David Bidstrup: Gaming the system

An article in “The Australian” (July 2 2018), reported on power price rises due to “gaming the system”.

Earlier this year I did an analysis of SA wholesale prices for January 2018 to look at price changes on 3 of the hot days using data from AEMO Price and Demand reports. If anyone has doubts about the horrendous “market” we have or the possibility that generators might “game the system” this might give some insight.

Each day was over 40 degrees and the details for each day are in the table below. The colours refer to the chart lines for each day. The number in parenthesis in the “average $/MWh” column shows the multiplier based on the average price on 6 January.

Date Max Temp Daily wholesale cost Max price $/MWh Average $/MWh over the day Total MWh consumed
6 Jan 43 $ 3,047,470.00 $ 113.69 $ 78.58 (1) 38,784
18 Jan 43 $ 67,965,999.00 $ 14,166.50 $ 1,404.45 (18) 48,393
19 Jan 44 $ 59,969,400.00 $ 13,408.28 $ 1,195.28 (15) 50,172

The chart below shows load and price/MWh over the course of the day. The AEMO data is given in 30 minute intervals so the X axis shows forty eight 30 minute intervals from midnight to midnight. The load lines are in the lower part of the chart and are reasonably similar in shape although their peaks vary a bit.

The price/MWh for 6 January follows the X axis as the scale of prices is such that it barely makes it above the axis. The price/MWh for both 18 and 19 January do so until the afternoon “peak” hits when they go through the roof.

On 18 January the afternoon “peak” from 3 p.m. to 7.30 p.m. cost $63,343,640.00, ($4,723.00/MWh), which is 93% of the total daily cost. On 19 January the “peak” from 2.30 p.m. to 7.30 p.m. cost $53,103,892.00, ($3,772.00/MWh), or 88% of the total daily cost.

Wind power went AWOL due to a large high pressure system, a frequent occurrence in summer, and the system was on the edge. As you can see, the generators made a meal of it and the suckers paid the bill.

If the Port Augusta power station had not been sacrificed on the altar of climate change it would have been able to provide the shortfall from wind power and removed the opportunity for generators to wait until the last minute and then rape and pillage at will.

The last chart shows the comparison between Q1 2018 wholesale prices in the various states that make up the “National Electricity Market”.

I wonder why, if it is a “national market”, prices vary so much from state to state.(Numbers at base of chart show % comparisons against the Q1 “average” over total supply and cost.

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9 Responses to David Bidstrup: Gaming the system

  1. but Mal says:

    “We have seen a reduction in the wholesale price gas by around 50 per cent over the last 18 months because of actions my government’s taken. We have seen a reduction of at least 25 per cent over the last year of wholesale generation costs already.

  2. Dr Fred Lenin

    Would that be 25 per cent of the price rise? My bill says turnbull is an unmitigated liar ,but then again that’s to be expected ,he’s a failed lawtradespersons isn’t he ? When have you ever known a lawyer or politician to tell the truth ? That’s why they all hate Trump. He does tell the truth .

  3. stackja

    RGR started the scam. TA undid much. Then MT came along.

  4. RobK

    David,
    Im more familiar with engineering than pricing (and I live in WA which has a diffent system ) but I offer the following comments:
    1) As I understand it there is a spot market and a contracted market. From what I gather, you are analysing the spot market, so the billable average would be diluted. I don’t know the details.
    2) Finkel’s report did go into rorting of the system and recommended changes from the 5min spot averaged over 30min. Its been a while since I read it and the details i remember are a bit vague. (I haven’t time now)
    3) Finkel and the other report into the blackout recommended charges for support frequency ancillary services for when it’s very windy, but i guess that’s a seperate issue.

  5. Bruce of Newcastle

    A better contract would be a reverse take-or-pay system. In take-or-pay the customer either takes the contracted amount of the product or they pay a penalty. In this case the better alternative is for electricity suppliers to supply-or-buy. The supplier would contract say a week in advance for a number of MWh for each hour of the target day, and if they can’t supply it they buy on the spot market and supply those MWhs at the contracted price.

    That would be fair for all suppliers, since if wind producers could not supply on a day at the contracted price of say $100/MWh they would have to buy spot electricity to supply the consumers instead. The same would apply to coal plant operators with mechanical problems.

    If the spot price tops out at $14,000/MWh they are out of luck. Or they go buy a gas plant, or a battery, based on the expected savings of avoiding the price spike. Which would turn non-dispatchable electricity into dispatchable.

    This system would cause spiking to be corrected since the suppliers causing the spikes have an incentive to spend capital to stop them happening. So average electricity prices fall and the customer gets lower prices. At the moment suppliers love the spikes as they rake in dosh when they occur.

  6. IRFM

    You finally got there David. If you had looked out the ‘window’ you would have seen only gas peakers with no gas power station providing base load power – this trend says it all and it it is not going to change. In the US they legislated some time ago for all base load coal power stations to have a least 10% input levels from gas. With the low price of gas this has forded the thermal coal industry into decline as more and more generators have moved beyond the 10% threshold.

  7. Dr Fred Lenin

    How about each generator is assessed for the amount of potential power they will brag about generating and issued with a costly licence to generate , then penalised for non supply of the amount they stated at full market rates ,continual failure to supply the amount will mean loss of licence with a large fine ,plus total removal of all now redundant equipment ,(_windmills solar panels etc ) and site restored to pristine condition .

  8. billie

    Isn’t this pretty well what Enron did?

    “F***king over grandma”, was the expression the traders used when they were setting up California for huge cost increases, pretty well the same as this, when power was needed and there was ashortfall .. boom .. big price hikes.

    All the Enron trading tapes are online somewhere, I went through some way back when with a phoneme search package, it kept struggling to keep up with the number of hits it got.

    It was funny listining to the traders, they were having a great time of it and the Californian taxpayer paid and paid.

    Most of the traders went to jail, unlikely that will happen here.

  9. egg_

    As renewables itself is a scam, why wouldn’t the market act accordingly?

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