<story><title>Solar farm has to switch off every second day due to negative prices</title><url>https://reneweconomy.com.au/this-solar-farm-has-to-switch-off-every-second-day-due-to-negative-prices-63529/</url></story><parent_chain><item><author>JMTQp8lwXL</author><text>An explanation of the mechanics of how I&amp;#x27;d have to pay somebody else to take my electricity (e.g., a negative rate) would be helpful.&lt;p&gt;As prices approaches 0, I could take the excess electricity and say, mine cryptocurrency. Is nobody considering the arbitrage opportunities here? Take the 0-cost electricity, move water up a hill, and convert it back to electric when it&amp;#x27;s needed, etc.</text></item></parent_chain><comment><author>apendleton</author><text>Anything you could do it with it would have capital costs. Maybe it&amp;#x27;s transient enough that that money would be better invested elsewhere. Like, if you only run your cryptocurrency mining when the price is negative, your capital is stuck in an idle asset most of the time, and if you run it all the time, it&amp;#x27;s the average price you want to consider, not the minimum price (even if the minimum price is negative), and my guess is that Australian electricity isn&amp;#x27;t cheaper &lt;i&gt;on average&lt;/i&gt; than other kinds of power other places (especially places with lax environmental regulation).&lt;p&gt;Another way to think about it: uses like those you propose that can soak up excess energy in the grid are exactly why energy markets are allowed to float, and even to go negative. If there&amp;#x27;s a surplus, they want you to use it, and if it were economical to store it and sell it back to the power company later, both they and you would benefit. That this isn&amp;#x27;t common suggests that it isn&amp;#x27;t economical.</text></comment>
<story><title>Solar farm has to switch off every second day due to negative prices</title><url>https://reneweconomy.com.au/this-solar-farm-has-to-switch-off-every-second-day-due-to-negative-prices-63529/</url></story><parent_chain><item><author>JMTQp8lwXL</author><text>An explanation of the mechanics of how I&amp;#x27;d have to pay somebody else to take my electricity (e.g., a negative rate) would be helpful.&lt;p&gt;As prices approaches 0, I could take the excess electricity and say, mine cryptocurrency. Is nobody considering the arbitrage opportunities here? Take the 0-cost electricity, move water up a hill, and convert it back to electric when it&amp;#x27;s needed, etc.</text></item></parent_chain><comment><author>manicdee</author><text>Executive Summary (drastically oversimplified):&lt;p&gt;In a wholesale electricity market we have a market operator who estimates the demand for the near term future and opens the market up to bids for supply.&lt;p&gt;Suppliers bid a certain capacity for each period, with the operator typically accepting firm supply offers, contingency supply offers, and ancillary service offers in advance. Since some suppliers are “baseload” (ie: unable to adjust output to suit the current level of demand) they will typically bid low to always be paid for their supply. Everyone else will be affected by these bids because the “baseload” operators are typically not only inflexible but also have huge capacity.&lt;p&gt;In periods where total demand is low relative to total supply capacity, the wholesale bids will drop to low prices. For the baseload suppliers, they would prefer to pay for someone to use their excess power rather than damage their equipment by either turning it off or reducing output below certain minimums. A baseload supplier might, for example, be facing a maintenance cost of a million dollars versus paying the market a hundred thousand to create extra demand for surplus energy. So rather than turn off equipment they will bid negative prices on the wholesale market.&lt;p&gt;A second cause of negative wholesale prices is established players with large war chests waging economic war against new entrants. They know solar farms have razor thin margins, so it is worth spending a few tens of million dollars to drive the solar farm bankrupt. Enough negative pricing periods during peak solar capacity means the solar farm is not making any money. If the baseload operator knows roughly the breakeven point for the solar farm, they will know how much they have to spend in order to shut the solar farm out of the market and bankrupt them. There are no rules against this kind of activity in the Australian energy market.</text></comment>