Does anyone know how the national grid pricing model works? I’ve never thought about it before, but we have various private electricity suppliers all feeding in to the same grid, and making big profits. Who decides the spot price?
Here we go. The system has a bunch of moving parts.
The spot price is decided on a demand basis. This model makes sense when there is a good portion of base loaded generation. However when the base loaded generation is insufficient (as it is now) this model causes major issues.
It is an auction based system; where you bid your number of MW at a price, for the upcoming period (6 or 10 minutes from memory). Everybody gets the highest bid price, but the grid can only take what is demanded. So the price is set by the bid that meets the final demand.
So lets say that you are a geothermal generator, you can’t easily throttle your plant. So you bid in the auction at a very low number (1c / MW), because you want 100% of your power to be taken.
Lets say you are a hydro plant, you can throttle your capacity semi-quickly, so you bid a realistic number ($80 - $120 / MW), and you want most to all of your power to be taken.
Lets say you are a wind generator, your output is fairly predictable, but not perfectly. You know you will probably be able to output ~80% of your capacity reliably. You can throttle your output by furling your blades, you bid around the same as a hydro.
Finally lets say that you are a peaker plant, you are spinning reserve eating gas at a low rate hoping there is a grid event (trip of a major generator) you cost ~$20/MW to run at idle (generating no power into the grid). But in a grid event where you can supply to meet demand it may be $5,000 - $50,000 / MW for an hour or so while the grid is stabilized.
Now to the shake out:
In normal operation, the base loaded generation all bid crazy low numbers, and this should account for ~80+% of your generation; next the hydros and wind take up the final 20% giving everyone around $120/MW (2023 numbers around $150/MW).
Should a grid event happen, one (or more) of the spinning reserve (peaker plants) will put in a special price and take up the slack (the peakers compete for this); depending on what is available you can get some crazy high numbers.
In our current situation, we don’t have enough base loaded plant, and the hydro plants have low lake levels. So we can’t supply the demand, with the assets we have, wind is great but leads to a lot of fluctuation in the market which the hydros are not able to dampen like usual. So the spinning reserve is being called on far more than it should.
What we need as a country is to increase the base loaded generation (more hydro, more geothermal) in the past coal was base loaded. Once you get enough wind a big portion of it can be considered base loaded.
The model we have works well if there is incentive to build and maintain base loaded generation, but the power companies make more money when they get to use their spinning reserve.
We’re incredibly fortunate to have so much hydro too, because it can be ramped up and down so quickly, so it works very well to fill in the gaps in base load.
Dams that have low water levels still work quite effectively as peak plants, too.
There is a bunch of hydro along the Waikato. Lakes are huge.
Current most efficient panels are 750W giving an power density of ~350W/m2. With all of the gaps and extras you can probably get a system density of around 250W/m2.
Using this assumption, we are looking at 1MW/acre.
Floating 10 acres of panels (or using the nearby river bank) would supplement 10MW of generation during the day, reducing the draw down on the lake level. Do this at the 9 dams along the Waikato that is another easy 90MW without major infrastructure costs.
The capital outlay is also very small, compared to trying to get another 90MW plant built and commissioned somewhere.
The capital outlay may be small, but the ongoing maintenance on a floating structure like that would be quite high, certainly compared to a fixed installation.
What’s the solution to the issue of not enough base load? I know there’s a lot of new power generation being built, but also demand keeps increasing so maybe it won’t be enough.
Do we need the government to build a bunch more generation to increase base load? Maybe build a bunch of battery storage to even out the peaks?
It sounds like the private sector has no incentive to build the batteries.
I think that would be ideal. We would probably need a different setup to encourage people to install more than they individually need, since selling back to the grid isn’t really feasible at the moment (the spot price may be $1000 but your provider only gives you $.10).
I think having home owners being able to borrow money at 0% or 1% is helping to encourage more, though. Just a shame home ownership rates are falling.
Yes, but largely consumers aren’t exposed to these fluctuations. Most people are on plans with fixed usage charges, and the provider takes on the risk of the spot prices. That mitigates the benefits of being able to do this yourself with a battery.
I think it would be more effective to have big subsidies for industrial roofs; a domestic dwelling may have a ~80m^2 of usable area. Industrial buildings have 1000’s of square meters available, with a single feed in point.
A few of hundred industrial buildings could, supply 300MW for 6hrs a day. This would reduce the demand on the hydro lakes. A good subsidy for this would help a great deal.
I think people are generally more supportive of subsidies for individuals rather than businesses. You could subsidise building a massive array of solar panels on a big rooftop but what happens next? Does the company that owns the building own the panels? Does the government pay for the panels and give the building free power as payment for using the roof?
If the govt just gave them money and the company owned the panels, it might be seen as handouts to companies.
The company would own it, a subsidy is there to promote the business to spend the money.
The subsidy shouldn’t be paying for the whole cost. It is there to reduce the payback period to something that makes sense for the company ~5 years or less.
If the government subsidized 30% of the cost, there would be some that would take it up. You would also limit it to a max installed capacity ~1GW - 2GW or so.
But if you have these huge industrial buildings, surely the company is not going to be able to justify covering the whole thing in panels then feeding back to the grid. They would only build what they needed to cover their usage, which is probably only a fraction of their roof.
The short version is it’s an auction, retailers and large users bid against each other on the spot market. There’s also stuff like futures contracts etc.
Does anyone know how the national grid pricing model works? I’ve never thought about it before, but we have various private electricity suppliers all feeding in to the same grid, and making big profits. Who decides the spot price?
Here we go. The system has a bunch of moving parts.
The spot price is decided on a demand basis. This model makes sense when there is a good portion of base loaded generation. However when the base loaded generation is insufficient (as it is now) this model causes major issues.
It is an auction based system; where you bid your number of MW at a price, for the upcoming period (6 or 10 minutes from memory). Everybody gets the highest bid price, but the grid can only take what is demanded. So the price is set by the bid that meets the final demand.
So lets say that you are a geothermal generator, you can’t easily throttle your plant. So you bid in the auction at a very low number (1c / MW), because you want 100% of your power to be taken.
Lets say you are a hydro plant, you can throttle your capacity semi-quickly, so you bid a realistic number ($80 - $120 / MW), and you want most to all of your power to be taken.
Lets say you are a wind generator, your output is fairly predictable, but not perfectly. You know you will probably be able to output ~80% of your capacity reliably. You can throttle your output by furling your blades, you bid around the same as a hydro.
Finally lets say that you are a peaker plant, you are spinning reserve eating gas at a low rate hoping there is a grid event (trip of a major generator) you cost ~$20/MW to run at idle (generating no power into the grid). But in a grid event where you can supply to meet demand it may be $5,000 - $50,000 / MW for an hour or so while the grid is stabilized.
Now to the shake out:
In normal operation, the base loaded generation all bid crazy low numbers, and this should account for ~80+% of your generation; next the hydros and wind take up the final 20% giving everyone around $120/MW (2023 numbers around $150/MW).
Should a grid event happen, one (or more) of the spinning reserve (peaker plants) will put in a special price and take up the slack (the peakers compete for this); depending on what is available you can get some crazy high numbers.
In our current situation, we don’t have enough base loaded plant, and the hydro plants have low lake levels. So we can’t supply the demand, with the assets we have, wind is great but leads to a lot of fluctuation in the market which the hydros are not able to dampen like usual. So the spinning reserve is being called on far more than it should.
What we need as a country is to increase the base loaded generation (more hydro, more geothermal) in the past coal was base loaded. Once you get enough wind a big portion of it can be considered base loaded.
The model we have works well if there is incentive to build and maintain base loaded generation, but the power companies make more money when they get to use their spinning reserve.
We’re incredibly fortunate to have so much hydro too, because it can be ramped up and down so quickly, so it works very well to fill in the gaps in base load.
Dams that have low water levels still work quite effectively as peak plants, too.
I know, it isa real boon for the country.
I was discussing how we could extend our current generation capacity quickly.
Floating solar on the resivours/lakes would bring new generation close to the grid connection points, the water acts as a battery.
Obviously significant DC-AC converters would be required, but we could get new generation in a few months, rather than years.
Floating solar sounds like a bit of a gimmick to me, I suspect if it was as easy as the people promoting it make out, it would already be everywhere.
It also doesn’t help that our hydro is mostly at the other end of the country to where all the sun is.
There is a bunch of hydro along the Waikato. Lakes are huge.
Current most efficient panels are 750W giving an power density of ~350W/m2. With all of the gaps and extras you can probably get a system density of around 250W/m2.
Using this assumption, we are looking at 1MW/acre.
Floating 10 acres of panels (or using the nearby river bank) would supplement 10MW of generation during the day, reducing the draw down on the lake level. Do this at the 9 dams along the Waikato that is another easy 90MW without major infrastructure costs.
The capital outlay is also very small, compared to trying to get another 90MW plant built and commissioned somewhere.
The capital outlay may be small, but the ongoing maintenance on a floating structure like that would be quite high, certainly compared to a fixed installation.
Maybe, it is not like the ocean. The lakes don’t have big waves to deal with etc…
The benefit is that there are not any trees and plant growing above where you want your panels.
Interesting, thanks!
What’s the solution to the issue of not enough base load? I know there’s a lot of new power generation being built, but also demand keeps increasing so maybe it won’t be enough.
Do we need the government to build a bunch more generation to increase base load? Maybe build a bunch of battery storage to even out the peaks?
It sounds like the private sector has no incentive to build the batteries.
Microgeneration. Solar panels on every roof!
I think that would be ideal. We would probably need a different setup to encourage people to install more than they individually need, since selling back to the grid isn’t really feasible at the moment (the spot price may be $1000 but your provider only gives you $.10).
I think having home owners being able to borrow money at 0% or 1% is helping to encourage more, though. Just a shame home ownership rates are falling.
If you have your own battery bank you should be able to do your own smoothing when the spot rate goes nuts.
Yes, but largely consumers aren’t exposed to these fluctuations. Most people are on plans with fixed usage charges, and the provider takes on the risk of the spot prices. That mitigates the benefits of being able to do this yourself with a battery.
I personally think, off shore wind especially off the Taranaki coast and massive solar install.
China is selling solar panels for really low numbers; the panels are only part of the cost, installation is a big number.
The biggest off shore turbines are 16MW, which is huge.
Batteries are a really good idea, massive solar requires an equally large investment in storage, be it batteries or pumped hydro.
Yeah, pumped hydro is effectively a big battery and shouldn’t have been cancelled.
I wonder if subsidies for solar would help (like they used to do for insulation). Though solar is a lot more expensive than insulation.
Well they worked in Australia.
I think it would be more effective to have big subsidies for industrial roofs; a domestic dwelling may have a ~80m^2 of usable area. Industrial buildings have 1000’s of square meters available, with a single feed in point.
A few of hundred industrial buildings could, supply 300MW for 6hrs a day. This would reduce the demand on the hydro lakes. A good subsidy for this would help a great deal.
I think people are generally more supportive of subsidies for individuals rather than businesses. You could subsidise building a massive array of solar panels on a big rooftop but what happens next? Does the company that owns the building own the panels? Does the government pay for the panels and give the building free power as payment for using the roof?
If the govt just gave them money and the company owned the panels, it might be seen as handouts to companies.
The company would own it, a subsidy is there to promote the business to spend the money.
The subsidy shouldn’t be paying for the whole cost. It is there to reduce the payback period to something that makes sense for the company ~5 years or less.
If the government subsidized 30% of the cost, there would be some that would take it up. You would also limit it to a max installed capacity ~1GW - 2GW or so.
But if you have these huge industrial buildings, surely the company is not going to be able to justify covering the whole thing in panels then feeding back to the grid. They would only build what they needed to cover their usage, which is probably only a fraction of their roof.
The short version is it’s an auction, retailers and large users bid against each other on the spot market. There’s also stuff like futures contracts etc.