This group brings together the best thinkers on energy and climate. Join us for smart, insightful posts and conversations about where the energy industry is and where it is going.

Richard Brooks's picture
Co-Founder and Lead Software Engineer Reliable Energy Analytics LLC

Inventor of patent 11,374,961: METHODS FOR VERIFICATION OF SOFTWARE OBJECT AUTHENTICITY AND INTEGRITY and the Software Assurance Guardian™ (SAG ™) Point Man™ (SAG-PM™) software and SAGScore™...

  • Member since 2018
  • 1,477 items added with 627,830 views
  • Nov 4, 2020
  • 1019 views

We see cracks in the wholesale market approach to pricing electricty. Traditional approaches are resulting in more frequent negative LMP results, which are simply unsustainable. We need to find a better way to value electricity. This message came through loud and clear during a meeting today discussing the future of Irelands Electricity Markets hosted by Cornwall Insight and within the article linked below. There was some talk of possibly setting reference prices, but there is no clear answer on how to fix the existing wholesale market pricing problems. The problems with Wholesale Capacity and Energy markets are symptoms of the same problem; how to value electricity (both capacity and energy) in a world dominated by an abundance of electricty coming from increasing amounts of renewable resources, which have no inherent variable fuel charges that compete with other generators that rely on fuel to generate electricity. This is a big issue today and it's getting bigger, as the Cornwall Insight presentation indicated.

Richard Brooks's picture
Thank Richard for the Post!
Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.
More posts from this member
Discussions
Spell checking: Press the CTRL or COMMAND key then click on the underlined misspelled word.
Matt Chester's picture
Matt Chester on Nov 4, 2020

When I say throw power away, I literally mean throw power away. Perez and Rabago were the first to spell this out. Others had suggested some spill, but these guys recommended upwards of 30% to 35% spill. 

Energy markets are weird, but goes to show that it's a unique industry and can't be looked at like other areas of the economy

Bob Meinetz's picture
Bob Meinetz on Nov 5, 2020

Richard, renewables disciples are at it again. Instead of acknowledging the problem of intermittency that has plagued solar and wind from the start, now they're blaming "conventional thinking."

Of course...we're not looking at it the right way! Presumably, we can learn to love not having enough energy when we need it, of having too much when we don't, if we just think outside the box.

"Demand side needs to learn how to dance to the rhythm of the supply side."

Actually, no. It doesn't. The public, de-humanized as "the demand side",  needs to stop accepting this idiocy at face value, to stop allowing profiteers to exploit electricity consumers who have no choice but to accept it as the new "rhythm" of how they must consume electricity.

"Traditional approaches are resulting in more frequent negative LMP results, which are simply unsustainable."

No, traditional approaches recognized that a free market in any commodity is impossible when supply is provided by a monopoly.

"...there is no clear answer on how to fix the existing wholesale market pricing problems."

Let's start by admitting a free market in electricity doesn't exist, shall we?

 

Richard Brooks's picture
Richard Brooks on Nov 5, 2020

Bob, How about we agree that the free market that is currently in operation is flawed and is deeply in need of a makeover.

Bob Meinetz's picture
Bob Meinetz on Nov 5, 2020

Again, you're assuming a free market (either wholesale or retail) can exist for a commodity when its retail sellers are monopolies.

In a truly free market, both wholesaler and retailer stand to gain by providing end-use customers with the best value for their money. With electricity, end-use customers don't get the best value for their money, or the worst. Because their provider is a monopoly, they get whatever their utility sends over the wires - take it or leave it.

Though for a utility there may be an incentive to provide adequate service for their customers so it doesn't get in hot water with the local public utility commission, there is zero incentive to give them great service. They make the most money buying electricity at the lowest price they can, and selling it at the highest price; by forcing customers to engage in "demand response" programs so they won't have to buy sufficient power in advance: "It's not that we can't generate enough electricity, it's that customers want too much!"

Needless to say, there is a significant conflict of interest between utilities and their customers, and the last thing we want for society is a truly free market - where monopolies can charge customers whatever they want.

Conventional thinking recognizes that because renewable electricity won't always be available when it's needed, it should cost less - not more; that end-use consumers will always want the most value for their money. I wouldn't expect that to change anytime soon.

Daniel Duggan's picture
Daniel Duggan on Nov 6, 2020

When 30% -35% of RE is dumped the price of the remaining 65% - 70% sold must be increased by approximately 50% to get the same return on investment for the wind farm developer.  One way or another, the consumer pays for RE and for the back-up power, storage and grid stabilization necessary.

With perhaps a very few exceptions, variable RE always results in more expensive electricity for the consumer than would be the case were conventional power generation utilized.  That is why we have government mandated RE targets and CO2 tax which penalise conventional generation and heavily subsides variable RE.

Some people believe this to be a good policy, others do not.  Here in Ireland we now have 40% variable RE with a 70% target by 2030, and I pay more than 25c / kWh for my electricity.  Meanwhile, the vast majority of Irish greenhouse gas is produced by our seven million heavily subsidized cattle each of whom emits 220lb of methane annually.  The EU cow subsidy is so enormous that in 2018 74% of Irish farmer’s income was provided by the EU taxpayer; three dollars cow subsidy for every dollar earned on the farm.   The global warming potential of methane is 110 times CO2 over 10-years, and 30 times over 100 years.

 I hope that by subsiding seven million methane producing cattle in parallel with ever-increasing CO2 tax on 4.5 million human residents, my government has chosen the right path, because all of us consumers are paying for it!

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »