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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

#71

Post by upsuper »

grecy wrote: post #56
upsuper wrote: post #38

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.

> -A$1/kWh in several states in Australia (which is the lowest possible bid allowed by regulation) It's telling they regulate the price and won't allow it to go "too low", just like they halt trading on the stock exchange if things go down too much. Free market my backside - can't let those profits dip!

The regulation applies in the opposite side as well. I think the highest bid allowed is like A$16.8/kWh or something like that.

It's not fully clear to me how the market work as a whole. I learnt that generators may have swap contracts with retailers and big users, which, based on my understanding, can distort the price to arbitrarily low, because generators get paid for the difference from the other side regardless of spot price, so they can set the lowest possible to ensure they can dump their power to the grid.

Also when it's predicted to be this low (or that high), there is likely some operations (market or not) behind the scenes to level the price. Usually when it gets to the time, the actual spot price has been in a reasonable range.

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

#72

Post by burnerburnito »

vGPU wrote: post #55
bongobingo1 wrote: post #44

Earlier quoted context omitted.

Without trying to fall too hard into a potential late-stage-capitalism hole, what is the advantages on trading like this? Beyond the advantages of making money on futures. I guess the buy/sell in advance lets generators etc fund projects ahead of time (maint, expansion, etc) instead of always living hand to mouth on "real time sold" and without having to land "huge multi-year contracts", so the market can be a bit mo…

The idea is to buffer changes in price. Started with crops originally iirc. Say I know I need 1 ton of seed for planting. It normally costs $5,000/ton. I am concerned that the rat epidemic might cause a seed shortage. It does. 1 ton of seed next year is worth $20,000. Because I purchased the future of 1 ton of seed for $5,000, I am not affected by this. Made up numbers obviously, as I know someone is just waiting to…

Question: how does that rat case actually work out followed through slightly more? If enough players bought at $5k/ton and the seed shortage increases prices due to scarcity, what happens when there's only enough seeds to meet 3/4ths of demand?

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

#73

Post by choilive »

burnerburnito wrote: post #72
vGPU wrote: post #55

Earlier quoted context omitted.

The idea is to buffer changes in price. Started with crops originally iirc. Say I know I need 1 ton of seed for planting. It normally costs $5,000/ton. I am concerned that the rat epidemic might cause a seed shortage. It does. 1 ton of seed next year is worth $20,000. Because I purchased the future of 1 ton of seed for $5,000, I am not affected by this. Made up numbers obviously, as I know someone is just waiting to…

Question: how does that rat case actually work out followed through slightly more? If enough players bought at $5k/ton and the seed shortage increases prices due to scarcity, what happens when there's only enough seeds to meet 3/4ths of demand?

So that depends on a few things..

1) If the contract is physically settled vs financially settled. 2) The existence of a clearinghouse - which is a middleman in charge of making sure both parties deliver on their contractual obligations. Virtually all futures contracts go through a clearinghouse.

Lets assume that it is physically settled with no clearinghouse - what happens is the same as any other contract where the other party does not deliver on the terms of the contract (also known as FTD - failure to deliver).

You sue them for the damages.

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

#74

Post by amluto »

upsuper wrote: post #38

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.

Are there really large solar PV installations that can’t curtail, continuously, all the way to zero? An MPPT ought to be able to operate arbitrarily far away from the maximum power point.

Or is there some other limitation that prevents this?

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

#75

Post by astrange »

grecy wrote: post #56
upsuper wrote: post #38

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.

> -A$1/kWh in several states in Australia (which is the lowest possible bid allowed by regulation) It's telling they regulate the price and won't allow it to go "too low", just like they halt trading on the stock exchange if things go down too much. Free market my backside - can't let those profits dip!

Price floors don't mandate high profits because you can just not purchase if you don't want to. Subsidies would.

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

#76

Post by astrange »

grecy wrote: post #69
zie wrote: post #68

Earlier quoted context omitted.

On the stock exchanges in the USA, they do that because we didn't use to and trading bots that were mis-configured went nuts and broke the markets for a while. Now they stop trading for (15?) minutes to let everyone make sure it's real and not their trading algorithms being stupid. It's not about not letting the stocks crash to far, it's about making sure the pricing is accurate. The Federal Reserve however is a diff…

> It's not about not letting the stocks crash to far, it's about making sure the pricing is accurate. If that were true, they would do the same thing if it was going up "too quickly". To the surprise of nobody, they don't.

Yes there are, it's called LULD.

https://www.nasdaq.com/articles/all-about-lulds

Don't think the entire market has ever gotten unreasonably high due to a trading error.

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

#77

Post by throwaway55664 »

iaw wrote: post #36

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 take…

Looking at the pricing curves it looks more like hourly vs cumulative screw-up. See how the supply keeps creeping forward: https://aggregated-market-data-latest.nordpoolgroup.com/Aggr...

(note: haven't found a permanent link to today's results, so that link is valid until 1200 UTC)

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

#78

Post by darthrupert »

bongobingo1 wrote: post #44
iaw wrote: post #36

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 take…

Without trying to fall too hard into a potential late-stage-capitalism hole, what is the advantages on trading like this? Beyond the advantages of making money on futures. I guess the buy/sell in advance lets generators etc fund projects ahead of time (maint, expansion, etc) instead of always living hand to mouth on "real time sold" and without having to land "huge multi-year contracts", so the market can be a bit mo…

Like all market activity, the high-level point of all that activity is to derive the real price of the thing being traded. Without falling too far into the late stage central planning thing, this is the mechanism that has been absolutely broken (due to been poorly done by pathetic humans) in all previous attempts at communism.

As a tangent, it would be interesting to see if non-pathetic modern computer systems could actually achieve to implement that mechanism successfully. But if sci-fi is to be believed, that could easily fall into another form of dystopia.

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

#79

Post by fulafel »

bongobingo1 wrote: post #44
iaw wrote: post #36

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 take…

Without trying to fall too hard into a potential late-stage-capitalism hole, what is the advantages on trading like this? Beyond the advantages of making money on futures. I guess the buy/sell in advance lets generators etc fund projects ahead of time (maint, expansion, etc) instead of always living hand to mouth on "real time sold" and without having to land "huge multi-year contracts", so the market can be a bit mo…

Electricity market is interesting from a late stage capitalism perspective because it's so managed by regulations and transparent, and relatively pretty closed-world, and there's fast feedback. So many of the capitalism critiques don't work as well against it.

Of course the fundamental problems of unfairness and poor people paying more for electricity than big industrial users can also be attributed to properties of how the market is managed and regulated by the public (the classic "critique of free market" -> "not free enough, ergo not fault of free markets" trope).

Besides generation, this also enables pricing and funding of energy storage. Eg you could use historical data to see how profitably you could play production peaks and lows to charge/discharge battery storage, and use fairly well known risk management stats for the uncertainty factors.

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

#80

Post by fulafel »

cratermoon wrote: post #52

How much money was or will be lost as a result of this? Is this a Knight Capital -level error?

Going by the trade value:

-203.40 per MWh, 5787 MW for 24h, 203.40578724 = 28M € - so about 5% of Knight Capital $440M

Of course this may not be all, as they still have to buy the electricity from somewhere that they are selling for negative price...

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