Counterpoint: electricity markets are terrible for reliability.
Markets are great, but there are no pricing signals for reliability. You won't know that your grid will collapse at the first strong breeze, until it happens (see: Texas).
Theoretically, it can work because companies might invest in reliable generation, in the hopes of getting $$$$$$$$$ when the spot price goes up through the roof. But in practice, pretty much nobody wants to wait 5-10 years between "income events".
And it's even worse in Europe. It's just a story of utter market failure.
The first California deregulated electricity market had an auction every half hour and all pricing was spot. This caused blackouts and the bankruptcy of Pacific Gas and Electric, even though it was what PG&E had lobbied for.
Today, most markets (at least PJM and CAISO) have a "day ahead" auction, and a current auction to fine-tune. Most of the market is in the day-ahead auction. This seems to have reasonable stability.
I've read that the overall effect of electricity deregulation is that prices are slightly lower, and reliability is down. Rate-of-return regulation encourages utilities to overbuild somewhat, which is not necessarily a bad thing. Beats under-building.
Weren’t the California brownouts caused by Enron fucking with California’s supply to cause them to purchase electricity from Texas at insanely high rates. Also led to Gray Davis being recalled which must have been a nice bonus because the Bush administration was very allied with Enron execs.
> Weren’t the California brownouts caused by Enron fucking with California’s supply to cause them to purchase electricity from Texas at insanely high rates.
The Texas grid (ERCOT, specifically) is almost completely isolated, in order to avoid certain Federal level regulations. There's no real way for California or any other state to sell power into Texas or buy power from Texas.
Part of what happened with California is that Enron would schedule to deliver a bunch of power over transmission lines that were not rated to handle the power. When it came time to deliver the power, this forced a transmission constraint that in turn forced CAISO (CA grid operator) to buy power on the spot market (expensive) to cover the shortfall. Enron then had generation they could sell at a premium. I remember hearing stories of the ISO seeing the trade go in, recognize what was happening, and not have any legal recourse within the market's legal design.
I've been meaning to find some decently in-depth explanation of what market manipulations happened. Found this one: http://www.mresearch.com/pdfs/19.pdf
> I've read that the overall effect of electricity deregulation is that prices are slightly lower, and reliability is down.
One interesting option is the option to let customers choose where they want to be on the reliability vs price scale.
Typically, in times of crisis due to undersupply, an electricity network cuts off customers (blackouts).
However, this needent happen at the district/region level. It could just as easily be implemented by your own electricity meter - effectively a breaker which opens when it detects crisis.
Crisis can be fairly easily measured from the power itself - when the supply of electricity is tight, the frequency and voltage drop.
That means a supplier could theoretically have customers choose what reliability they wanted, and set a switch on the back of their electricity meter to give them the reliability they had paid for.
The downside is that this system only works if the majority of electricity meters behave this way.
> One interesting option is the option to let customers choose where they want to be on the reliability vs price scale.
...
> t could just as easily be implemented by your own electricity meter - effectively a breaker which opens when it detects crisis.
What you're really talking about is demand response. It's been around a while in both commercial and residential settings.
It doesn't really address reliability to the extent that reliability depends on investments in distribution, transmission, generation, fuel to the generators, etc. If those aren't there, it doesn't matter if the user has opted into reliable (non-interruptable) power, because the power won't reliably be at the meter to begin with.
It addresses reliability by shedding the customers who don't pay a premium for reliability first. Most of the time, that can solve the problem. It is, as you say, imperfect because it doesn't allow that premium to be used to fund investment in reliable generation.
California providers are required to purchase "Resource Adequacy" contracts. Those that are badly managed try to dodge the expense, rather like operating a business without insurance:
IIRC, the only US ISO without a capacity market is ERCOT (TX). They let the marginal rates go higher on the theory that it will create an incentive for construction of generation to address anticipated capacity constraints.
Europe has a very robust energy market. The Ukrainian war put a lot of stress on it last winter. The lights stayed on. Sure prices rose a little and that sent off a strong price signal for people to conserve energy and invest in alternative solutions. Exactly what you'd hope for in a well functioning market. The European market is all interconnected. You might get electrons from Norwegian hydro, German or Danish wind, or Spanish solar. Or a mix of all of those. And of course there are loads of coal, nuclear, and gas plants connected to the grid as well. There's plenty of generation capacity. The main technical challenge is cables, not generation. More cables means better energy distribution and more competitive pricing.
A lot of French nuclear plants being down for maintenance right in the middle of the Ukrainian crisis did not result in rolling blackouts. Instead it resulted price signals for others to step up their energy production and serve that demand. The bad thing was that that was German coal. But the good thing is that it worked. Coal is expensive, so the price signals exist to get rid of it. Renewables are cheap, so there's a shift from coal to renewables in most places with a functioning market.
The European energy market is much more dynamic than the US. In the US you have Texas basically disconnected from the rest of the US market for ideological reasons and local monopolists both setting prices and dictating what home owners can and cannot do with things like solar.
The Texas grid collapsed there when it got a bit cold and gas pipes and coal piles froze up. The local monopolists created a price signal but were not able to produce the required energy supply. And as they were unable to import any energy, they had to do rolling blackouts. They should be exporting clean energy most of the time. There's plenty of it. Why is that not a thing? Don't they like money there? Classic example of a broken market. The fix is changing the policies that prevent competitors from challenging the status quo. There's no shortage of entrepreneurs in Texas. They could fix it in no time.
Not sure what OP refers to but it isn't very long ago that we were paying over a dollar per kwh in Norway. We've always had extremely low energy prices due to our abundant hydroelectric power etc, but now it's all being sold to Germany or whatever and we get to buy their coal power for 30 times the price we're used to.
Yea, that was when we refused to buy natural gas from a dictator attacking sovereign countries.
And due to how the market was built, Germany's over-reliance on Russian gas affected everyone for a good while.
On the other hand I've been enjoying pretty much free electricity for about 6 months now. A few rare spikes up to 40c/kWh, but it's mostly been under 1c/kWh.
> A few rare spikes up to 40c/kWh, but it's mostly been under 1c/kWh.
The cheapest rate I can get in NL is ~30c/kwh, and that’s with a dynamic price contract.
The government has applied an artificial limit of 40c/kwh for 2023, after energy companies here fleeced everyone last year. Unfortunately, it expires by 2024.
The worst part is that NL privatized the energy market long ago, to give people “choice” - which has only led to coordinated exorbitant pricing.
I was one of those people who got fleeced. I moved here in the fall of 2022, right before winter started. My monthly fee to Vattenfall was €400/mo for an "A" rated new build apartment of 90m2. I had just moved and didn't know any better. I knew the war was contributing to energy prices but I had no idea to what extent.
Last winter, we kept the heat on to a minimum and tried to keep the lights off. Really, the killer was the price of gas for heating (in-floor) and hot water. But even by comparison, my 20 minute hot shower once every 2-3 days wasn't really the issue. Our "usage" for January was over €550. Luckily, I used basically nothing the first two months I lived here so it averaged out so I didn't need to pay anything. Had I known what I know now, I would have purchased electric space heaters and ran them 24/7... it probably would have been cheaper and I could have walked around my apartment naked while it was -2 outside.
I've switched to Tibber (Swedish company I think?) on a variable rate plan and have been much happier. It would be one thing if I could have locked in a rate at Vattenfall, but even that wasn't possible. You still pay out the ass for all of your usage, so I might as well not overpay when it's cheaper to produce. In the meantime, I'm saving some money each month for winter and will still likely invest in a couple of space heaters since the price of natural gas is still pretty high.
Now we've seen what some families have had to deal with paying their year-end balances and that is/should be criminal. I've seen people receiving bills for thousands of Euros. Their only crime was living in an older home with 2 kids. Got forbid you want your family to be clean and warm! I understand there is some personal responsibility to be taken, but obviously something went very very wrong.
Finland now has the opposite problem where the market price is negative at times. Our neighbours (Sweden, Estonia) are not able to import as much as we produce excess on good days. Luckily, more cables are being built and the variably cheap electricity attracts new industry that can make use of it (green hydrogen and green steel production).
From the market's point of view selling to Germany distributes the goods more efficiently. Germans don't freeze in the Winter, while you don't keep office buildings lit up at night just because electricity is cheap. It feels like you're losing here, but on average everyone wins.
(also, there's the whole invasion of Ukraine going on, which has caused a massive disruption to the market)
Can’t for the life of me understand that particular Scandinavian peculiarity in what would seem otherwise very rational society. I assume it must have been logical or still is?
For most homes and offices the primary source of heating is electrical, so in the winter it doens't really make much difference whether you turn the lights off or not, heat is heat. In the summer there's no excuse though. Old habits die hard, or something like that.
That said, modern LED-lighting doesn't really use that much electricity, all lights in my apartment use a total of 100Wh, or 75kWh per month. I could turn off all lights in my apartment for a year and it still wouldn't be close to the energy needed for a single transaction on the bitcoin blockchain. But clearly some speculative investment has more utility than me not stumping my toe when going to the bathroom at night.
> For most homes and offices the primary source of heating is electrical
Source? I only know that people in isolated villa use electrical heating. Most apartments get hot water from a nearby garbage incinerator owned by the city.
> But clearly some speculative investment has more utility than me not stumping my toe when going to the bathroom at night.
We were talking about office buildings being fully lit 24h a day. Where nobody sleeps. Nobody is saying people should go to bed at 2pm in the winter.
Latest data is from 2012[0], but to counter to my own argument, I have district heating in my apartment. Outside of Oslo or any of the other "larger" cities in Norway I think you're hard pressed at finding anything like that, the population density is so low that it economy of scale for systems like that doesn't work out.
I'm not going to pretend that these office buildings don't exist, but usually they're not really empty. I've yet to be in an office without obnoxious motion sensors that don't work properly so you end up sitting in the darkness when working either early in the morning or late in the evening.
All that said, light pollution is a huge problem here. When I'm out hiking I don't really need a compass or anything to know the direction of Oslo, I can just look at the sky. I think the point I was trying to make is that lighting is a very small percentage of electricity usage, especially now with LED-lighting. In the winter I use the equivalent of 2000kWh/month for heating and hot water. Lighting would be 75kWh if I left all light on, all day, all night.
Norway had trouble with hydro power because of low water levels. Compared to 2021, hydro power was down 10%, imports went up by 60%, and exports remained the same. And for the record, Germany didn't have any trouble with electricity last year, they exported records amounts of it, even increased the usage of gas to meet other countries' demands. Germany exported more electricity to Luxemburg than Norway exported to Germany - and while it seems popular for Norwegians here to claim that Germany wrecked their electricity market, I've yet to see a German claim that little Luxemburg caused electricity prices to explode in Germany.
I'm not saying it's Germany's fault, we're the ones selling them energy. Or rather a couple rich guys make shitloads of money while everyone else pays for their profits.
It sort of depends on what you mean by markets. In most places in Europe the production of power is on the market, but the actual power grid is not freely traded. The grid is instead handed out to semi-permanent monopolies that are heavily regulated and controlled by governments and/or non-profit NGOs that are essentially a way we do efficient government in the supply sector.
It works, but the benefit isn’t usually to the consumers despite that being the intention. We’re currently seeing a load of insider trading and price manipulation cases roll into court after the price hikes following last years gas craze, and over all, power prices haven’t really gone down.
In many ways it’s mostly been a way to divert public money from the public services and into private investors. The way I pay for my electricity is that I pay for the grid, which is the non-freely-privatised part of your electricity market and makes up around 50% of my bill. Before it was privatised it was 90% less expensive. The other 50% is the actual electricity that I buy, we currently buy ours from a company of two people who buy and sell electricity on the European markets. This part is cheaper than it was before it was privatised, but the profits go to those two people and not into advancement of our electric grid.
The prices of electricity are also sort of heavily dependent on the government. A huge part of the income you get from running something like a solar plant is often going to be tariff because the EU can’t/won’t allow green energy to be traded freely as it would bankrupt fossil fuel plants, and you sort of need those since they can scale power at any time. Of course if it wasn’t privatised you could spend those tariffs, green euro and other subsidies on actually building the sector like you did with nuclear and fossil fuels. Not that I mind, I work in an investment bank that builds energy plants and sell them, so it’s good money, but it’s also sort of silly financially.
Like in Germany you have Tariffs where you only get the tariff if you don’t exceed the production max that’s set politically. So if you produce up to 99.9% you get your free money, but if you produce 100.1% you get zero tariff money. You obviously still get paid from the electricity production at whatever rate it’s capped at, at any given time. Then on top of that the government is paying you to shut down production during peaks so you don’t flood the European grid beyond capacity. Which is fine for us, but also sort of silly for consumers since it’s their tax money that’s basically used to make energy production a lucrative business for us.
So yeah, it works, there is a lot of money in it, and a lot of job creation, but it’s not really a net benefit for your consumers.
> It works, but the benefit isn’t usually to the consumers despite that being the intention.
That was never the intention. The intention of the current iteration of EU electricity markets is to allow wind and solar electricity to be sold at the same price as power-plant electricity.
Wind and solar producers have virtually 0 marginal costs and make electricity at an unpredictable schedule. If there was no market and they had to negotiate long-term contracts with utilities and consumers, the price of their electricity would have been quite a lot cheaper than thermal and hydroelectric plants that produce electricity on demand.
What do you mean there's no way out? Some European countries have already stopped using fossil fuels, some are making good progress, in some the progress has recently stalled, some haven't really started yet...
Cheap electricity is going to be important for national economies and there are no countries that couldn't build cheap wind and solar (and/or cables to import neighbours' excess renewables production).
> Some European countries have already stopped using fossil fuels
Yes, the ones that have classic hydro.
> Cheap electricity is going to be important for national economies and there are no countries that couldn't build cheap wind and solar (and/or cables to import neighbours' excess renewables production).
Solar and wind ARE NOT cheap if you actually want them to be reliable. They are about 5x-10x more expensive than nuclear power in this case.
The problem is called Dunkelflaute. Here's an actual example: https://energy-charts.info/charts/power/chart.htm?l=de&c=DE&... - renewable generation mostly disappeared for a week from 18-th to 25-th. These kinds of events happen almost every year, and often more than once.
Worst-case modelling shows that Germany can get about a _month_ of sustained Dunkelflaute about once in a century.
We are not stuck and these issues are solvable (as much as they exist): trade of electricity with neighbouring countries, storage etc. For example, a simple thing where Germany could try to follow the Nordic countries is heat pump installations to keep houses warm without fossil fuels.
It is true that heating should be electrified … but it’s important to note that this makes the Dunkelflaute problem more serious, not less.
Because now your inflexible base-load has increased. And while spreading generation over a wider area helps, it rapidly reaches limits (unless your power grid extends close to the equator).
It makes it less serious in the north where shortage of electricity would mean freezing indoor temperatures. Heat pumps have reduced the amount of electricity needed (compared to direct electric heating) for heating a house and thus the amount of imports/storage needed. Also, if the heat pumps are a part of a district heating system, a heat storage solution can be included in the system.
In a country where heating isn't yet electrified, it's a way to reduce fossil fuel use and carbon emissions (the ultimate goal) without necessarily reducing the fossil electricity production. So even if it doesn't solve Dunkelflaute alone, it's a part of solving the climate and energy crises.
Germany is complicated, because they mostly use gas for heating, not electricity. So switching to heatpumps will require more generation. And for now this means new natural gas plants.
This is not _too_ bad in itself, using gas for generation and then powering heat pumps is more efficient than burning gas for heating. But the capital requirements for new power plants will cement Germany's dependence on fossil fuels for at least another 2 decades.
I don't believe they are solvable with the existing approaches. Transition to natural gas from coal is possible, but there's nothing on the horizon after that.
The existing plans (if you can call them that) mostly depend on asterisks pointing to a footnote saying "magic happens here": cheap hydrogen, power-to-gas, radically cheaper batteries, etc.
> For example, a simple thing where Germany could try to follow the Nordic countries is heat pump installations to keep houses warm without fossil fuels.
They are trying. But they are already having problems with very expensive electricity. Which will only get worse, as demand climbs with more heat pumps.
We can build more of what we have, such as pumped hydro and EU-wide interconnections.
You mentioned the fear that the solutions will cost 5 times more than nuclear. That's not a horrible worst case scenario (as nuclear is so cheap ;-) and we can be sure that costs go down as the markets scale and technologies mature.
It may look bleak in Germany at the moment, but it certainly doesn't look bleak everywhere or for long.
a lot of the answer here is hydro. currently, hydro is seen primarily as a generation method, but as the amount of solar and wind increase, hydro increasingly becomes an easy way to fill the gap from dips in production. another short term answer is natural gas. if you run a natural gas plant 1 week a year, it's not ideal, but it's still 50x better than running it all the time.
I've read several studies that say that you're wrong. You need to get your information from other places than nuclear trade organizations.
The reason storage hasn't been yet been addressed much is simply that the demand is not there yet. But as one example, you can produce biogas and use the existing gas infrastructure.
> I've read several studies that say that you're wrong.
Well? Where's the plan then? The ones I've seen require taking a very stiff dose of crack and meth to make them believable.
> The reason storage hasn't been yet been addressed much is simply that the demand is not there yet.
Well, yeah. Europe has no capacity market, so cheap low-quality solar/wind is a good way to get return on investments. And wintertime generation is supported by fossil fuels that are still too cheap.
> But as one example, you can produce biogas and use the existing gas infrastructure.
"Biogas" can support only a tiny amount of consumption. Power-to-gas (methane produced from water and captured CO2) is an option, but the round-trip efficiency is poor and costs are too high.
You're mixing up "the grid" (TSO) with your local delivery (DSO). The first one didn't fail recently. The second one depends on your distribution operator and is not on the market.
Actually, electricity markets in Europe work just fine, and provide in fact a lot of required stability. And income events are pretty much instantanious. The only problem European markets have is way too low costs for CO2 certificates which make coal plants way to cheap. Other than that, they work just fine.
Nope. They are not fine. Europe is floundering with its renewable transition.
Right now it's easy to build tons of cheap low-quality wind or solar generation, but it's not economic to build any kind of storage. As a result, Europe is now dependent on natural gas and coal during the winter.
And there's nothing that can change that within the next decade.
France finished it's nuclear build-out decades ago. It's still got issues, but the matter is sorted.
The UK is adding scads of wind power every day.
Ditto for Spain, only with solar.
Norway, Sweden, Switzerland, and Finland have mix of hydro, nuclear, and renewables.
Yes, Germany is screwing the pooch on this one. Most places east of Germany isn't doing much better. But their failure is theirs, and not their Western and Northern neighbours.
The western neighbours have outsized influence on EU policy compared to the east, of course they have to take part of the blame.
EU energy policy made visible changes on the markets and landscape of the eastern republics - and the people here hate the EU for it.
For example, it created a whole class of "solar barons" who used the EU regulation to get free money that now everyone has to pay for, and for the necessary energy storage that the "barons" are not on the hook for. The population here would've preferred to go nuclear, but EU forced it to support this instead.
The EU green deal was specifically anti-nuclear until very recently. What I'm talking about started in 2008 and finished around 2012 (though we're going to be paying for it for many decades).
Yes, it was made pro-nuclear under pressure from France. But even before then, the only countries with more nuclear power than the EU (that aren't also in the EU) are Ukraine (which is on the European grid), Switzerland (also on the European grid), Armenia and South Korea.
Europe's revealed preferences makes it the most pro-nuclear region in the world, by far.
Wut? Their anti-nuclear policy reveals them as pro-nuclear? What new nuclear was built during the last 2 decades, before they had to change the anti-nuclear policy?
The population is pro-nuclear, sure. But the policy was set by the anti-nuclear supporters of the green deal and we had to wait for many years until reality forced them to accept nuclear.
Again, the energy policy of Europe has resulted in them having more nuclear than anywhere else in the world, besides South Korea. Everything you say about Europe as a whole being anti-nuclear is more applicable to almost every other country globally. Because Europe has more nuclear than basically everywhere else.
> What new nuclear was built during the last 2 decades
More than the US, believe it or not. Between new reactors in Finland, France, and Slovakia, around 3,700 MWe versus the US at around 2,200 MWe from reactors in Tennessee and Georgia.
I'm not saying energy policy has been good in EUrope over the last 2 decades, but it's not been uniquely worse than the rest of the Western world.
I don't care about the rest of the world. The rest of the world can do whatever. My state doesn't have natural gas or oil, nor a lot of sunshine or wind, nor a lot of rivers.
I care about my taxes (and I don't mean EU subsidies here) going to solar baron's pocket instead of nuclear reactors.
The few projects you listed - you seriously think that's enough? I don't. We can see in practice that all the money spent on solar and wind led us to over dependence on fossil fuels, not their abolishment, and now we have to spend another absurd amount of money on storage to solve that.
It's a failed anti-nuclear policy that's thankfully reversed now but that doesn't change history. I really don't care about the US, or frankly, Slovakia and France. I care about my own home.
BTW, it's funny that all the projects you listed were started way before the green deal. IMHO you just confirmed what I said.
Germany is the main culprit. There's no plan for fossil fuel phaseout in Germany, or for most of the European countries that are not blessed with almost limitless hydroenergy.
Cheap renewables allowed Europe to quickly slash some emissions, but now they're hitting a hard wall of reality: the wintertime sucks for renewables in Europe.
Germany will exit coal none later than 2038. I guess the rest of comment is just as wrong as the first claim. You still didn't bring up nuclear, I am almost surprised.
Such a plan is currently being prepared for coal. Gas, as a means to cover peaks on short notice, is still needed so, but also much better than coal, especially at significantly lower volumes.
This is a classic case of letting the perfect be the enemy of the good. And revamping huge portions of an energy grid, and generation base, is nothing that is done easily or fast.
> This is a classic case of letting the perfect be the enemy of the good
No. If you say they're exiting fossil fuels, but they're moving on to gas, your claim is just wrong. Gas might be better than coal, but that wasn't the claim.
Oh dear... They have a plan to exit the dirtiest form fossil fuel, one Germany heavily relies on today. I did not say Germany is gonna move to gas, since I didn't read everything, that was just an assumption.
So, what you say is the current plan to exit coal, which you initially claimed didn't exist, is garbish because the result might include some gas. And hence, there is no such plan, and even if there was, said plan wouldn't be feasible because of reasons.
That is exactly getting a (poorly defined) perfect in the way of the good.
Edit: Just realized I replied to another commenter, so please replace "you" with GP.
I have hard time seeing that electricity markets in Europe were designed with a view to achieving a renewable transition (some lib service notwithstanding), so not sure that is a failure of the market as designed.
There are capacity markets, and the article spends a good portion talking about them (or more specifically why they believe energy only markets are superior).
When sources were inherently dispatchable, like coal/oil/gas, reliability was free. Markets have not been updated to reflect the value of reliability. It may be just an oversight of slow moving regulators. Or it may be intentional to allow the growth of unreliable wind and solar without making them bear their own cost of unreliability.
I'm not sure about USA but in Poland whoever mispredicted production/consumption - pays for balancing the network back. So there's quite strong incentive for reliable predictions.
More cross-border capacity would help with reliability as well as making the investments' profitability easier to estimate. This is something Europe at least is investing in.
Maybe you can quibble over the definition of 'collapse', but in each of those three events there was a significant inability of the grid to meet demand (and subsequent involuntary demand curtailment).
The richest people I know (guys in their 30s worth 100 million) all made it through energy trading. Lots of hands in pockets here and is similar to most corrupt privatisation initiatives.
> generators artificially "shut down" to drive up prices
Isn’t that an argument for having a proper market with multiple suppliers? Competitors would normally step in to provide supply at non inflated prices to generate greater revenue.
I wonder how realistic is this? It probably takes multiple years to build anything that generates electricity at scale so competition must be very predictable.
Then you can probably calculate your optimal profit strategy very easily and when you sell something that people have to buy, in some cases, probably just inflating the prices by reducing production is the most profitable strategy. There’s no risk of someone stepping in if it’s most profitable for everyone to just produce enough to inflate prices(if you produce one percent more you earn one percent more but if you produce one percent less and if the price go 10% up, you end up making much more money).
The price for all units sold is set by the highest producer at a any one moment. This led to windfall profits for generators with fixed costs like wind. It's not a functioning market. Imagine if the price of a beer everywhere in the US was set by the highest seller. Every beer sold would be immediately dearer, not cheaper, as it just takes one seller to push the price up.
Its a public utility function. The problem is rationing. Both capex and opex.
Money only exists in this space to try and control things. It's not actually a good profit centre, unless 100% of the profits are hypothicated to the function it implements. The assumption was the market would equipoise to the "best" outcome. Well guess what: it only sort of works. Now we're in end-times for coal and gas look at what coal and gas electricity suppliers do, maximising their profit.
John Quiggin, University of Qld may be one of the last old-school economists who argue its time to walk back from this market madness. Yes, "it works, kinda" but the Kinda here is the massive amounts of market distortion which emerge to make profit, not to further the interests of the public utility function.
Remember, its a public utility. And, its a regulated market. This is not a profit centre, its a function we need, which has been put to market because economists believe their own bullshit and Politicians got on board. It worked, kinda.
Below is the fundamental hypothesis behind electricity markets:
> Efficient plants with low fuel/opportunity costs usually set the price, and prices rise slightly to bring on less efficient plants during peak hours.
You'll see it everywhere someone discusses electricity markets. The only problem is that this hypothesis is wrong in practice …
It's not so much the marginal price that sets which energy source start and stop, but mostly the technical flexibility of the produce mean. First of all, marginal price doesn't really exist in the first place[1], and different means of electricity production have very different ramp-up delay and costs, which is totally unaccounted by the marginal price hypothesis.
[1] and this isn't just the case in the electricity market, but pretty much everywhere: marginal price is a economic concept that just doesn't refer to anything existing in the real world, as illustrated by the work of Nobel Prize winner Maurice Allais.
I like the idea but not sure about the implementation.
Here in deep south Texas they have electricity retailers. What they do is advertise a very low fixed rate, but make it only last for 6 months.
Then if you don't switch to a new provider, you may end up being stuck with a rate that is effectively double what you originally signed up for. Not in the rate that they say they are giving you, but there is some fee that they are allowed to add supposedly related to the real electricity costs from the actual power company, and they make it as high as they can get away with, in order to max out the effective rate.
This has almost nothing to do with the topic at hand, which was a commentary on the value of a functioning market for electricity (I hesitate to call it a "free" market because any electricity market ends up having a lot of rules).
I personally think Gen IV nuclear reactors have stuff-all chance of competing in such a market, but if somebody believes otherwise and wants to put up the dollars to try, all power to them.
I wouldn't say that a technology which would dump a ton of supply, affecting, if not disrupting the market, has "almost nothing to do with the topic at hand". it's unfortunately a bit of a fantasy and years out from being possible due to a natural disaster setting the industry back by yet another a decade but it's totally relevant for a threaded forum.
SMRs are going to have relatively high capital costs and (hopefully) low but non-zero operating costs. They will probably have similar ramping characteristics to coal. As such, they will probably operate like coal - generating most of the time when able to and get their lunch eaten by zero-marginal-cost solar in the middle of the day.
One thing SMRs will absolutely not be used for is as peakers, which is where market design matters is most important for keeping the lights on at an affordable cost.
Both France and Germany have nuclear plants with load following capabilities to the tune of 5% change per minute. That is 50-100MW change every minute for a single powerplant. It might not be peak-peak, but it is certainly going to handle the vast majority of all electricity generation with very small delay.
Sure, I get that you can ramp nuclear plants, technically, but it’s highly unlikely to be economically attractive to build new ones with the intention of ramping them a lot.
If SMRs are built, I’d expect many of them to be accompanied by batteries (either co-located or elsewhere on the grid) to be used as an alternative to ramping.
Too much supply is just as bad a problem as too little & nuclear doesn't have the rapid startup needed to adjust the grid for sudden demand that the markets are intended to accommodate.
It’s money. Look at the cost of nuclear, the real cost with mining, development, construction, maintenance, and decommissioning. It’s way more than the market can bear, and it won’t get any cheaper. You also need a guaranteed pipeline of nuclear operators and an iron clad corporate safety culture to ensure there aren’t any mistakes ever.
I love nuclear tech, but it’s just not feasible today compared to other tech.
Small modular reactors have almost nothing but disadvantages compared to the good old large-scale PWRs.
The ONLY advantage of SMRs is that they are easier to build because only a handful of companies in the _world_ possess technology to build reactor vessels for large-scale PWRs. And none of them are in the US.
The factors cited were inflation and higher interest rates, which are going to be universally applicable.
Cost overruns at Vogtle and others had inflation as a partial factor but the bigger issues, per the DOE:
"Work began with incomplete designs and managers repeatedly failed to realistically schedule tasks. Experienced workers were in short supply and defective work often had to be redone. Workers quit for other jobs and the COVID-19 pandemic led to high absenteeism."
So a pass on Covid impact but the rest is the result of building a huge bespoke power plant. SMRs change all of that to units of mass production.
I'm sure there's still issues to solve there but if nuclear has a future competing against low cost renewables then that SMRs seem to be the only way forward.
Rosatom is exporting nuclear power plants within budget and (mostly) on time.
It's simply a question of expertise and experience. The US and Europe have ignored nuclear power for so long, that most expertise was lost long ago. And each new nuclear power plant becomes a unique snowflake.
That is mostly because there are no more large scale nuclear investments, lot of knowhow has been lost, everything is custom built now on every level of implementation (which SMRs promise to solve), and because people care about the initial investments, not for the TCO. Oh, and politically motivated NIH red-tape for getting some votes on the cost of whole society.
You didn't make an argument, you merely stated something that the respondent disputes. There is a very stable base load in most countries that can be well provided with nuclear. This is especially the case when there are good interconnections between neighbouring countries.
Since they’re small they can be placed far closer to urban hubs and other places that suck electricity.
The last design plans I saw one could fit within a single city block, buried under ground with only 1 story exposed.
> The last design plans I saw one could fit within a single city block, buried under ground with only 1 story exposed.
This is a completely unrealistic plan, designed to lure investors.
An SMR meltdown will produce enough radioactive contamination to make a small city unlivable, at least for a while. So you'll need a full containment building. You'll need emergency generators, coolant pumps, etc.
Then you have a question of security, an easily accessible reactor will provide a great target for terrorism. So you'll need a perimeter around it with armed guards.
Then there's a question of control. A working reactor requires at least two trained nuclear engineers on duty at all times. So each reactor will likely need around 15 highly specialized engineers. That will have to live within a commuting distance.
Sounds bad already. But that's not all. There's also a question of inspections, something like the NRC can be reasonably expected to regulate several hundred reactors. They are not prepared to inspect many thousands of reactors. And the last thing I personally want is a "self-regulating" nuclear industry.
Any _realistic_ SMR power plant will look just like a regular large nuclear plant, except that it'll have multiple reactor units instead of just one large reactor.
They are not "inherently safe". Reactors that produce power (in large quantities) are dangerous because fission products are radioactive, and they produce energy even after the chain reaction stops. So once cooling is lost, these fission products can melt through the reactor vessel and escape the confinement.
Also, accelerator-driven reactors are just bonkers. They make no freaking sense for power generation. They are being investigated because they can produce very energetic neutrons, in quantities that are large enough to transmute some long-lived nuclear waste.
Are you implying that they do not produce more energy than they consume? Conventional commercial reactors release only a tiny fraction of the energy available in the fuel. Accelerator driven reactors make it possible to release more of it. They can also make effective use of thorium.
No. I'm implying that they are completely impractical.
You need to have a system with cryogenic superconducting magnets and high vacuum within centimeters from a reactor producing at least hundreds of megawatts of power (if not gigawatts) within a volume of several cubic meters. You're basically constructing a fusion reactor at this point.
Oh, and parts of your accelerator close to the reactor will become activated, so you won't be able to do maintenance. ITER (the fusion reactor project) is planning to solve this problem using robots.
Fission reactors solve this by using VERY THICK pipes made of special steel, with careful inspection of every single weld. So once the vessel and its connections are placed, they stay inside the shielded area until it's time to decommission the reactor.
Part of the reason is because they none have actually been built yet, and there would take even longer to perfect them. You could say that that is a reason for that is under-investment, but you can't say things like "they solve all our climate change-related challenges" about something that doesn't exit yet...
Nuclear so far is very expensive and hasn't shown a great price trajectory. It remains unclear if new designs would realize better price points if they were to become reality.
Invest proportional to the risk. Nuclear is a very risky investment. But it might pay off. The financial risk level is why it is so dependent on state subsidies and tax payer money. Without that, nuclear operators would be going bankrupt and no sane investor would risk their money on it. The risks include lengthy delays, cost overruns, policy issues, safety related cost, and much more. Some of those things might be fixable. But there are no guarantees. And without prices for nuclear energy coming down substantially, the resulting technology is not viable in the market. It might happen but it's not looking like that would happen before there's a few more tw more renewable capacity online in the next few decades.
Solar, wind, and other renewables are very popular investments right now. There are very clear learning effects visible when implementing them resulting on year on year cost reductions. These investments have a very reliable ROI. A very predictable and quick implementation. And they are easy to scale. That's why so much new capacity is coming online vs. the absolutely pitiful amounts of nuclear being added to the grid. The price gap is basically an order of magnitude and growing. You get about 10x more capacity in renewables for the same money. The realized capacity gap also is much larger for the same reason.
Yea it always seems like there’s some technology right around the corner that’s a better plan than the renewables we could be installing right now. Might as well use petrochemicals for another couple quarters!
I am still a fan of the way Texas handles its energy markets. The failures that happened a couple years ago was terrible and Texas screwed up big time but I still think its markets are better.
This is of course anecdotal but it always seems like most other markets in the US are not as efficient in terms of infrastructure and pricing. In Texas you have what I consider the more public utility piece, the transmission that is split between two companies. I am sure there are areas in Texas that struggle but I found Texas transmission builds and maintenance to be a lot further ahead then the other states I have lived in.
I always really appreciated picking my retail energy provider. There are some shenanigans here so customers need to pay attention to the pricing BUT I appreciated how this allowed more transparent pricing on a whole for everyone. I am paying a separate company for the transmission piece and then paying the generation through a retail provider who is setting a price for me and then essentially buying that capacity on the market. In other states it always feels like a struggle for the single "public utility" company to argue their way to increase or decrease rates. So instead of having many different energy generation plants which can include solar, wind, battery storage etc, I am stuck with a single company that is publicly traded. Maybe they do need to bump up rates to serve demand or maybe they are trying to also get some more profit out of it.
I also always appreciate the amount of data you could get in Texas.
We develop software for the german energy market (just the economic parts of it). If you are interested, look the following (we germans loooove rules and specifications :D) https://www.edi-energy.de/index.php?id=38 This are just the specifications for exchanging data between participants.
A sprawling read that is difficult to follow. In particular the critical design elements of an "electricity market" are never defined, let alone convincingly defended.
Market dynamics is a complex interplay of market design (which influences participant behavior), market maker incentives and regulation etc.
There is no single alternative to a monopoly market. Turning every nano-Watt of electricity consumption into in incessant trade and emulating money markets is the market intermediary dream but it is not necessarily optimal.
Here in South Africa, energy production is starting to move more and more to individual households and businesses, because our government power utility is failing. We don't have electricity markets, but that seems to be changing.
Hopefully we will get robust electricity markets here. Not because I think they are intrinsically a great thing, but because they are less terrible in the SA context.
Electric water heaters have long been in demand response programs, but new upgrades improve their ability to shift energy based on real-time conditions without leaving customers with cold water. Roughly 18% of household energy goes towards water heating, though many buildings still use fuels like natural gas.
Would love to hear more on this point. Which companies are doing the integration?
For my house, I put in a heat pump with a decently sized storage tank and all it takes is a simple timer - it comes on at 10am and heats until the tank is at least 60 degrees C (for Legionella prevention).
This works to power it entirely from my solar almost all the time (I've only had it for a year, but I think in that time over 98% of my water heating would have been directly from my solar). Where I am, there tends to be surplus solar energy in the grid at that time anyway, so where I am at least, you don't even need anything super smart that tracks real-time energy pricing or anything. As long as you avoid the morning and evening peak, which this always does (it's finished heating usually well before 1pm, and the peak doesn't usually start until 4pm at the earliest in Winter).
There's a lot of activity around this topic in Europe. E.g. several companies with innovative products in the UK, Netherlands, and Scandinavia. Also changing regulations around gas are creating incentives for houses to modernize. A lot of home owners are spending lots of money in this new market.
One company that was promoted on the Fully Charged Youtube channel a few times is Myenergi. They have a range of products around managing energy in your house. If you combine them, you can do things like defining rules for when to use solar energy from your roof to charge your battery, heat your boiler, charge your car, or sell it back to the grid. Seems like a smart solution. There are many such solutions in the market.
Nice channel to check out if you want to know more about this. They regularly review products and solutions in this space.
.png){kind=link}
Markets are great, but there are no pricing signals for reliability. You won't know that your grid will collapse at the first strong breeze, until it happens (see: Texas).
Theoretically, it can work because companies might invest in reliable generation, in the hopes of getting $$$$$$$$$ when the spot price goes up through the roof. But in practice, pretty much nobody wants to wait 5-10 years between "income events".
And it's even worse in Europe. It's just a story of utter market failure.