Tesla big battery setting market prices, including at $14,200 cap

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Tesla big battery has been been an active bidder in wholesale markets, including being a price-setter for bids at the market cap.

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Tuesday’s story about the shift of focus from the Tesla big battery of testing and showboating to some serious money-making certainly sparked a lot of interest, as do most stories about this fascinating and important new technology.

Tuesday’s story, however, may have given the impression that the Tesla big battery, known as the Hornsdale Power Reserve and operated by Neoen, was just following and cashing in on market gyrations.

Paul McArdle, from Global-Roam, the authors of RenewEconomy’s popular Live NEM-Watch widget, has spied another new development. The Tesla big battery is not just cashing in on price spikes, it is helping to set them.

This graph below sent through by McArdle illustrates how. Take a deep breath and find your reading glasses – and click on the graph to enlarge if you need to.

The key is the dark red – which are top of the range bids. Hornsdale set that price for capacity of 30MW and above, but the key shift came just before 2pm (grid time) last Thursday, when it bid all its capacity into that range.

That bidding pattern was recognised by the Australian Energy Market Operator, which named it as one of the price setters that pushed South Australia’s wholesale market up to the market cap of $14,200/MWh.

As McArdle notes, the Tesla big battery appears to have learned something about bidding behaviour from the gas generators, who rarely hesitate to push the market up, and to price caps, when they can.

Whether this becomes part of Hornsdale’s regular bidding strategy, or whether this is just part of the new technology’s voyage of discovery, remains to be seen.

Certainly, many in the market would be disappointed if it turned out that Hornsdale emerged as just another player exploiting its market power.

Perhaps that will end when more batteries are in the grid, rules that encourage such technology are in effect (such as 5-minute settlements and inertia markets), and when the operators, owners and rule makers get their minds around how this fast-speed inverter-based technology can change the market.

(Update: It has also been pointed out to RE that under the contract to provide system services to the SA government, Hornsdale is required to bid at $14,200/MWh  for government FCAS so as “not to interfere in the market”.

It does not necessarily mean that the bids are cleared and only occurs when AEMO moves to a situation called VOLL (value of lost load), when the market reaches its cap as the supply/demand balance reaches a critical area).

On the subject of Hornsdale, McArdle also sent us this graph below, showing Hornsdale discharging at 100MW yesterday afternoon, and the intense activity in the battery.

It will will likely be busy again this long weekend, with the Bureau of Meteorology forecasts temperatures of more than 42°C in Adelaide on Friday and Saturday, and AEMO earlier this week warning that forecast temperatures would be above the normal operating range for the big fossil fuel plants.

And, just on our Live NEW-Watch widget, it now has a feedback button so you can send questions about its data directly to the people who should know the answer.

 

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41 Comments
  1. MrMauricio 10 months ago

    Well,well well…”the Bureau of Meteorology forecasts temperatures of more than 42°C in
    Adelaide on Friday and Saturday, and AEMO earlier this week warning that
    forecast temperatures would be above the normal operating range for the
    big fossil fuel plants.”
    Looks like we will all have to get batteries to go with our private solar ASAP with black/brown coal based grids and climate change bearing down on the functionality of these “”assets”

    • Joe 10 months ago

      It will all be the fault of SA’s solar and wind if those Coalers fall over…I can already read Joshie’s tweets on this.

    • Ray Miller 10 months ago

      If you look at the specifications for any of the batteries they too like to be cool and high temperatures decrease their life, the good news is they can use heat pumps to remove excess heat, which is not possible for a large generator.

  2. Gordon Bossley 10 months ago

    Good luck to Hornsdale, and (I think) bring it on! The more exploitation of the market by big players, the more smaller players will take matters into their own hands and either ‘island’ or disconnect from the grid. The genie is out of the bottle, big-time! We’ll drift towards a true free market instead of an oligopoly.

    • Guy Stewart 10 months ago

      The actual solution is to eliminate the retail/wholesale pricing model and open it up so anyone can buy and sell energy.

      Power Ledger has a technology platform that could do this.

      It would make a MASSIVE difference to the cost of energy. Far greater than building new generators in the existing framework.

      • itdoesntaddup 10 months ago

        The winners would be those with the best trading algorithms. The losers would be everyone else.

        • Guy Stewart 10 months ago

          As opposed to the current market, where the winners are those with the biggest generation weight to throw around and the losers are…everyone else?

          Unless we nationalise/socialise the essential services, I will take the algorithms and low barriers to trade.

          At least in a open market as a small scale generator I can get access to market prices for my energy.

          • itdoesntaddup 10 months ago

            Currently you presumably get access to highly subsidised feed in tariffs. $14,200 prices make for good headlines, but in reality they account for only a tiny volume of supply: the Australian electricity market is of the order of 200 million MWh per year (200TWh). An hour of $14,200 prices in SA during high demand might be 2,000 MWh – 1/100,000ths of the annual consumption. Make it a free market, and you can be sure that such events would be much more common – and the prices you would have to pay uncapped might go much higher: moreover, you would have to be careful not to be supplying when prices go negative. For all that regulation is imperfect, it’s probably a whole bunch better than letting you get outsmarted and losing your subsidised feed in tariff.

          • Guy Stewart 10 months ago

            My feed in tariff is relatively high at 16c / kWh but I wouldn’t call it subsidised. Considering the surplus I export displaces the purchase of power that is sold at full retail 30c / kWh to my neighbours.

            Peak pricing events are a tiny volume of supply, but a majority of the profit taking. That is why they are so ripe to target with regulation change. A relatively small deployment of distributed, dispatchable generation that isn’t controlled by an oligopoly CAN supply all that peak demand event energy. This is an extremely efficient mechanism to reduce power prices.

            I do not agree that freeing the market will increase the number of high priced events. Nearly all the events are currently caused by collusive large generators abusing their market power by withholding supply to drive up prices during peak demand events.

            Opening access to this market from a handful of players to everyone will make the collusion impossible.
            Thanks to low cost computing and reliable high speed communications (lol nbn), this can now be an automated process. It would be set and forget for most home generators.

            Negative prices would similarly disappear because every battery would be programmed to charge as power prices approached $0, increasing demand.

            Unlike large generators, small scale systems with batteries can switch from idle to full charging to full discharging in seconds.

            This can be done not just at a few points of major generator interconnection but down to the level of every substation. This would also improve grid stability and reliability.

          • Greg Hudson 10 months ago

            This where a P2P / blockchain community power group could make a motza…

  3. Tom 10 months ago

    Hey Paul and Giles, .png is much clearer than .jpg. I can barely read those graphs with all the artefacts in the picture!

  4. MG 10 months ago

    “many in the market would be disappointed if it turned out that Hornsdale emerged as just another player exploiting its market power.” … especially true, given that Hornsdale is competing against private players in a competitive market, and only exists due to government/taxpayer intervention.

    • David Osmond 10 months ago

      The government part of the battery is in FCAS, and it is clearly making a big impact in reducing FCAS pricing. But the private part of the battery is in the energy market, and I guess they are free to exploit any market power they have in that market

  5. PaulC 10 months ago

    We need to remember that the HPR is privately owned by a generator. Under basic capitalism, businesses have the obligation to charge what the market will bear. I see no reason therefore why they would change their strategy from maximising their profits.

    But again, this is just a market operating normally. Those price spikes should attract new investment – or at least they would if the rules provided enough certainty. As with all markets, excess profits attract competitors so this should reduce gouging.

    The problem we face is that the government could have solved the uncertainty with a bilateral approach under Finkel. Instead, they have proposed the NEG which is vapourware and simply creates even greater uncertainty and disagreement. Hence, there remains limited investment and excess profits continue unabated.

    And that is the root cause of so many ills in Australia – not just with energy. Our politicians of all flavours believe in ideological and class warfare rather than discussion, negotiation and sensible compromise.

    • Chris Drongers 10 months ago

      Ironic that batteries could exacerbate the gaming of the bidding system.
      A key advantage of the batteries is their millisecond switching which would allow them to stay out of bidding till the last second. A transition to 5 minute bidding would intensify the last second bidding options until we end up with computers engaging in algorithm driven trading in the last microsecond, same as in the share market.
      The logical outcome then would be an algorithmically trading distributed generation aggregating retailer or retailers in competition.

      • Vic Webster 10 months ago

        Sorry, but did you say “an algorithmically trading distributed generation aggregating retailer”?

        • Chris Drongers 10 months ago

          I was speaking to a reasonable man on the Clapham omnibus!

      • itdoesntaddup 10 months ago

        Algorithmic trading is already here in power markets, and has been for some time. Indeed, I find it hard to explain the highly oscillatory yet semi random behaviour of the battery (see the second article chart) without looking to algorithmic trading. I’ve looked in vain for evidence the battery has been balancing out physical flows. A thought did occur to me that they might get less energy loss if they operated the batteries intermittently, but it makes little sense, as they can rotate around the batteries and inverters they use while they are only operating at +/-30MW peak. Another possibility was that they were encountering overheating/thermal issues (particularly in the hot weather). Again. rotation should largely solve it – and turning up the A/C.

        I’d be curious to understand why the battery blasted out a couple of 100MW spikes when there was nothing untoward happening in the underlying market.

      • Vic Webster 10 months ago

        No one is disputing that.

    • George Michaelson 10 months ago

      I deleted a post but in summary: there is no “obligation” to charge what the market will bear, and there is no such “thing” as basic capitalism here. Its a regulated market. You’re projecting your own philosophy onto somebody else.

      • PaulC 10 months ago

        Well, perhaps you can explain why there is widespread gaming in markets such as this? And why has their been excess investment in poles & wires? And why does health insurance, road tolls, and just about any other market you can look at see increasing prices in the absence of effective competition?

        You may not like it, but the reality is that businesses will charge what they feel they can get away with. Of course, if you charge too much there can be a customer backlash, but with energy, what are you going to do? If it persists you may go off grid, but on the whole we pay up and carry on. Who holds energy suppliers to account? Government don’t, consumers can’t.

        So by all means disagree, but then I’d like an alternative explanation of how we get prices (with or without HPR) at $14000?

      • Guy Stewart 10 months ago

        It’s not the law, it’s a market force. As a business if you leave money on the table, you are making less than you could. That effects the return on invested capital, and makes it less likely that investors will give you more to build more in the future.

        An energy company maximising the income potential in a regulated market with a high barrier to entry is so obvious that it would be news if a company DIDN’T.

        • George Michaelson 10 months ago

          fine, if you want to call this a force lets do that. but this obligation to.. language really gets up my nose. There is no obligation, and it is entirely appropriate for a board to direct that the price is set 5% or 10% below market rate, on some reasoning such as longterm goals. The ROI can be set to achieve sustainable goals, not short term peaks. the pattern of investment can declare up front it avoids peak profit to ensure market stability.

          There is not one single source of capital, and there is not one single driving force, and there is not one single line in the directions to directors which obligates them to seek maximal profit at all times, above all other things.

  6. Craig Allen 10 months ago

    Well, if renewable installations with batteries start gaming the current broken set of rules maybe that will finally spur the government and regulator to do something about them. They have no problems with fossil generators doing it but will no doubt be horrified about renewable generators doing the same.

  7. Captain Obvious 10 months ago

    Why not just call it the same as you do when fossil fuel generators do it: price gouging?

    • Kate 10 months ago

      As a person who’s only interest is as an end-user I’m pissy enough about electricity costs that I certainly will. I would much prefer that government policy would be in place to encourage a more stable, efficient and timely manner to the inevitable shift to an energy sector focused on renewables.

      Far better that than purely market forces driving an unstable shift with little to no strategic planning in how, where and when the different components of that inevitable shift occur.

      But unfortunately, we currently have a federal government who has neither the foresight, courage, nor cojones to do that. Instead they bring a lump of coal to parliament and lovingly caress it.

      So, yes, it’s price gouging, and since price gouging implies there is gold to be made in them thar hills, then market forces will spur investors act sooner, albeit in a more haphazard, less strategically driven and public-minded fashion.

      But I can’t do anything to change the status quo. None of us can.

      … apart from using our votes wisely in the next election…

      Be afraid LNP. Be very afraid.

  8. Ian 10 months ago

    Can’t find the purchase price for the HPR but recall it was about $100 million. Inhabitat estimate this event netted the battery $1 million. Not a bad return on investment. Given that they have had numerous events , the likelihood is that this battery has already generated more income than it cost.

    Details of this should be open for all to see to encourage reform of the market and to encourage other players to join this gold rush of grid storage.

    • Kate 10 months ago

      This is how the ‘fake news’ accusations start. REneweconony publishes an article speculating that due to the events on 18th & 19th of January the Hornsdale facility possibly having made $1 million. Inhabitat uses the REneweconomy article as a source in their article. A commenter back here on a separate REneweconomy article references the Inhabitat article about Hornsdale likely having netted $1 million in profit in a few days.

      This is circular reinforcement of speculation/opinion. It is not fact (which I know you’re not asserting Ian – I’m just pissy about the whole circular reinforcement of speculation scenario).

      Undoubtedly this entire situation is of enormous public interest. Because it is I for one would like to read about whether Hornsdale management can actually confirm it as fact, or otherwise correct any mistake in these article’s assumptions/speculations, so as not to have this discussion/topic derailed by so-called ‘sceptics’.

      REnewecomony – have you sought any comment/confirmation from Horndale’s management on this?

      • itdoesntaddup 10 months ago

        I have made an estimate of their earnings based on the available 5 minute data for the battery’s discharge to the grid and charge/own use from it, using the SA Regional reference prices for each 5 minute period. I did at least take the trouble to calculate it all in a spreadsheet, rather than guess – and anyone can cross-check my results by downloading the data for themselves. Details are in comments to this article:

        https://reneweconomy.com.au/tesla-big-battery-moves-from-show-boating-to-money-making-93955/

        I have to say, in general it is not easy pickings to make money on that basis alone: events like the one highlighted here are rare, rather than every week. The underlying normal levels of the past 6 weeks or so would only allow a gross income of $1.5-2m a year (not mega against a supposed $100m asset that has a limited lifespan), so they need to milk incidents like this for all they can get. Of course, as has been pointed out, they are also earning other sums for providing various forms of backup capability, where at least part of the income is simply for being ready to act if called on to do so. How much they might earn in this way is much less transparent, but there are some figures on the size of the overall market – see page 15 here:

        https://www.aemo.com.au/-/media/Files/PDF/Guide-to-Ancillary-Services-in-the-National-Electricity-Market.ashx

        Set against the other generators they are really fairly small, so they can only expect a small share of the total. I am in no position to estimate with any more accuracy how they might do from these other income streams.

  9. Anne Brady 10 months ago

    Has Baaaaaaaaaaaaaarnaby Joyce been reading this?

  10. neroden 10 months ago

    At this point there are still too few battteries in the market. There need to be enough batteries that if they all make price-gouging bids *they don’t all get used*. That’s what will start driving price competition.

    In addition, they need to fix the whacked-out bidding system — this “rebidding” nonsense and the 30-minute settlement nonsense are absurd.

    • Craig Allen 10 months ago

      Unfortunately if companies owning such batteries are willing to use them to game the system, then they will be able to do it on millisecond scales.

      It demonstrates that something needs to be done about the market mechanism besides refucing the window from 30mins to 5mins.

      I hope that companies that are willing to destabilise the system for a quick buck in this way will be excluded from being able to build battery installations and participate in the market.

  11. Ian Franklin 10 months ago

    If the battery is being used to compete in the wholesale market, does this mean that Neoen has the right to use the battery for this purpose? Most of the media seems to have assumed that it was paid for by the SA Government, who (I understand) are not allowed to compete in the market with their diesel generators. So, my question is: does Neoen own 70% of the battery, and if so, did they pay for it?

  12. Greg Hudson 10 months ago

    This seems like an ideal time to limit the market cap to $5k/MWh IMO

Comments are closed.