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Bidding error sees Finnish day-ahead power price tumble

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Re: Bidding error sees Finnish day-ahead power price tumble

#21

Post by ttkari »

sigurdjs wrote: post #15
patall wrote: post #10

Earlier quoted context omitted.

They placed a bit at that price doesn't mean the market price will be that high.

It is an auction and everyone pays the same price. During the afternoon tomorrow every household in Finland will be paid significantly for their power usage unless they have a fixed price agreement, which is not that common

According to Finnish Energy Authority (energiavirasto.fi), at the end of 2022 only 13,7% of customers had a contract where pricing is tied to the hourly market rate. It is much more common to have either a fixed price contract (usually for a term of 12 or 24 months) or a contract where the pricing is set by for example monthly averages of the market price.

Re: Bidding error sees Finnish day-ahead power price tumble

#22

Post by kragen »

sigurdjs wrote: post #11
patall wrote: post #7

Earlier quoted context omitted.

I think it's all there. The company in questions bid provides ~5800 MW for 24h, paying 203€ to those that use that power. Other companies will have accepted that bid (automatically) and will now tomorrow expect that power to be delivered (and get money for it), while other providers are planning to do something else with their power. The company mentioned may or may not have that much power available.

They cannot produce that amount of power and needs to buy it back on the secondary market. Will likely cost around 100Meur.

this is similar to how knight capital lost 440 million us dollars one afternoon in a trading bot bug and had to get merged with one of their competitors. this isn't quite that big

Re: Bidding error sees Finnish day-ahead power price tumble

#23

Post by rsynnott »

sigurdjs wrote: post #2

Very strange that no one noticed this error as it was ~60% of Finlands average daily electricity consumption

… Wait, how do you think modern markets _work_? Hint: it is not an elderly man writing numbers on a ledger with a quill pen. There is not generally a human in the loop.

Re: Bidding error sees Finnish day-ahead power price tumble

#24

Post by sigurdjs »

ttkari wrote: post #21
sigurdjs wrote: post #15

Earlier quoted context omitted.

It is an auction and everyone pays the same price. During the afternoon tomorrow every household in Finland will be paid significantly for their power usage unless they have a fixed price agreement, which is not that common

According to Finnish Energy Authority (energiavirasto.fi), at the end of 2022 only 13,7% of customers had a contract where pricing is tied to the hourly market rate. It is much more common to have either a fixed price contract (usually for a term of 12 or 24 months) or a contract where the pricing is set by for example monthly averages of the market price.

My mistake! Assumed all Nordic countries were the same

Re: Bidding error sees Finnish day-ahead power price tumble

#27

Post by temp112123 »

keule wrote: post #25

I understand put options and short selling, but how on earth can the price of a commodity sink below zero? How can you make a „sell“ order that is negative? Can someone explain please?

You need to dump product you can't store.

Happened to oil during early covid: https://www.nytimes.com/2020/04/20/business/oil-prices.html

Re: Bidding error sees Finnish day-ahead power price tumble

#29

Post by sigurdjs »

rsynnott wrote: post #23
sigurdjs wrote: post #2

Very strange that no one noticed this error as it was ~60% of Finlands average daily electricity consumption

… Wait, how do you think modern markets _work_? Hint: it is not an elderly man writing numbers on a ledger with a quill pen. There is not generally a human in the loop.

Other regulated commodity markets have what is called a «reasonability limit» avoid this exact kind of scenario. It is very concerning that the exchange didnt have any automated alerts that could trigger for example a phone call to verify that the order is correct.
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