in offering both
electricity and good information about that electricity. Then they can send
signals to local time-shiftable equipment (for example car charging, water
heating, power storage, desalinization, even blockchain mining).

In Norway the grid operators deliver near-real-time supply signals to
customers using the same sort of radio signals that tell people the song
that's playing on the radio station. Sure, the US is bigger. But if the don't
try to do this, they'll never figure out how to do it.

One negative consequence of this pinch: as it spreads the net metering deal
that current solar-cell households enjoy will fade away.

------
stcredzero
If the general pattern holds of the electrical power market being like the
natural gas market, just at much shorter time scales, then does this mean that
we are going to see an increase in electrical power storage in the next few
years? Companies have been making money by offering storage and pooling
services in energy for quite awhile. It's just that storage has been more
difficult from an economic and technical sense with electricity than with,
say, natural gas.

~~~
EvilEndures
Probably that and "quick start" powerplants already serving this function in
the UK.

[https://www.ft.com/content/ba6bd46a-1d75-11e8-956a-43db76e69...](https://www.ft.com/content/ba6bd46a-1d75-11e8-956a-43db76e69936)

> The episode showed how small, flexible power plants are now bridging the
> supply gaps, especially at a local level, between intermittent renewables
> and Britain’s fleet of large, but slow-to-fire-up, gas and coal plants.

~~~
stcredzero
_Probably that and "quick start" powerplants already serving this function in
the UK._

Right. Quick start plants basically convert "stored" energy in the form of
natural gas into electrical energy on the grid. The natural gas supply has a
chemistry/physics advantage in terms of storage efficiency. (As well as
industrial infrastructure already built up.) This would allow us to calculate
a target number for the storage cost of batteries which could compete. We can
then apply industry trends to see which battery chemistry or power storage
technology might become competitive, and when it is likely to achieve that.

------
deweller
Surely Bitcoin miners will snatch up these opportunities soon. Cheap
electricity can be translated into money if you have the mining equipment.

~~~
rb808
Agreed but its a weird transaction system that works better on windy days. :)

~~~
epx
I just saw myself licking the thumb, putting the arm out of the window,
waiting a bit and thinking "ok the thumb got chilled enough so it is great
time to pay that bill".

------
aphextron
Can someone please explain then why we are paying the highest prices in the
continental US for retail electricity, at $0.28/kWh, in a state with the
highest percentage of renewables in the country?

~~~
rb808
I can't say for sure, but quite likely renewables cause high costs like the
article says. The problem is that electricity generators of all types have
very high fixed costs. If you have a lot of wind and solar power its a problem
that it ruins the profitability of the traditional generators half the year,
so they need high prices in the other half to cover the capital costs.

Also California isn't most expensive, seems pretty much the same as many blue
states.
[https://www.eia.gov/electricity/state/](https://www.eia.gov/electricity/state/)

~~~
aphextron
>Also California isn't most expensive, seems pretty much the same as many blue
states.
[https://www.eia.gov/electricity/state/](https://www.eia.gov/electricity/state/)

>Data for 2016

This lists California at $0.15/kWh. I've never paid even close to that
anywhere I've lived.

The current PGE residential rate of $0.28/kWh [0] is about the same as
Honolulu, Hawaii, where 100% of electricity is produced from burning natural
gas and petroleum.[1]

[0]
[https://www.pge.com/tariffs/electric.shtml](https://www.pge.com/tariffs/electric.shtml)

[1] [https://www.hawaiianelectric.com/billing-and-
payment/rates-a...](https://www.hawaiianelectric.com/billing-and-
payment/rates-and-regulations/average-price-of-electricity)

~~~
rconti
Silicon Valley Electric was 8c when I lived there, 10c now.

My PG&E's lowest off-peak rate is now 16c, though I'm on a TOU plan and just
installed solar, and I have generation through Peninsula Clean Energy so my
bill is somewhat more complicated than the charts involved to send Apollo 11
to the moon.

~~~
mmt
> Silicon Valley Electric was 8c when I lived there, 10c now.

If you mean Silicon Valley Power, the municipal electric utility for Santa
Clara, it's now (as of Jan 2017) 11.82c [1] for residential non-TOU for the
upper tier.

It's also only for the city of Santa Clara. Palo Alto has a municipal utility,
but its rates are higher, and these are exceptions. AFAIK, the vast majority
of California is served by a private utility (e.g. PG&E).

[1]
[http://www.siliconvalleypower.com/home/showdocument?id=6253](http://www.siliconvalleypower.com/home/showdocument?id=6253)

------
jillesvangurp
This is not a problem but a huge opportunity. Instead of shutting down
capacity, they need to find ways to utilize it. There are plenty of things you
can do with energy.

Water desalination, splitting water into h2 and o2, etc. all take lots of
energy. California has a huge water shortage and apparently too much
electricity.

~~~
dalore
Also cryptocurrency. People are complaining about the huge amounts of energy
being wasted by it. But if prices are negative, and coming from green sources,
then it's not an issue.

------
brendog
the key to solving this problem is a communications link between the supply
side and the demand side. It's crazy that there's a complete disconnect
between something that consumes power (that in many cases could delay it's
consumption until a time when there was excess capacity, or at least make a
more informed decision) and the supply side. I started episensor in Ireland
and we've been working on this problem for many years.

~~~
sounds
To add to that, this recent article on HN [1] goes into a lot of great detail
on how the economics of a home solar installation are part of the problem.

Basically, if there were an incentive for residential solar installations to
include a little bit of storage capacity, it would be a net win for the entire
economy.

[1] [https://syonyk.blogspot.com/2018/05/why-typical-home-
solar-s...](https://syonyk.blogspot.com/2018/05/why-typical-home-solar-setup-
does-not-work-off-grid.html)

------
ethagknight
Bring on the compressed air economy!
[http://www.lowtechmagazine.com/2018/05/history-and-future-
of...](http://www.lowtechmagazine.com/2018/05/history-and-future-of-the-
compressed-air-economy.html)

~~~
mpax
“You only sell hot air?”

“Yes, I’m full of it! And quite dense!”

------
torpfactory
Negative energy prices are one of the signals which might drive the devlopment
of grid scale storage. Very obvious arbitrage potential here. The fact that
utilities themselves are complaining about this instead of investing in
storage is a little dismaying.

------
bit_logic
A carbon tax combined with excess green energy could cause some unexpected
results. Currently, most assume that EV cars are the future. However, there
are companies working on processes that can convert CO2 from the air + energy
+ water into synthetic fuel. There are already working examples of this such
as the Canadian company Carbon Engineering. If the energy is green (such as
excess solar/wind) this fuel would be basically carbon neutral and exempt from
any carbon tax. The process would be economically viable because the carbon
tax would raise the price of oil from traditional fossil sources. But the
increased price of oil would make a carbon neutral synthetic process like this
viable at the same time.

If this happens, the EV car becomes much less competitive. From a pure
efficiency view, EV is still much more efficient. But there is a lot of
existing infrastructure supporting carbon fuel and billions of cars. This
synthetic fuel would immediately fit into that. If there's a heavy carbon tax,
can EV complete successfully against a carbon neutral synthetic fuel?

~~~
adrianN
Yes they can because they don't cause air pollution in cities. Air quality
standards are only getting stricter.

------
ars
Last time there were "weird" issues with power someone was gaming the system:
Enron.

Something about this article just seems off to me, something isn't right from
a technology point of view, and I suspect someone is manipulating things.

(No, I do not have evidence. Just a feeling like this isn't such a hard
problem to solve technically.)

~~~
nachexnachex
> Enron

"Quien se quemó con leche, ve una vaca y llora."

It can seem weird to have an excess of power availability, but it's a
consequence of electric power not being easily stored -- electricity is just a
good energy _transmission_ system. While using electrostatics (batteries) is
possible for storing very small amonts of energy, when you think at a state or
country scale, it's just too much to store.

This means excess energy must be either immediately consumed, or transformed
in order to store it. The most common storage system would be gravity -- build
a pump right besides your dam, and pump water upstream so you can use it later
when power is not readily available. There are already some reservoirs using
this -- at least one in Wales and I've recently read they'd like to build one
in Hoover Dam. It's not simple though, because usually water is left to fall
yet another bit right after the dam, so a second reservoir right below the dam
would be needed.

So, what does a negative price mean. As the article puts it, its a signal from
the grid that it has no use for your energy, _right now_, as there's an excess
of generation. But if untapped, wind and solar will be just lost, so why not
offer it to the users.

As renewables continue to grow, probably more storages will get built that can
buy that excess and this anomaly will cease.

~~~
majewsky
To save you the Google tour:

> Quien se quemó con leche, ve una vaca y llora.

This appears to be a saying that corresponds to the English saying "A burnt
child dreads the fire."

~~~
JetSpiegel
But the literal translation is "That who has been burn with milk, watches a
cow and cries". Much funnier

------
kbutler
The only reason power costs go less than zero is the contracts that the green
(primarily wind) generators have that guarantee a minimum price for their
power regardless of time of supply.

This creates an incentive for them to keep producing electricity beyond what
people are currently willing to pay for it.

These minimums have been required to fund the capital expenditures to build
the plants and have generally been funded by government subsidies.

Coal plants have a different incentive structure - they are very hard to bring
online/offline quickly ("base load"). Natural gas plants are _relatively_ easy
to spin up/down.

I expect this will resolve itself in changes to energy storage and contracts
as the technologies involved become more pervasive.

------
m1n1
So store the excess with a gravity train and sell it back later.
[https://www.aresnorthamerica.com/](https://www.aresnorthamerica.com/)

------
jnxx
That the market price of renewable power can and sometimes does go to zero is
simply a consequence of that the marginal cost of producing additional energy
is zero. The market price does not include the upfront cost but depends only
on that marginal cost.

About the same is valid for nuclear power. Only the upfront cost is higher,
and there is a much larger cost for decommissioning a plant.

That's the reason why renewable power needs to be subsidized, at least to some
degree, and why nuclear power was always subsidized.

~~~
geezerjay
I've assumed that the reason was that green energy production, which is tied
to climate factors (windy/rainy/sunny days), can't be ramped up or down to
match demand. As surplus energy can't be stored or sold then its value tends
to zero.

------
safgasCVS
How do you store it for when night comes? If you live near a mountain you
could pump it up during the day but not everyone is that lucky. Now what about
winter when its overcast half the time and solar panels barely work? Just
think how much additional capacity needs to be built to allow for these long
periods youre not making power. Basically one has to build 3-4x the capacity
to supply what one coal plant produces nonstop.

The next Rockerfeller will be the one who stores gigawats on the cheap

------
mabbo
Sounds like a great time to be building Tesla-style battery stations. Get paid
to take in energy when it's flooded, get paid to output energy when it's not
flooded.

~~~
brandmeyer
When residential and small commercial customers can participate in the spot
markets, this will happen.

------
whateveryou381
Another way to see this problem is: you have too much energy at the wrong time
of day. This is a fundamental problem with unmitigated installation of green
technologies without grid level storage mechanisms. The green plants are
losing money while this is happening.

Solar/wind energy aren't delivering enough power in non-peak operation to
shutdown other traditional sources. It is just the coal/traditional power
industry optimizing for total profit...

------
petermcneeley
Can someone with a microecon background explain how this is possible?

(My guess is that consumption is somehow completely independent of unit price
and that its also inelastic?)

~~~
nostrademons
Consumption and production are both inelastic and storage costs are high.

Traditionally when a producer produces more of a good than consumers want to
buy, the price drops, consumers buy more, and producers produce less. If
consumption & production are both inelastic, consumers won't buy more and
producers can't produce less. The excess goes into inventory, where it's
treated as an asset and then sold (often at lower prices) when supply and
demand equilibrate.

You can't put electricity into inventory, at least not without batteries or
similar tech, which cost money and leak charge. Hence, if you produce extra,
you have to pay someone to manage the storage or usage of that extra current.

There are a few other industries that function like this. Garbage is a big
one: you have to pay someone to take your garbage because demand for garbage
is much less than supply and storage has non-zero cost.

~~~
WalterBright
> Consumption and production are both inelastic and storage costs are high.

Consumption is inelastic because the electricity rates are fixed 24/7\. Allow
variable pricing based on supply, and you'll see very elastic behavior.

For example, people will charge their car batteries when the rates are
cheapest. Same for running the electric hot water heater, and the A/C,
refrigerator, etc.

~~~
Dylan16807
I'd say it's more "slightly elastic" than "very elastic". A lot of people
won't spend the mental energy to optimize anything more than the most major
consumptions, and even then most of what they can do is rearranging loads, not
reducing them.

~~~
WalterBright
It's not about reducing them, it's time-shifting them. The big electric
consumers are A/C, heating, refrigeration, hot water heating, and car battery
charging. All of those are very amenable to time shifting, and this shifting
can be automated.

~~~
nostrademons
That's an interesting idea. The current residential home appliance setup is
totally not amenable to it - I don't even know where my refrigerator & hot
water heating on-switches are, I rarely touch the A/C & heating, and I'm
certainly not going to remember the rates at a give time of day as a consumer
(I likely wouldn't even be home or awake when they're lowest). But if rates
actually varied throughout the day, I could imagine smart-thermostats and
smart-switches being a very lucrative new market. Manufacture a piece of
silicon & copper and it saves you a hundred dollars a month in electricity; I
like the idea.

~~~
caf
I'm on a time-of-use tariff, and I use the timer on my washing machine to have
it finish just before the end of the very cheap overnight rate. That alone has
made a pretty big difference.

------
true_tuna
Here’s a crazy idea. Batteries?
[https://cleantechnica.com/2018/08/06/analysis-reveals-
that-w...](https://cleantechnica.com/2018/08/06/analysis-reveals-that-worlds-
largest-battery-saves-south-australia-8-9-million-in-6-months/)

~~~
mattmanser
They can't magically make national grid grade batteries overnight.

So, yes, at the moment it's a crazy idea. The whole point of the trials in
Australia and places is to get it to work at the scale needed.

You can't just plug in 1,000,000 rechargeable batteries and hope it works.

~~~
jldugger
You'd probably be better off with water pumps to put water back behind a hydro
dam. If you assume the presence of hydro, it's a pretty cheap battery to lift
water back up.

------
foxyv
So we need a product that uses large amounts of nearly free electricity that
can be produced during specific parts of the day. Maybe some sort of smart
aluminum factory, hydrogen generator or water purifier. Then again, maybe the
capital depreciation would necessitate continuous usage.

------
theshadowknows
Or in other words watch out for the power companies to lobby to make wind and
solar power illegal.

------
exabrial
I'm not anti-gteen, but it's not worth "less than zero", it's the people's
money being given away. This isn't a so much as a huge success as it is a
legislative oversight. :/

------
maherbeg
Power companies should really be petitioning the federal government to
continue EV subsidies and help market them to create more demand.

Generally this seems like a temporary phenomenon until EVs start to come
online in en masse.

------
whitej125
Any good book recommendations that could shed light on the
mechanics/economics/incentives of the power industry and how it came to be?

~~~
computerphage
The Grid.

I heard about it two years ago and recommend it often.

[https://www.gatesnotes.com/Books/The-
Grid](https://www.gatesnotes.com/Books/The-Grid)

[https://www.gatesnotes.com/About-Bill-Gates/Best-
Books-2016](https://www.gatesnotes.com/About-Bill-Gates/Best-Books-2016)

~~~
whitej125
Awesome, thanks!

------
qiqing
It seems like a good time to use cryptocurrency mining to balance out the
periods of zero or negative energy cost.

------
iamgopal
Subsidy should be reduce now to become zero in 20-25 years.

------
korantu
The nagging thought here is that this property of wind/solar make them not
sustainable in capitalistic setup.

Let me explain: soon there will be point where investment in W/S would stop
making sense - very difficult to compete when you mostly get your investment
to produce power when all your competitors also produce power!

In most other markets you are free to produce if the price suits you, and stop
otherwise.. . Oil is too cheap - stop pumping it, ice cream in winter not very
popular - reduce production, don't pay people to please eat it because your
ice cream making machine works best in winter..

------
amarant
so...bitcoinminers now have 2 sources of income?

------
dev_dull
The logical next step is devices (storage) which can arbitrage these prices
and make a profit. Capitalism is a wonderful thing, especially when it’s
helping make green energy more efficient.

~~~
Firerouge
A power wall that's paid to be charged during peak generation, and gets paid
again to discharge during peak consumption would be pretty fantastic.

~~~
logfromblammo
Why would a power utility allow customers to perform time-of-day arbitrage
when they could do that themselves without upgrading all the meters?

~~~
dev_dull
Lid shifting. PGE actually pays a subsidy for you to do it via a battery.

------
lucidguppy
Champagne problems...

~~~
quickthrower2
Well champagne has plenty of CO2, too.

~~~
usmeteora
this is what masogyny looks like.

------
usmeteora
Hi. I'm an Electrical Power Engineer and I analyzed electrical power energy
pricing for three years after working a startup designing renewable stations.

I worked at the NYISO, which runs all the real time energy pricing markets on
a realtime power market separate from the public stock market. The issue is
this. NYISO, MISO, ERCOT, CAISO run real time energy markets throughout the
U.S.

The idea is energy demand is met with energy supply obtained at the LBMP
(locational based marginal price) from energy bid into the markets by energy
suppliers who can meet demand in that area (transmission line losses are 10%)
so there is an advantage to local/decentralized energy as the markets price
congestion on these transmission lines.

Transmission lines are expensive (consider buying up all those little
protesting family farms lawsuits buying individual land) and will melt or if
run beyond 90% of their capacity which could leave an area stranded and
blacked out by cascading over voltage conditions and blacking out the entire
power grid.

So the tldr is energy can only move so far before it becomes uneconomic and
needs to be synced with another power bus.

Now, you have politicians throwing free money in subsidies, grants or 20yr
loans to Venture capital funds who contract renewable energy farms like wind
for example. They get paid subsidies for the power they produce.

That sounds reasonable, but this is where it becomes unreasonable. Power is
realtime and needs to respond to demand usage.

The other important thing to note is even if we did vote for high taxes in the
u.s. to fund clean energy, clean energy is massively inefficient right now,
and this doesn't provide an economic incentive to innovate in the industry.
Quite the opposite. It makes the people raking up this free money hapoy
sitting on their behinds, which brings me to my previous point,

The VCs get paid to produce power but not when it's needed. They could store
this in a battery somewhere, but it turns out hurricane Sandy flooded a
$50million battery that was supposed to back up all of long island. Ironic.
Most investors tweaked out after this, and anyways, why would venture
capitalists spend their free money on actually investing in making the
technology better by buying batteries to save power being produced when it's
not needed (a windy night on a mtn vs 4pm the next day when everyone is using
power) when they are getting paid either way?

The money that isn't lining their pockets is subsidizing their cost of
production bids into thr market. So wind plants in NY always bid in at $0 and
they get the bid to produce Everytime.

Since every five minutes economic dispatch (Google "acopf ferc") creates a
price signal based on demand needed and this can actually drive the price
negative. The decision making tree here is based on a mixed integer
programming algorithm for which the implementation is close sourced by an
algorithm contracting company, which I personally think is an egregious
injustice to stakeholders but that's just me.

Sounds great, how does it get worse?

Well, because not in my backyard policy, all of these wind plants are in
upstate NY, so they have to waste and dissipate 10% of the power on the way
down to NYC clogging the transmission lines, if they happen to be running when
it's needed.

For the few companies truly interested in putting batteries on their plants,
the NYISO, CAISO and ERCOT are decades behind implementing the legal economic
markets for these generators to engage in to set up batteries at different
entry points on the power grid than where they are supplying it.

Germany runs on 50% solar and does well, which clearly shows this is not a
technical background but a legal, political and organizational one. However,
the economic efficiency is not entirely revealed t us. Do you think the u.s.
would vote for 50% taxes like they have in Germany?

Hope that helps and feel free reach out if you have any more questions.

