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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

#81

Post by Ndymium »

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.

That's the average for the whole day, the max negative price is -€0.5/kWh which is limited by regulations. It starts from 15.00 and continues for the rest of the day. Other than those hours, the price is normal, so the average is not as drastic.

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

#82

Post by tovej »

yieldcrv wrote: post #48
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?

how it was explained to me: its like if you booked a prostitute to come over on Friday, on Friday you found out your partner was coming over and you need the full service sex worker to go somewhere else but have nowhere to send them, so you attempt to pay anyone to take the booking and everyone else is in the same predicament and eventually someone’s going to take the loss of having the prostitute around their partne…

This sounds like something a toxic middle management bro might say to be edgy.

If this is easier for you to understand, you might have a problem.

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

#83

Post by tomatocracy »

Aurornis wrote: post #67
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…

> 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 Trying to view things as “late stage capitalism” isn’t a good way to really understand anything. It’s a cynical Reddit trope that assumes malice from the start, which doesn’t leave much room for a real explanation. The reality is that trading like…

The other main example of negative price offers into the market is renewables which receive some types of subsidy. For example, if you have a solar farm and receive $40/MWh subsidy, you might bid into the market at any price above -$40/MWh.

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

#84

Post by blitzar »

tomatocracy wrote: post #83
Aurornis wrote: post #67

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 Trying to view things as “late stage capitalism” isn’t a good way to really understand anything. It’s a cynical Reddit trope that assumes malice from the start, which doesn’t leave much room for a real explanation. The reality is that trading like…

The other main example of negative price offers into the market is renewables which receive some types of subsidy. For example, if you have a solar farm and receive $40/MWh subsidy, you might bid into the market at any price above -$40/MWh.

Negative pricing also has an incentivising effect

If your output regularly drops to low / negative levels - invest in storage and sell when the price is higher. If it occurs grid wide - interconnect to neighbouring grids.

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

#85

Post by miohtama »

euroderf wrote: post #31
miohtama wrote: post #17

Earlier quoted context omitted.

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 ?

It's impossible to undo because a lot of bids are build on the top of other bids. You would need to undo tons of history. A lot of legit players and traders would lose money. They would sue for market manipulation.

Let one who makes mistakes to pay for them.

However this does not prevent doing other trades on the top this trade to other direction. It is the question who catches the falling dagger and pays for the mistake of others.

See a similar story here

https://en.wikipedia.org/wiki/Knight_Capital_Group

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

#86

Post by XelNika »

euroderf wrote: post #31
miohtama wrote: post #17

Earlier quoted context omitted.

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 ?

There are many market participants, some of whom start trading on this information immediately. The Finnish grid is connected to the rest of Europe so a market participant could in principle flow this cheap energy from Finland all the way to Spain if the cables had capacity. I would guess it was too late the moment it happened.

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

#87

Post by imtringued »

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…

Physical commodities cannot be delivered instantaneously, additionally there is no giant warehouse at the commodity exchange that stores the commodities. This means that what you are going to trade is a delivery contract.

If you play a game like Prosperous Universe, there is no delivery problem on the central commodity exchanges and the commodity exchange has infinite storage capacity. When you buy something, you instantly receive the commodity.

If you want to know why there are duration differences on the contract beyond the delivery itself, e.g. why someone would issue the contract 3 months or 6 months before delivery, then the reason is that they want to minimize income fluctuations or to pay off specific contracts. Similar to how businesses want to turn capex into opex at exactly the rate the money comes in, but this time the goal is for the income to arrive at the same time as the expenses.

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

#88

Post by XelNika »

IndrekR wrote: post #51
sigurdjs wrote: post #29

Earlier quoted context omitted.

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.

The limits are there. -500€/MWh and 4000€/MWh. It did hit the lower limit for 10 hours in the row from 14:00 till midnight. Before 14:00 they were not the last bidder, so prices are higher there. Price on the market for everyone is set by the last bidder who fits in the predicted consumption pool.

They have price limits, but I think GP means volume alert limits. Someone unexpectedly bids a third of the Finnish production capacity, you call them and ask if they are sure.

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

#89

Post by upsuper »

amluto wrote: post #74
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?

I think it's mainly because of large amount of rooftop solars which are either unable or don't have incentive to curtail, and then there are coal generators already running at their lowest output level.

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

#90

Post by imtringued »

keule wrote: post #35
temp112123 wrote: post #27

Earlier quoted context omitted.

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.

No the opposite is the case. How would you expect a zero minimum price to be enforced? All waste products would have to be disposed by the government for free and the thing is that this costs money. Negative prices signal a desire to get rid of something.
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