July 29: Belgium has the “lowest prices”

When does the good news ever stops? At the end of last month, our green Minister of Energy sent out this cheering tweet (translated from Dutch):

Due to a lot of German wind & sun + imports, Belgium has the lowest prices.
Due to negative prices, a shortage of flexibility and storage, offshore wind is currently being shut down.
100% renewable via flex & storage. Look to the future, instead of recipes from the past. 1/5

This is the screenshot:

Tweet TinneVdS 20210729: 1 of 5

It is a thread of in total 5 tweets and the first two detail an issue occurring on July 29 when (some) offshore windmills were shut down. There are several things in this thread to look closer into, but I will solely focus in this post on the “lowest price” claim in the first sentence of the first tweet.

“Lowest price” obviously wasn’t used meaning “low cost” or “cheap” electricity, as most members of the public would understand it. We are in the top 3 of EU countries with the highest electricity price for consumers (just behind Denmark and Germany), so what does she really mean by that? She reveals the basis for her “lowest prices” claim by showing this map:

https://trustyetverify.files.wordpress.com/2021/08/day-ahead-prices_eu_20210729_map.jpg

These are the average day-ahead bid prices of July 29 and the Belgian price is the lowest of them all. This (average) price is very low because prices dip below zero roughly between 10 AM and 4 PM, see the other graph she shows in the tweet:

Day ahead prices EU 2021-07-29: hourly evolution

Those negative bid prices that lead to this “lowest prices” are not necessarily a good thing. They indicate that stress on the grid is expected, in this case a forecast overproduction of intermittent power without the ability to balance it (which is Germany’s intermittent power strategy). Such negative prices give incentive to electricity providers to avoid putting electricity on the grid in this stress period, unless they are willing to pay the purchasers for what they put on the grid.

The power producers have to make the trade-off between the costs of powering down/off there production and the cost of producing at negative prices. Producers of base load power will accept the negative prices as long as the overall balance remains positive, producers of dispatchable power will lower their production or even shut down, therefor avoiding the negative prices as much as possible. That is the ultimate goal of those day-ahead bid prices: keeping a grid (with increasing intermittent power injected into it) in balance.

Producers of electricity from solar and wind are more or less protected from these negative prices, but this protection is not unlimited and then those producers will have to make the same trade-off between the lost revenue by for example shutting down a windmill and the cost of producing at negative prices. We have been there before. This reminded me of the 104 windmills that were shut down for a couple hours at the beginning of the lockdown roughly for the same reasons.

The low(est) day-ahead prices are something different from what the public thinks about low(est) prices. I think it is therefor misleading to cheer about how low these day-ahead prices are on a particular day, especially in communication to the general public. Solar and wind can push (day-ahead) prices down, but that doesn’t mean that the deployment of solar and wind will lead to actual low (consumer) prices.

via Trust, yet verify

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August 15, 2021 at 05:39PM

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