Here in the Netherlands we have some energy companies offering dynamic tariffs. Basically it means that the price is high when the demand is high, and on contrary, the price is low when the demand is low. When the energy supply is greater than the demand the prices can become negative, I.e. -0.05 ct per Kwm
And the negative price is what amazes me. It means you earn money by using electricity. So in theory I can built a giant hamster wheel which will be powered by electricity only when the price is negative, and it will make profit. Free money for doing nothing
Does anybody knows how negative energy prices work?
In: 3
There’s a lot to it but the jist is if supply is too high, and you cannot lower you output fast enough. It cheaper to sell for a small loss. If you don’t you may be out of compliance and charged fees for non compliance. Check out CAISO or AGS to understand
From an ERCOT perspective (i.e., the energy grid in Texas) it basically amounts to renewable energy. The government subsidizes “green” power in that they guarantee a rate of return. So typically the wind is blowing at night, and the turbines are producing energy when nobody needs it. So they sell it at below market prices knowing they will be made whole by the government or whatever contract they have in place with an energy provider.
Conventional forms of generation automatically monitor the ebb and flow of power needs and adjust accordingly. In a competitive market, the higher cost generators simply come off line (as directed by the grid operator) when the cost of energy drops below their profit margin. I’ve read some of these other answers and I really wonder what they were smoking.
If you build a hamster wheel, you get to run it with cheap electricity…it doesn’t mean you get a dividend from it. But if you can buy it cheap and re-sell it to someone else that needs it, then you make money just like the energy providers do.
My utility invested in West Texas wind generation to the tune of something like $27/mwh. When you do that, you generally have to commit to a given megawatt capacity. So if we contracturally committed to 50 mw of power, but didn’t have the demand, we were still financially obligated to pay for the full 50 mw whether we had the load demands or not. We could try to sell it on the open market, but if those market prices were below our obligation, we ate the loss.
Latest Answers