How can one benefit from this living in Germany? Who bids at these prices? I would love to have negative prices to, for example, mine bitcoin or run server farms. How to get off the retail market is the question I guess.
Very good Julien. So, how do we explain price spikes above the short run marginal cost of gas-fired power generation? My theory: gas-fired plants can’t recoup fixed costs at marginal prices, and withhold DA bids until prices rise high for long enough to lure them in. Perhaps it is even quite easy to coordinate in small markets with just a handful of large thermal plants?
Not discussed is the importance, or lack thereof of day ahead. In France, day-ahead accounts for perhaps 3% of overall market volume, by contrast, in Spain, day-ahead is circa 75% (market volume) - both numbers come for the French and Spanish regulators (2021) - might be a bit out of date - but you get the idea. Germany is a bit of a mix forward markets and day-ahead. Thus the problem is: what are we really looking at? It is possible to get an idea in France - day-ahead is mostly irrelevant - it is the forward markets (weeks, months, years) that count. Set against that, day-ahead in Spain gives a good view - & it is likely that day-ahead France vs day-ahead Spain drives the x-border back and forth (mostly in the favour of the French btw)
One question not answered: sunny place Spain - when its hot (& thus high a/c/ demand) it is usually sunny. Is it beyond the wit of man or markets to deliver a localised solution (some pv-powered a/c plus cold storage for use when the sun goes down). Given the realities of Spanish power demand - with peaky prices this would spoint to a gross market failure ("markets driving innovation" & similar utopian fantasies). In the case of France, the nuke - hydro dynamic is something of a problem in spring since much of the hydro is "must run" = use it or lose it as EdF remarked to me some years ago. Which will make the problem worse for France as it, in theory, builds out more renewables, yet another power block. As for "deamand flexibility" ... I recall assorted EU directors (Marie Connelly) whining on about this more than a decade ago - and assuming that markets would do it. They won't. You want a power system fit for purpose? you engineer it. Markets have little to no role, until the engineering is finished - they they do a bit of cost optimisation & even then - from the stats provided they do a poor job, under marginal pricing.
Very interesting analysis. I would really like to see a similar analysis for different grids within the United States.
I think that it is also very important to add that Western Europe has by far the most expensive electricity prices in the world (along with small island nations). USA has an average price of 16.2 cents per kWh. For comparison, you can see here:
How can one benefit from this living in Germany? Who bids at these prices? I would love to have negative prices to, for example, mine bitcoin or run server farms. How to get off the retail market is the question I guess.
Very good Julien. So, how do we explain price spikes above the short run marginal cost of gas-fired power generation? My theory: gas-fired plants can’t recoup fixed costs at marginal prices, and withhold DA bids until prices rise high for long enough to lure them in. Perhaps it is even quite easy to coordinate in small markets with just a handful of large thermal plants?
Very interesting analysis.
Not discussed is the importance, or lack thereof of day ahead. In France, day-ahead accounts for perhaps 3% of overall market volume, by contrast, in Spain, day-ahead is circa 75% (market volume) - both numbers come for the French and Spanish regulators (2021) - might be a bit out of date - but you get the idea. Germany is a bit of a mix forward markets and day-ahead. Thus the problem is: what are we really looking at? It is possible to get an idea in France - day-ahead is mostly irrelevant - it is the forward markets (weeks, months, years) that count. Set against that, day-ahead in Spain gives a good view - & it is likely that day-ahead France vs day-ahead Spain drives the x-border back and forth (mostly in the favour of the French btw)
One question not answered: sunny place Spain - when its hot (& thus high a/c/ demand) it is usually sunny. Is it beyond the wit of man or markets to deliver a localised solution (some pv-powered a/c plus cold storage for use when the sun goes down). Given the realities of Spanish power demand - with peaky prices this would spoint to a gross market failure ("markets driving innovation" & similar utopian fantasies). In the case of France, the nuke - hydro dynamic is something of a problem in spring since much of the hydro is "must run" = use it or lose it as EdF remarked to me some years ago. Which will make the problem worse for France as it, in theory, builds out more renewables, yet another power block. As for "deamand flexibility" ... I recall assorted EU directors (Marie Connelly) whining on about this more than a decade ago - and assuming that markets would do it. They won't. You want a power system fit for purpose? you engineer it. Markets have little to no role, until the engineering is finished - they they do a bit of cost optimisation & even then - from the stats provided they do a poor job, under marginal pricing.
"Alternatively, could highly automated processes be implemented relatively inexpensively to capture price variations between countries?"
Depending on utilization obviously, but could datacenters be one such highly automated process? Opex is basically only electricity
Transmission costs are higher in Germany, but downtime is also incredibly low. Average downtime in 2020 for residential users was about 11 minutes pa (https://www.bundesregierung.de/breg-de/schwerpunkte/klimaschutz/stromausfall-blackout-2129818)
The corresponding number for the US is 5.5 hours (https://www.eia.gov/todayinenergy/detail.php?id=61303)
So in a way Germany pays a premium for a very reliable electricity supply. Whether that's the right trade-off is a different story
Retail prices appear to be:
Spain 22 cents
France 26 cents
Italy 33 cents
Germany 40 cents
https://qery.no/consumer-energy-prices-in-europe/
Germany's prices may decline if transmission and system costs have more long term value
Very interesting analysis. I would really like to see a similar analysis for different grids within the United States.
I think that it is also very important to add that Western Europe has by far the most expensive electricity prices in the world (along with small island nations). USA has an average price of 16.2 cents per kWh. For comparison, you can see here:
https://www.globalpetrolprices.com/electricity_prices/