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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

#31

Post by euroderf »

miohtama wrote: post #17
YetAnotherNick wrote: post #13

Earlier quoted context omitted.

Can't officials just place a bid to buy power at whatever price(negative?) to even out the extra power that is not there?

Sales are final. The seller (Norwegian Kinect Energy) will need to negotiate with other major marker participants to bail them out. But it’s likely in the interest of everyone of not to let them collapse. The markets would be in disarray if there would be undo button for a trade. Preparations need to be made by large industry participants for every daily allocation.

It's Scando, so i would imagine that if the relevant ministers in FI SE NO all sign off, and no major market players (like Fortum) object, then they'll unwind it and fall back to replaying the previous day's bids. Or is this impossible ?

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

#32

Post by euroderf »

sigurdjs wrote: post #29
rsynnott wrote: post #23

Earlier quoted context omitted.

… 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.

Nor a suitable test suite to catch this kind of thing preëmptively.

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

#33

Post by teaearlgraycold »

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?

Happened with crude oil in 2020. If you’re still going to produce it but have no where to store it you need to pay people to receive a shipment of 10,000 barrels.

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

#34

Post by fenixnuke »

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?

Happens frequently in CAISO midday during shoulder months (https://www.caiso.com/PriceMap/Pages/default.aspx). Renewable generation produces a lot (sunny, decent wind) and electricity usage is so low, that supply exceeds demand. Electricity has to go somewhere to keep the grid balanced, so the utilities will wholesale electricity at negative rates.

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

#35

Post by keule »

temp112123 wrote: post #27
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

Ah thank you. I remember now. Still weird that this can also happen (and is allowed to happen) in an energy market.

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

#36

Post by iaw »

Unless you have a strong familiarity with ISO/FTR markets this article will be pretty opaque.

The short version is that electricity delivery forecast is managed by a financial optimization process. Market participants (generators, line owners, and consumers) basically buy and sell their electricity in advance. Sometimes as far ahead as 2 years, all the way up to the day before (at which time the real time market takes over IIRC).

So in addition to the primary stakeholders you have financial participants that buy/sell electricity without having access to any apparatus for the generation/transmission/consumption. These participants sometimes have very manual processes for buying their contracts.

My guess would be some poor fresh grad was under supervised and transposed the source and sink address. Instead of buying at 203.40 they sold at 203.40 by reversing the source and sink.

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

#37

Post by Obscurity4340 »

teaearlgraycold wrote: post #33
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?

Happened with crude oil in 2020. If you’re still going to produce it but have no where to store it you need to pay people to receive a shipment of 10,000 barrels.

So why don't they put that towards their own capital in terms of expanding retention capacity?

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

#38

Post by upsuper »

It's only -€0.2/kWh, not that bad at all. I've been seeing spot price predicted to be -A$1/kWh in several states in Australia (which is the lowest possible bid allowed by regulation). Even in Europe, I recall seeing some post desperately trying to figure out how to curtail their solar export because the price was reaching -€0.34/kWh. Not sure an error of -€0.2/kWh is anything newsworthy TBH.

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

#39

Post by djbusby »

Obscurity4340 wrote: post #37
teaearlgraycold wrote: post #33

Earlier quoted context omitted.

Happened with crude oil in 2020. If you’re still going to produce it but have no where to store it you need to pay people to receive a shipment of 10,000 barrels.

So why don't they put that towards their own capital in terms of expanding retention capacity?

The traders have no place to store it. No method to retain, unless you pay rent, which puts pressure on your trade.

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

#40

Post by hokkos »

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?

Nowadays it is mostly renewable subsidies without a clause for negative price, marginal cost is 0, if they are paid at a fixed price they will produce and dump it on the market, in Nederlands they big glasshouse turn on the light when the sun is at its peak and earn money. And there is also inflexible baseload, that can't cycle up and down at the rate of changing demand or renewable ramp.
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