A Christmas Conundrum

This post posses a few questions that I do not know the answers to. Informed commenters are invited to provide the answers. The questions are linked to electricity prices, smart meters, subsidies and energy storage.

Q1 What is the relationship between commercial spot prices and prices paid by consumers? Spot prices can go down when there is over supply but do consumers benefit from this (See Figure 1)?

Q2 Let us imagine that consumers could buy and store renewable electricity very cheaply when it is windy using a programable smart meter. But the way the market is rigged the producers get paid their guaranteed high price (FIT or ROC in the UK) regardless. If consumers are paying below the FIT or ROC price someone must make a loss. Who is that someone? How is this market supposed to work?

Q3 If this market worked efficiently then demand and prices would rise at time of surplus as consumers buy low to send energy to storage. And demand and prices would fall at time of scarcity as consumers fall back on stored energy. This will eventually eradicate the price differential that the market depends on. And that is the Christmas conundrum.

Electricity Prices in Denmark and Norway

Electricity prices appear to be closely guarded secrets, but not in Denmark and Norway where hourly spot prices can be downloaded from the Energinet website. There are lots of different prices listed there, I am showing the Elspot price in Figure 1 – I hope that is correct.

Figure 1 Data for 1 to 10 October 2015 a period characterised by regional lulls punctuated by fronts that passed through the pan-European highs.

It is possible to make a number of simple observations:

  • The E and W Denmark prices are normally the same but sometimes diverge.
  • The Denmark prices are the same as Norway prices at night but are sometimes but not always much higher than Norway during the day.
  • When the wind blows hard, Danish and Norwegian prices are the same and when the wind doesn’t blow hard enough day time prices go through the roof in Denmark.

What we are seeing is Denmark importing very expensive electricity from Norway when the wind does not blow. When it does blow the Danes use their own wind and export cheap electricity to Norway. There are departures from this rule that presumably reflect market conditions in other countries like Sweden and Germany.

Q4 How are these large variations in spot price reflected in domestic and commercial electricity prices in Denmark?

 

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36 Responses to A Christmas Conundrum

  1. Luís says:

    Q1: These are actually two questions. Spot and retail markets are not the same and only affect each other long term. When a consumer negotiates a contract with a supplier there are other costs involved: mainly distribution, but also power. This is usually a long term contract at a fixed price (€/kWh), at ballpark value 3 or 4 times that of average spot prices. Long term, if spot prices remain low, the consumer might revise the supply contract to a lower fixed value.

    Q2: There are not many FIT left in Europe, much less above average supply prices. The difference from spot to FIT is paid in different ways in different places. In Germany, for instance, consumers pay an additional fee on each kWh they consume that is kept in a renewable energy compensation fund; FIT are then tapped from this fund. On the other hand, in Portugal this has been mostly covered by the national budget. In other places still, consumers may voluntarily opt for an alternative supply contract with a high content of renewable electricity.

    Q3: This is broadly the concept of smart grid, that I have shown not to function on basic economics principles. It creates a perfect competition market where many suppliers are money losers. Without a FIT it will always be more economic to go for auto-consumption.

    Q4: I do not know the Danish market that well, but I would not expect these daily variations to be reflected on supply contracts. However, if spot prices remain depressed for long periods, supply contracts may be impacted long term.

    • Euan Mearns says:

      Thanks Luis, this more or less confirms the answers I got from well informed friends before I posted this. Are you saying that retail prices are often higher than the FIT / ROC in any case now? I tend to forget that the “subsidy” is small compared to the overall cost to consumers.

      But my main point, which I think has been clarified, is that the retail prices and spot prices are not closely linked. The wholesalers are smoothing out the price and that differential that might actually drive investment in storage. If you look at these Danish prices, you would be incentivised to buy and store when prices were low. But then as I point out in the post, if everyone did this the price differential might disappear as the diurnal and wind cycles are smoothed.

      A first step with smart meters would be to expose the public to spot prices.

  2. Lars says:

    “What we are seeing is Denmark importing very expensive electricity from Norway when the wind does not blow. When it does blow the Danes use their own wind and export cheap electricity to Norway.”

    Much of the time true, but it deserves a short comment. We cannot see from your graph to which level the Danes import from Norway during the price spikes. The huge spikes are occuring because imports of hydro are not sufficient to cover Danish peak demand along with the most inexpensive Danish production. Therefore some very expensive Danish production like gas turbines must come online too pushing up prices. As you can see from your graph there are periods when Danish and Norw. prices converge even with little wind, probably mostly during night time.

    The elspot price is always set at the most expensive, successful bidder. Of course it is a Danish problem that they don`t have sufficient CHEAP and dispatchable production on their own to cover demand at all times. We know the reason behind of course.

    • Lars says:

      I checked the Statnett site to see how much power was transferred Norway-Denmark Oct. 1 – Oct. 10. It turns out your choice of date was a bit unfortunate. The maximum power flow during this time was about 1000 MWs, meaning that the Skagerrak 4 interconnector (700 MW) was out of operation, probably due to maintenance. This explains the exceptionally high spikes in Danish elspot prices during the time.

      Likewise, during the night October the 7th when the wind was blowing hard only a maximum of 1040 MWs was sent from Denmark to Norway.

      • gweberbv says:

        Lars,

        when I convert Danish Krones to Euros I end up with a maximum price of about 52.5 Euros per MWh. I guess a lot of countries would be delighted to be able to import this ‘very expensive electricity’ from Norway.
        What I see in this data (if these few days in October represent the average situation) is the following: Electricity prices in Denmark are on a level where no power plant will be build without additional incentives. In such a situation the wholesale price does not tell you much about the ‘real’ costs of power generation.

        • Lars says:

          gweberbv, you are right. And what`s more is that the elspot price that says “Norway” in Euan`s graph is in fact only elspot area 2 in Norway which is interconnected to Denmark. This along with area 5 are surplus areas and normally the cheapest ones + they have very even prices. If Euan had produced elspot prices for elspot areas 1 and 3 in Norway he would have seen similar spikes as for Denmark actually during peak load times.
          Due to a exceptionally good hydro situation at the moment and low prices overall I would say getting peak load prices at that level even with reduced capacity on the interconnector is nothing to complain about and I have never heard the Danes complaining for that matter.

  3. Joe Public says:

    “Q2 Let us imagine that consumers could buy and store renewable electricity very cheaply when it is windy using a programable smart meter.”

    1. Why just ‘renewable’? If, (and it’s a very big ‘if‘), a consumer ‘invested’ in a PowerWall or similar, (~£5k* for 10kWh for ~10-yr* lifespan), their ‘smart’ meter could recharge it at low-cost nighttime prices, & then could draw-off during the day.

    *Very rough estimates of installed cost & life

    2. Put into perspective, my current electricity costs are daytime 9.726 p/kWh; nighttime 7.979 p/kWh. Different suppliers have different differences between their day & night prices, I selected my supplier for its relatively low daytime price which best-matches may day vs night consumption pattern.

    3. IMHO ‘cheap’ domestic storage is not yet available.

    • willem post says:

      JoePublic,
      Power wall? Like TESLA 10 kWh power wall?

      Here are the calls to show that is a hoax. If you have better calls, please let me know.

      Using Batteries to Store Nighttime Grid Energy for Use During the Day: TESLA markets wall-hung, Powerwall units, 7 or 10 kWh, li-ion batteries, and Powerpacks, 100 kWh. The below calculation is for the 10 kWh unit. There are battery charging losses and discharging losses, and AC to DC and DC to AC conversion losses. The TESLA 10-year warrantee is for manufacturing defects, does NOT cover performance!! The INSTALLED cost of the 10 kWh unit = $3,500 + S & H + Contractor markup of about 10 percent + $2,000 for an AC to DC inverter + Misc. hardware + Installation by 2 electricians, say 16 hours @ $60/h = $7,100, or $7,140 per this URL.
      http://www.bloomberg.com/news/articles/2015-05-01/solarcity-taking-orders-for-tesla-batteries-starting-at-5-0001.25

      Assuming “normal driving” applies, the available kWh (67.4/85) is 79%, and a 90% AC to DC inverter efficiency, and allocating half of the 8% DC-to-DC loss to the charging side (the unit has a round-trip DC-to-DC efficiency of 92%, per spec sheet), it would take 0.79 x 10/(0.9 x 0.96) = 9.144 AC kWh of off-peak grid energy to charge up the unit. During on-peak hours, one would get back 0.79 x 10 x 0.96 x 0.90 = 6.826 AC kWh to use in the house, for a minimum energy loss per cycle of (1 – 6.826/9.144) x 100% = 25.4%!!

      If we GENEROUSLY assume the battery would have NO performance loss over its 10-yr WARRANTEE life, and one cycle per day, i.e., 3,650 cycles, and night-time cost of charging at 10 c/kWh and day-time avoided cost at 18 c/kWh, then 3,650 x (6.826 x 18 – 9.144 x 10) = $1147.03 would be the gain over 10 years. The cost of financing, PLUS any costs for O&M, PLUS any capacity degradation due to cycling, PLUS efficiency reductions of part-load operation of AC/DC or DC/AC inverters, PLUS the cost of depreciation are ignored. The above is a best-case analysis. Actual results are much worse, i.e., terrible.

      For more, see
      http://www.theenergycollective.com/willem-post/2264202/reducing-us-primary-energy-wind-and-solar-energy-and-energy-efficiency

      • Dan Johnson says:

        Vermont Utility Is the First to Offer Tesla Battery

        (Winter storms cause frequent grid outages in this part of the U.S., which is an influencing factor in this case.) http://www.smartgridnews.com/story/green-mountain-power-changing-home-energy-storage-game/2015-12-04

        “…the battery can be paired with small-scale solar such as rooftop panels to store locally generated energy or used without solar as a battery to store power from the grid. During a storm or emergency, the battery is able to power essential parts of the home like lights, refrigerators, and furnaces.

        “…Green Mountain Power outlined to the Vermont Public Service Board its plan to offer three options to customers who want the Powerwall. Customers who share access of the battery will pay about $37.50 a month with no upfront cost — or $1.25 a day. Customers can also choose to purchase the Powerwall for about $6500, share access with GMP, and get a monthly bill credit of $31.76, which represents the value of leveraging the battery to help lower peak energy costs. Or customers can buy the Powerwall outright from GMP with no shared access for about $6500.”

    • Euan Mearns says:

      Leo Smith mentioned and has described a system for storing energy as hot water.

      http://euanmearns.com/green-gone/#comment-13592

      Now this is elegantly simple. No need for dams, pumps, batteries or kinetic energy. Simply store cheap surplus energy as low grade heat and switch off you gas boiler (furnace for American readers).

      I could seriously consider researching, designing, manufacturing and marketing a storage system like this but fall down at the first hurdle which is electricity pricing. If off peak leccy cost half of peak then it would really drive the market.

      And your right Joe, it doesn’t have to be a renewable store. The diurnal demand driven price cycle is the one that makes most sense. But lets imagine you knew a storm was coming and prices were about to dump, you would wait and heat your store at rock bottom prices. But we are still left with the conundrums of buying wind dirt cheap and the market eventually eradicating the price differentials.

      We are basically in a situation where the storage problem can’t be solved because of the way the market is rigged.

      • Peter Lang says:

        And your right Joe, it doesn’t have to be a renewable store.

        This is the really important point. It is much more economic to store cheap off peak electricity every day and supply peak power during times of peak power prices every day than to store when the wind is blowing or sun is shining and sell when the wind is not blowing or the sun is not shining. Therefore, storage will be most economic if using power from baseload power stations … like nuclear! With dependable cheap off-peak power every night and sale of all your storage capacity at times of shoulder and peak power the following day, the plant can achieve a capacity factor of up to 25% (equivalent of 6 hours full-power generationevery day from say 7 hours pumping during the night). In this situation, storage can earn sufficient income over its life to pay for itself and deliver the required profit to its investors – i.e. it can be economically viable.

        Reality check! when UK and Europe were building lots of nuclear power plants, pumped hydro schemes were economic to build, e.g the 1728 MW, 10,000 MWh Dinorwig pumped hydro station in Wales, commissioned 1984: https://en.wikipedia.org/wiki/Dinorwig_Power_Station ). However, pumped hydro is rarely economic to build nowdays, since the proportion of electricity supplied by reliable baseload power stations is declining. Battery storage is an order of magnitude more expensive that pumped hydro, so nowhere near to being viable at large commercial scale, let alone in small installations..

  4. theProle says:

    Surely the spot market will remain in existence because of the cost of energy storage is never going to fall to zero.

    Energy storage is effectively an arbitrage system that uses time shifting via storage to buy and sell at two different spot prices. The profits on this, once the cost of storage is accounted for, are never going to be massive, as it is a market with no significant barriers to entry.

    All this will do as take up of storage system increases is pull the peak spot prices down, and the trough prices up. This in turn will reduce the profitably of storage units, which reduces the incentive to fit them – thus the system will reach a new equilibrium.

    As no-one appears to have invented meaningful amounts of storage at sensibly costs apart from large scale pump hydro, I can’t see the equilibrium moving much any time soon.

    • Euan Mearns says:

      Yes, it is a conundrum. But any government serious about incentivising storage needs to work out a way of rigging the market to make it happen.

      • gweberbv says:

        Euan,

        there are many countries that offer some kinds of incentives for (electricity) storage. But I doubt that any of them can be regarded to take this issue ‘serious’. In Germany, for example, a lot of hydro storage projects were stopped/cancelled in recent years.

        Paying FF power plants for acting as a backup is much cheaper.

    • Peter Lang says:

      I agree. Pumped hydro is by far the cheapest electricity storage technology at the scale required. But even new pumped hydro plants can seldom be justified any more. When the proportion of electricity generated by cheap nuclear approaches 75% (as it is in France) then large scale storage may become viable again, but only if it is cheaper than using gas generators of load following nuclear.

  5. The Danish situation was noted a five years ago in an article where it was proven that because of the presence of wind power Denmark had to sell electricity at a low price but had also to buy at high price. The article is in Italian but as always google translator does a pretty good job http://www.fusione.altervista.org/energia_eolica_danese_fuori_mercato.htm

  6. Michael hamilton says:

    As you rightly note wholesale and retail prices are pretty much unrelated. Out German friend pay close to 300 e for residential power, while wholesale goes for about 28 e.

    Home Battery storage, based on current retail pricing structures only incentivises to store for self consumption (removing net metering would incent batteries significantly).

    To truly incentivise people to adjust their schedules we need Time of use pricing. This is available in a few places (Texas being one).

    That said, a power company would probably pay for the ability to fill and drain your battery storage (or indeed your electric car) as they are exposed to the spot price.

  7. Graeme No.3 says:

    In Australia there is no immediate correlation.
    The ‘standard’ contract that most have (regardless of who is sending out the bills) is for a set rate (actually several set rates, one for overnight, one for a low level of usage and a third for higher usage – in summer [our peak period] another higher rate replaces that third one).

    Work on the basis that the supplier doesn’t want to lose money and will always charge enough to cover most peak periods. Thus South Australia has higher standard rates as it is more exposed to higher peak rates due to its concentration of wind farms. When the peak periods increase in price or frequency the next billing period will bring communications raising rates.
    For those interested in daily fluctuations of bulk supply
    http://www.aemo.com.au/Electricity/Data/Price-and-Demand/Average-Price-Tables
    historical data last 4+ years
    http://www.aemo.com.au/Electricity/Data/Price-and-Demand/Aggregated-Price-and-Demand-Data-Files/Aggregated-Price-and-Demand-2011-to-2015

    Note: Tasmania is usually hydro but with drought is having to import electricity from Victoria, which raises rates.

    Feed In tariffs for solar PV are subject to some (minimal) competition as they counter the demand in peak summer periods. Based on net contribution, i.e. generation is first used by customer and only any exported amounts get paid for. (Very nice too, I am a small user and my solar PV returns 19% per annum). But the tariff rates are being lowered and new installers get half of what my contract pays).
    Typical household rates in SA ($A & including 10% GST)
    $A 316 per MWh for first 11 kWh a day & $ 367 for any extra. Night time $156.5
    For Victoria (brown coal mainly)
    $A 281 per MWh for first 11 kWh a day & $ 364 for any extra. Night time $146
    For NSW (black coal)
    $A 233 per MWh for first 11 kWh a day & $ 227 for any extra, but peak summer rates (2-8pm. $506. Night time $114

    Hope this helps.
    A Merry Christmas and Happy New Year to all readers

  8. Michael hamilton says:

    Euan, spot prices for de, fr, it and ch can be found here. http://www.epexspot.com/en/

  9. I see above mention of Time of Use Meters. These are often incorrectly called “smart meters” by some (I live in Australia) – although true smart meters can be programmed to be dumb TOUM’s.

    There is a huge difference:
    TOUM might simply set fixed prices for consumption between certain hours of the day. No connection to market prices. Prices adjusted by the supplier annually by resetting a schedule of retail prices.
    Smart Meters can, theoretically, do whatever you want them to do – turn appliances such as refrigerators off during high price periods, display usage and prices minute by minute through the day, so that customers can keep an eye on things and reduce loads when they wish, etcetera. They are capable of reflecting actual variations in the wholesale market prices, thus passing the market risk through the retailer to the customer. This can become even more complex when rooftop solar or private wind generation is added – different rates can apply to imported and exported energy.

    Retailers could also remotely shut down or isolate the customer’s generating capacity, eg for safety of workers who might othewise be zapped by a back-feed, or due to system capacity limits being reached (or just to be nasty?).

    It is entirely reasonable to expect to have in-home display of actual wholesale and retail prices on a WI-FI display on your kitchen wall, showing what each minute is costing. That would motivate some consumers to reduce their load eg during peaks, causing the retailer to lose some business. So retailers aren’t keen to offer this level of functionality and the consumer remains a passive mushroom.

    Time of Use and Smart Metering are huge subjects, well worth a comparative technical and cost review of their own.

  10. Peter Lang says:

    Euan,

    [Up thread you commented and I replied; I am reposting an edited version of my reply and adding another ‘reality check’]. You said to Joe Public:

    And your right Joe, it doesn’t have to be a renewable store.

    I agree. This is the really important point. It is much more economic to store cheap off-peak electricity every day and supply peak power during times of peak power prices every day than to store when the wind is blowing or sun is shining and sell when the wind is not blowing or the sun is not shining. Therefore, storage will be most economic if using power from baseload power stations … like nuclear! With dependable cheap off-peak power every night and sale of nearly the full storage capacity at times of shoulder and peak power the same day, the plant can achieve a capacity factor of up to 20% (equivalent of 5 hours full-power generation every day from say 6 hours pumping during the night). In this situation storage can earn sufficient revenue over its life to pay for itself and deliver the required profit to its investors – i.e. it can be financially viable.

    Reality check #1: when UK and Europe were building lots of nuclear power plants, pumped hydro schemes could be justified on their economics, e.g. the 1728 MW, 10,000 MWh Dinorwig pumped hydro station in Wales, constructed 1974-1984: https://en.wikipedia.org/wiki/Dinorwig_Power_Station ). However, pumped hydro is rarely economic to build nowdays, since the proportion of electricity supplied by reliable baseload power stations is declining. Battery storage is an order of magnitude more expensive than pumped hydro, so it is nowhere near to being viable at large commercial scale, let alone in small installations.

    Reality check #2. Look at the cost of energy storage in Figure 14 in this excellent, recently competed analysis: Managing Flexibility Whilst Decarbonising the GB Electricity System http://erpuk.org/wp-content/uploads/2015/08/ERP-Flex-Man-Full-Report.pdf . This analyses the technology options and costs for decarbonising Great Britain’s electricity system. Figure 14 shows the CO2 emissions savings and the total system cost per year for each additional 5 GW increment of each technology. Hydro (if suitable sites were available) and nuclear would be the most cost effective at reducing emissions. Since there is limited additional hydro capacity available, adding nuclear is the cheapest way to achieve large emissions savings. Wind, marine, CCS and pumped hydro are all very expensive and ineffective. The worst of all is to close old nuclear plants; doing so would increase emissions and costs. Their life should be extended if possible.

    Pumped hydro is very costly and ineffective. Any other type of energy storage would be more costly than pumped hydro.

    The cheapest option to achieve the same emissions intensity as France, i.e. 42 g/kWh, is with 31 GW of nuclear.

    • Euan Mearns says:

      The cheapest option to achieve the same emissions intensity as France, i.e. 42 g/kWh, is with 31 GW of nuclear.

      Here’s my 2050 pathway which has 90GW of nuclear. If one is targeting 100% decarbonisation with electrification of transport and heat then we need a lot more leccy.

      • Grant says:

        Exactly that. Moreover IF a widespread electrification of personal transport is to be successfully enacted the result would surely be greater demand over night. Anything else would be problematic for the concept.

        In effect it would smooth the demand which would seem to be good for base load technologies but also likely to eradicate the market pricing differential between peak and off peak periods. (Maybe nor entirely but surely with a signficant levelling.)

        In which case the supposed financial benefits of rooftop generation would be at least reduced. The benefits of “wall” storage would be disconnected from market pricing and become relevant only to the risks associated with non-supply. Basically one would be investing in a large UPS for the benefit of continuity alone.

        Or have I missed something?

      • Peter Lang says:

        Euan,

        The cheapest option to achieve the same emissions intensity as France, i.e. 42 g/kWh, is with 31 GW of nuclear.

        Here’s my 2050 pathway which has 90GW of nuclear. If one is targeting 100% decarbonisation with electrification of transport and heat then we need a lot more leccy.

        http://euanmearns.com/energy-matters-2050-pathway-for-the-uk/

        That’s an interesting analysis. Thank you for referring me to it. I hadn’t seen it previously. A few things triggered my ‘needs a Reality Check meter’.

        1. 100% decarbonisation of electricity and transport fuels by 2050 is an interesting and valuable analysis for establishing boundaries and high end costs, but unrealistic.

        2. Your cost chart shows the ‘Energy matters’ scenario – i.e.90 GW nuclear + 30 GWh energy storage capacity and 10 GW interconnection with Europe – could be achieved for virtually no real increase electricity price above 2013 prices. To achieve this by 2050 would require an almost overnight reversal of the public’s paranoia of nuclear power to widespread enthusiastic support and enthusiastic advocacy for nuclear power throughout the developed countries and for public demand of their politicians to implement it. This is not going to happen any time soon.

        Therefore, although an interesting exercise, it’s not realistic and not useful for policy analysis.

        Do you have a detailed understanding of the 2015 ERP report ‘Managing Flexibility Whilst Decarbonising the GB Electricity Systemhttp://erpuk.org/wp-content/uploads/2015/08/ERP-Flex-Man-Full-Report.pdf ? Can you comment on it?

        It seems to me it is an excellent and relevant analysis that should be useful for high level policy analysis, public education and for discussions regarding pragmatic solutions such as on blog sites like Energy Matters. The ERP is co-chaired by Prof John Loughhead FREng, Chief Scientific Advisor to DCEE members include a broad spectrum of stake holders including from electricity industry, academics, government agencies and environmental NGOs).

        The ERP analysis considers and does sensitivity analyses on important inputs and constraints that the DECC calculator does not.

        From the Introduction:

        In light of the increasing penetration of variable renewables the ERP undertook to examine issues around grid flexibility and stability. A model was developed to balance not just the need for energy but also ensure the supply of services critical to the operation of the grid. This was used to produce robust modelling of a real GB system across a wide range of scenarios, supported by more stylised analysis to explore the fundamental constraints within which a secure technology mix must lie. This section introduces the main issues facing the GB system and the lessons from other grids, the GB modelling work is described in the following sections.

        As well as the high level conclusions there is some guidance offered on specific topics, such as some preliminary work on storage. This work highlights a valuable and necessary approach to considering the GB system as a whole. With less focus on the specifics, the power of this is in setting the direction of travel and defining the solution space.

        From the Executive Summary:

        A zero- or very low- carbon system with weather dependent renewables needs companion low carbon technologies to provide firm capacity.

        The modelling indicates that the 2030 decarbonisation targets of 50 or even 100 g/kWh cannot be hit by relying solely on weather dependent technologies like wind and PV alone. Simple merit order calculations have backed this up and demonstrated why this is the case, even with very significant storage, demand side measures or interconnection in support. There is a need to have a significant amount of zero carbon firm capacity on the system too – to supply dark, windless periods without too much reliance on unabated fossil. This firm capacity could be supplied by a number of technologies such as nuclear, biomass or fossil CCS.

        Figure 11 shows that 31 GW nuclear by 2030 would achieve the 2030 targets at least cost (for the mix of the three main technologies considered in this chart). This chart shows the cost would require a £70/t carbon price plus another 3.5% electricity price increase.

        Figure 14 shows that the least cost option (of realistically available options) for achieving the 100 g/kWh requirement by 2030 is with 31 GW of nuclear power. Pumped hydro energy storage is hugely expensive and the worst option of all by far is to close existing nuclear plants (if their lives can be extended).

        If I am interpreting Figure 10 correctly, it says that, in 2012, 7.9 TWh energy storage would have been sufficient to allow a 100% wind and solar powered GB system to meet demand (after demand side management and short term storage).

        If you do have a detailed understanding of the ERP analysis, I’d really like to know what you think. I’d like to discuss it in comments, especially the costs, financial viability and the practically of achieving the target by 2030. An ‘Energy Matters’ post would be great.

        • Peter Lang says:

          Correction: first sentence of my point 2. should read:

          “2. Your cost chart shows the ‘Energy matters’ scenario – i.e. 90 GW nuclear + 30 GWh energy storage capacity and 10 GW interconnection with Europe – could be achieved for virtually no real increase above “approximate energy system cost today” [where ‘today’ refers to 2010]”.

  11. A C Osborn says:

    Merry Christmas to one and all.

    • Euan Mearns says:

      Hi AC, yes I wish everyone including your good self a happy Christmas, whatever that means. These are tumultuous times. And yet, here in Aberdeen, despite $30+ oil, life appears to be going on as usual. I spent the day with wife, sons, wife’s parents brothers, nephews and grand nieces etc. Four generations in all. Its great. But there are growing numbers of refugees out there, and the disenfranchised within the UK. It may catch up with us all some time.

      One of my main concerns right now is how academia and science seems to be broken. Spin rools. Problems can only be solved by understanding their true nature. Deliberately trying not to understand the true nature of problems sends us on the path of destruction where it seems many of our fellow human beings are headed.

      E

  12. Knut says:

    I’m a bit late to this thread, but in case anyone is still reading it, two things:

    1) Merry Christmas Euan, Roger and all.

    2) In the case of Norway, spot price and retail price will soon be closely linked indeed. There is a mandate that net operators must install smart meters in everyone’s fuse boxes by 1.1.2019. As far as I can see, retail prices will thereafter be set hourly, closely tracking the spot price. Usage will of course also be reported hourly. The new meters are supposed to be in two-way communication with the supplier, allowing people to set their appliances to run when prices are low, etc.

    The most authoritative source I could find for all this is here (in Norwegian):
    https://www.nve.no/elmarkedstilsynet-marked-og-monopol/sluttbrukermarkedet/smarte-stroemmaalere-ams/

    • Euan Mearns says:

      Hi Knut, thanks for this. I’ve not thought it through, but I’m guessing that since Norway is the King of Hydro, that conditioning consumers to minimise consumption at time of scarcity enables maximum exports at times of highest price?

  13. Knut says:

    Well it’s a bit ironic. In general I think this is extremely good policy. Germany for instance should definitely do it, for obvious reasons. But Norway is perhaps the place where it’s least necessary, due to said hydro situation. What you mention may be part of it, but I suppose the economic rationale, such as it is, has more to do with reducing the need for new domestic transmission. This is a long and hilly place, as you know, and Norwegians really, really hate those pylons (as Lars will testify).

    The wider explanation I suspect is that our bureaucrats/technocrats (who have a tremendous say on policy) like to think of themselves as cutting edge. Analogue television signals are long gone, FM radio is going bye-bye in 2017, and they are pushing to shut down the telephone cables (though that’s presently on hold due to popular resistance).

  14. Grant says:

    So if these Smart Controllers work and people can program their appliances to run only when prices do not exceed a certain point …. will the devices be built so that they can work effectively and reliably with continuous on/off operation?

    Will people have to buy new, random use compatible devices and accept that there are times when their refrigerators may lock them out because the price they set for operation has meant they have not chilled anything for several hours?

    Will they accept that, as more and more electric car owners take up the overnight excess capacity on the grid, their charge costs may be higher than they anticipated as the “low cost” periods transition to high cost periods – especially if they wish to ensure that they have enough charge for the predicted next day usage.

    Will their UPS devices need to be upgraded to ensure persistent connectivity to the grid waiting for messages in worst case supply scenarios?

    How viable is eating half cooked food?

    What is the market for “manual” carpet and floor sweepers rather than electric vacuum based devices?

    Other than loss of a potential social control tool – is there any reason at all not to ban (or at least limit) the use of televisions?

    Surely one of the points of all the potential control, assuming it can be enacted, is to even out demand peaks. More periods of supply might then be considered “base load”.

    That could stabilise prices (presumably upwards by removing the notion of “cheap off-peak rates” ) although of course that would only really work for a Nuclear (or similar) centric world since wind cannot be controlled to respond and solar would only have a place in daylight hours with a suitable number of hours in the day.

    There must be so many factors that could be influences and managed by smart devices once one has a “controller unit” in the house.

    • singletonengineer says:

      Each question has a simple answer. First, I do not know of an appliance in a home which does not regularly turn on/off, except perhaps the smoke detectors and the front door bell, each of which can easily be supported by a small battery or simply not remotely switched. The objective is not to cut the power to the house, but to “interrogate” the status of its intelligant appliances and offer those which are able to do so to have a 30 or 60 minute break.

      If un active use, they would continue – the example being cooking devices. Manual over-ride is simple, eg in case where it is desired to commence cooking – but at the higher electricity rates. The householder benefits from less balackouts, lower energy costs (due to shifting operating hours away from peaks) but could be penalised if they routinely over-ride requests for (say) air conditioning to be placed on standby for an hour.

      Such a system has potential drawbacks, for example the situation you described whereby electric vehicle battery charging might eliminate overnight off-peak rates.

      If such a system was effective, very substantial decreases in both generation and HV distribution systems can result.

      I’d like to read all the fine print before I signed up, though.

  15. Rob says:

    Does anyone know what’s happening to UK prices it is claimed that wind power now the
    Cheapest form of new build power.
    I would guess new gas fired power stations losing market share to renewables but does
    anyone have figures on UK market.
    http://www.independent.co.uk/environment/wind-power-now-the-cheapest-source-of-electricity-but-the-government-continues-to-resist-onshore-a6685326.html

  16. Pingback: Tesla's Power Wall Cheaper than Nuclear - Boston Commons High Tech

  17. matthew_ says:

    I’m late to the party, but since these are interesting questions I’ll leave my 2 cents anyway.

    My comments following are based on my understanding of the Norwegian market.
    Q1: Residential consumers can choose from 3 types of electrical energy price contracts from many different suppliers. The grid rate and billing (since it is a natural monopoly) is separate from the energy rate and billing (anyone can start an energy sale company). The three main options are a) fixed price for a certain period, b) standard variable rate (the energy company can adjust the price with a 3 week advance notice), and c) “spot” price plus fixed fee. I call it “spot” price because it is actually the average of the hourly spot prices for an entire month.
    Consumers who have “spot” prices benefit from lower spot prices, but not on an hour by hour basis. This may change after the new electricity meters are rolled out. All Norwegian grid companies must have installed smart meters at all of their customers by 1.1.2019, and there is an expectation that consumers will then get direct spot prices instead of monthly averages.
    I believe that large consumers (mainly industry) already today have smart meters and pay the direct spot prices that vary hourly based on their consumption during that hour. They benefit from lower spot prices directly and immediately.

    Q2: Norway uses a green certificate market with Sweden instead of a FIT. This market works in that the energy sale companies are required to supply all of their customers with a certain percentage of their power consumption in green certificates. The energy supply companies (with new small hydro and wind) get green certificates from the government for their production for first 15 years. These certificates are then sold to the energy sale companies who supply their customers with the required amount of green certificates which are then canceled by the government. The cost of buying the certificates is added to the customers’ energy bill.

    Q3: This conundrum is I think a big cost for society, and an example of market economics not producing the most economical solution. This is because the benefit to society on avoiding power price spikes is much larger than the benefit the market gives to the one who prevents the price spike.
    An example: Assume the Norwegian market uses 120 TWh each year at a price of 30€/MWh. If there is a need to add 5 TWh to balance the market next year, but the cheapest new supply requires an income of 40€/MWH, then the cost of balancing the market next year is not just the extra cost of the new 5 TWH, but instead an increase of all power prices from 30 to 40€/MWh.
    To get the 5 TWh more increases the costs for society by (120 + 5) * (40-30), but the new supply only gets a market benefit of 5 * (40-30).

    Q4: I don’t know, but I assume they get the same pricing as in Norway. Residential and small customers get a monthly average of the swings. Large customers get the swings directly.

    How should we solve the conundrum of storage making itself unprofitable?
    Perhaps a bid system where suppliers of storage or other grid services get contracts with the grid operator for having a certain amount of storage, flexibility, or reserves available for critical situations. We all pay a little each year to make sure that the reserves are there to keep the lights on in critical situations. As I understand there is some of that happening today with different grid operators securing contracts for reserve margins for the winter peaks.

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