Power Worth Less Than Zero Spreads as Green Energy Floods the Grid

Now, there are situations where demand response makes economic sense; just not enough by far to balance a huge amount of variable renewables.

Basically this is a problem because a bunch of existing incumbents are probably going to go bankrupt, or at least have to write down a lot of capital equipment and invest in new technologies. Boo-hoo for the incumbents, but it's good for consumers and good for society.

Also keep in mind that these are energy spikes that cause negative prices, whereas most industrial uses need a constant and even supply. These spikes are countered by periods of little to no energy.

This is the biggest problem with (most) renewables, they cannot entirely replace coal or nuclear energy for that reason. Energy storage (at cost) is an unsolved problem.

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.

Otherwise there'd be someone just consuming electricity for pay. I don't think this is "retail."

Germany has been attempting to make it work by turning the surplus electricity into hydrogen gas (and then maybe to something else, methane, diesel, ammonia, etc) by splitting water.

http://energystorage.org/energy-storage/technologies/pumped-...

  Richard Reynolds, who managed the Darbys’ Ketley
  ironworks, near Coalbrookdale, in the 1760s, introduced
  cast-iron plates and then cast-iron rails to protect the
  wooden rails from wear and tear or to replace them. He
  had another reason as well for using iron: as an
  ingenious storage system. A depression following the end
  of the Seven Years’ War in 1764 reduced demand for iron
  products. Prices fell. Reynolds wanted to keep his
  furnaces going and his employees at work. Rather than
  warehouse the excess production, Reynolds used it for
  rails. Then, if iron prices went back up, he could have
  the rails removed and sold. Reynolds “tried it at first
  with great caution,” his granddaughter recalled, “but
  found it to answer so well, that very soon all their
  railways were made with iron.”

In a normal demand response scenario, when too many people are demanding energy, certain loads are turned off or scaled back (ACs/Thermostats/Water Heaters).

Water heaters in particular have been shown to have been one of the better time shifting solutions. Seems like you could do the same thing with both water heaters and AC systems as most buildings have quite large thermal masses. For AC its a bit lame because the hottest time of the day is the best producing for PV frequently so shifting can be tough, but perhaps around the beginning of the day and end of the day there is some opportunity to precool homes before people return and then back off as the price goes above 0, that sort of thing.

These systems spin up quickly (at least in residential homes) and are a substantial fraction of our energy use.

(This, incidentally, is a reason I've heard power engineers give for preferring natural gas to e.g. coal, aside from cost considerations: generators are faster to start and stop.)

From what I understand, they recently have gotten cheap enough that they are starting to be adopted on a large scale.

And one advantage they have over many alternatives is they can respond instantly, so they can be used to deal with the momentary shifts in the supply-demand balance that all electric utilities experience on a daily basis. As a result they save a lot more money than just dealing with the daily cycle.

https://en.m.wikipedia.org/wiki/Ammonia_production

> Ammonia production depends on plentiful supplies of energy, predominantly natural gas. Due to ammonia's critical role in intensive agriculture and other processes, sustainable production is desirable. This is possible by using renewable energy to generate hydrogen by electrolysis of water. This would be straightforward in a hydrogen economy by diverting some hydrogen production from fuel to feedstock use. For example, in 2002, Iceland produced 2,000 tons of hydrogen gas by electrolysis, using excess electricity production from its hydroelectric plants, primarily for the production of ammonia for fertilizer.

The only groups that can afford to do this, are one's who can use clean energy government subsidies to bid in their cost of production at below zero, and essentially pay to produce energy on the power grid.

If you think clean energy should get a preference on the powergrid for dispatching energy, that is fine, and many places in Europe do it well and reliably. However, in this case, real time energy markets are probably not the best reflection of what incentives are truly at play.

An example of this is that clean energy gets an unfair advanatage in that it's weaknesses are not exposed. It is good to provide an economic incentive for the generators to need to perform better.

An example of this is wind plants in NY. They get energy subsidies for producing power, but not necessarily producing power on the power grid. So they can create energy, and never supply anyone with it, and get subsidies per MW for this. You might think the best way for them to double their income by

1. getting subsidies and

2. actually getting paid back the real time energy price on the power grid

would be by supplying power when it's needed by buying batteries and putting that energy they create (when the wind is blowing at night for example, when noones needs it) into the power grid when demand is high, at maybe 5pm on a hot summer day when everyone has their ac cranking, but it turns out that costs money? And they are already getting free money. Some power plants are starting to do that, but they could have easily done that a decade ago.

I believe we should have clean energy, and do what it takes to get there, that's why I specialized in Electric Power, but I think the way it's currently set up in the real time markets creates some preverse incentives that hinders optimisation in the field.

While clean energy is nice (solar panels, wind turbines) they could use alot of improvement on their efficiency and integrate batteries into their substation design. Many do not because it is too profitable as it is.

It's also important to note the people getting paid these subsidies are venture capitol firms funding these clean energy substations. They are not green tree hugging people, and most of the companies have an incredibly diverse portfolio that does not reflect a loyal dedication to clean energy cause. The profits they receive from these government funding go back to VC firms to be reallocated to...well.. whatever they see fit and many times it has very little to do with powergrid stuff at all, much less clean energy. This is free money for venture capitalists...think about that.

It's a very interesting market because people's idea of ethics and moral rightness are able to blind some very basic abuses in the system that degrade the performance, reliability and overall amount of clean energy produced on the power grid.

[0] https://en.wikipedia.org/wiki/Regional_transmission_organiza...

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.

These non-generation solutions exist, but utilities love to just install more generation because it's in their playbook and they don't want to innovate.

[1] https://www.forbes.com/sites/jamesconca/2016/05/16/natural-g...

Unless it affects grid reliability. Energy is not just a market. It's something that underpins modern society and the modern economy. I, for one, do not want my power to go out at 7pm because demand is peaking, traditional plants had to close, and the sun is going down.

With current technology, that means you need sufficient generating capacity from traditional sources to cover nearly 100% of your peak capacity needs--otherwise, on a day where the wind isn't blowing and the sun isn't shining, you can't produce enough electricity.

Current renewables subsidies results in a broken market structure: the market needs conventional generators, but the subsidization of renewables makes it unattractive to build those generators. A "well functioning market economy" does not eliminate incentives to produce products that people need.

You say that - up until the day there is a brownout on a cloudy, yet boiling hot day, because there is little sun and no wind, and no one wants to build non-economical power plants.

Because with negative electricity prices, the obvious "good" investment is in peaking power plants. And considering that the best spots for hydro are already well exploited, it means fossil fuel. Natural gas is the best but newer coal plants, like the one they are building in Germany can do that to some extent.

https://www.duke-energy.com/home/billing/rates

TOU summer rates:

23.456¢ per on-peak kWh

11.945¢ per shoulder kWh

7.012¢ per off-peak kWh

vs fixed summer rate of 10.369¢ per kWh.

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

I'd like to point out that I would LOVE this feature. I often throw laundry in, go do something else, and completely forget it's in there.

https://www.amazon.com/gp/product/B00MVFF59S/

https://www.amazon.com/Intermatic-HB114C-Heavy-Appliance-Tim...

If the wind PTC were to be renewed in the future, it could be structured so as to avoid negative-pricing incentives. Instead of $N dollars per megawatt hour, it could be something more like "up to $N dollars per megawatt hour, where $N <= the current average price paid to all generators." At a cap of $23 and current market price of $10, the wind generator would get $10 of tax credit per MWh. At a current market price of $35 the wind generator would get the full $23. State and local incentives would also need similar conditionals to eliminate all negative pricing incentives.

IMO a change like this would take a lot of wind out of the sails of fossil generators decrying "irrational and unfair" renewable tax credits. But it would not actually solve the overarching problem of unprofitability. The things mostly killing profitability for threatened fossil plants are lower price spikes and lower median prices. Ensuring slightly-above-zero prices instead of negative prices won't save them.

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.

https://www.ft.com/content/ba6bd46a-1d75-11e8-956a-43db76e69...

> 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.

Not until you tell us where you live, because I'm not going to backtrack by looking up which state has $0.28/kWh electricity. Though without that knowledge, I'm going to guess something something supply and demand.

Even with solar they charge me $10/month to be hooked into the grid, even though they’re using that same connection to sell my excess premium renewable energy to others.

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

Utilities also over installed a lot of generation capacity after the blackouts in the 2000s. We are still footing the bill for all the natural gas plants they built out of fear for future blackouts. Electricity demand has been flat since 2008, and many generators don't get used much (yet rate payers still paid a guaranteed rate of return to the utility to build the plants).

I think you gave the answer yourself. If you prefer the scientific method, take all the states and the percentage of renewables and do a plot. You will see mostly a line if you do not use the fake numbers (ex: 0.15 often reported for California instead of 0.28)

Some industrial customers have the ability to automatically ramp equipment up and down or schedule maintenance for when they know power prices will be high.

CA having a large amount of intermittent renewable power sources means your grid has to spend more on storage or peaker plants, dirty gas plants that can ramp up and down quickly to match load. You pay for that in a higher bill.

I don't know if you ever look at the pamphlets PG&E send you along with your bill, but it seems every month they're announcing a rate hike, with a meeting about it that's open to the public.

Maybe someone who hasn't yet thrown away one of those pamphlets could quote the supposed reason for one of their rate hikes. They always have some excuse for doing it.

With a price hike of something like 1% to 2% every month or two, it's a wonder we're not paying much, much more.

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...

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

It's fairly typical 'state of the industry' coverage, with no real surprises.

"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.

Some types of generators have long ramp-up/ramp-down times so it can actually be cheaper to keep them running and pay someone to consume the excess power they're producing compared to how much it would cost to stop them when the energy they're producing is no longer needed and then start back up again when it is. Additionally, some other types of generators (wind and solar) receive tax credits for every kWh they produce so even if you lose money selling the energy you can come out ahead when factoring in the tax credit.

In most (all?) cases utilities cannot actually set their own price structures without sign off from regulators, so the onus is essentially entirely on utilities themselves to level out their costs (with storage or more flexible generation).

A control dispatch system monitors/estimates demand and sends pricing signals to the generators in an effort to match that demand. So reducing price when there's oversupply and increasing price when there's undersupply in an effort to balance load demand and generation supply.

Nuclear and coal plants produce a baseline output when they're on and take a long-time to turn on/off so their baseline bid is nearly zero. As long as they get a penny for a MWh they'll stay on because they make their profit in they high demand hours.

In a system without wind (solar is less of an issue because it's easier to predict) this design works fairly well at moderating power generation relative to demand.

Adding a renewable that's not properly predicted to this system for a few hours leads it to try to "turn off" some baseline generation if these hours are already low generation. If that baseline is priced close to zero then the pricing has to go negative.

Hope that makes sense.

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.

Here's a good lecture that dives into some structures and why it's complicated: https://youtu.be/tsfBewWIF9c?t=21m47s (this is the market structure bit, the first chunk is all about renewables in new england)

Get your wonk hat on, you're going down the rabbit hole. Your econ-style graphs start around the 26:30 mark.

If it was a simple explanation, we wouldn't have these issues. Complex systems produce chaotic results.

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.

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

https://www.gatesnotes.com/Books/The-Grid

https://www.gatesnotes.com/About-Bill-Gates/Best-Books-2016

You can go read more about how all of this works, but I understand it's actual work, and the topic is complex enough to span beyond stereotypical litmus test viewpoints on both convservative and liberal sides, which makes people immediately shut down. That's the best way for media to control people, is to polarize them so they are mentally too close minded to even explore the possibility that anyone in the field of "clean energy" might be engaged in corruption. (oh no! I thought only people who sell oil do that!).

Exposing pricing incentives to clean energy could encourage more generators to increase performance and reliability. Right now, they throw away roughly 70% of the energy and easily 30% of it could be saved and put into the grid and supplied to people if they had any reward/loss mechanism other than receiving flat government subsidies for simply existing.

To believe that clean energy doesn't need a proper incentive system like everything else is fine. Europe does this well, but then the discussion should center around whether real time energy pricing markets should exist at all. To me, it's debatable. I think the fundamentals are sound, but it's too complicated of a system for the average person to understand, so politics rules the compass for how much corruption is at play. That's never a good thing. We would probably be better off operating like how Germany operates.

Still, wind turbines and solar panels could do better on their energy efficiency...

Acting like clean energy generators should get a free pass, free funding and never be reviewed on performance or reliability metrics or incentivised to perform better is like saying "my child is a genius. He's two years old, but he deserves to be at Harvard. He doesn't need to do homework, or work at anything in his life/ He's my son, hes entitled to all the success in the world because he has "potential" and is objectively more gifted than the other competitors".

no, you need to work at things, and get better. Solar panels and wind turbines need to get alot better. They have gaping holes in their performance metrics, all which can be fixed if they could profit from getting better.

I challenge you to a test that requires holding more than one thought in your head for 5 minutes. Go find one clean energy company in the U.S. producing solar or wind. The actual company who funds it, and follow the subsidy money. Where does it go? Does it go to power your home? Go find out, tell me where it goes....