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?