Pressure on power companies to act as energy woes mount
Pressure on power companies to act as energy woes mount
Action is desperately needed as power companies profit while growing numbers of manufacturers and households power down, commentators say.
Remember when we were told that privatisation of power generation would lower prices?
Remember when NActional Fist cancelled the pumped hydro storage project?
Remember when NAFf said that they were going to fix the economy. That the previous government had in such a "terrible" state.
Why invest in new generation when you can do nothing and supply/demand drives prices up?
I know! it's great! it's ALL profit, if you never pay for maintenance!
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.
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.
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.
Oof. Retailers definitely aren't making money right now.