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Comment by mdp2021 | Hacker News Reader

mdp2021

I do not quite understand why countries with large production such as France, which I remembered exported an interesting amount, seem to be hit severely (+50%). I thought they should have suffered less the unfortunate conjuncture.

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Maybe French generators are free to export their production to those who are willing to pay higher prices, rather than selling it domestically, just as LNG exporters are free to export their LNG to China instead of France if the Chinese can pay more. In that case, energy shortages in Germany would raise prices in France.

In an energy market, contracts are signed for months an/or years. If France thinks it has plenty of gas supply, it can agree to sell electricity capacity to other countries, when the gas goes away, they can't just cancel the contracts.

There do exist multi-year and even multi-decade PPAs, but an enormous amount of power is bought and sold in the day-ahead and even 15-minute spot markets. The article we're commenting on actually has a graph of prices in the day-ahead market; maybe you missed that.

My best guess is that the energy providers speculated on the energy trading market and lost, creating a huge gap. There's almost no risk for them, because when they win, they make a lot of profit, and when they lose they can just tell consumers there is a shortage in energy.

Ofc. this market is highly regulated, but if I understood correctly there's a lot of room in between the whitespace for interpretations.

(Note : Highly simplified explanation, in reality this will be implemented via leverage and derivatives, but I've consulted for an energy trading division a couple of decades ago.)

Energy generation (at least in Europe) has changed a lot in the last 20 years. So have many financial markets. I would strongly suspect that the dynamics of energy markets are quite different today to how they were 20 years ago.

yes, the dynamics of course. brilliant.

Even though the landscape might have changed, I don't see a reason why trading should change (except maybe for opening up the market to smaller players who are "energy resellers"...)

In the end, trading is betting on arbitrage, and I don't see why an energy producer would stop leveraging this "free money".

A simple example: if there was good weather expected in another country, the org would set up a contract to buy the energy surplus in that country at a cheaper price. Whether or not or bio-gas & coal plants were running or not was mostly based on how much energy we needed after taking into account what happened on the trading floor, the price of our fuel and how much the other country would be charging. Of course, the other country could decide we didn't offer a good price and decide to tone down it's amount of energy it produced.

I recall a lot of market making on the CO2 emission rights for example, but that's another story.

This is a simple scenario, in real life it was way more complex. (Just think about planning something like the delivery of coal at a plant.)

Energy retailing is, AFAICS, a very low fixed cost business. You don't need to own any expensive infrastructure. You just buy electricity from the wholesale market (usually time-varying, although careful operators can of course hedge their positions), and sell at fixed price to consumers. You essentially need a web site and a bunch of annoying telemarketers.

It seems what has happened is that many of these retailers are some small fly-by-night operations. When wholesale prices are low, they make a lot of hay (making sure to store that somewhere that regulators can't get their hands on them), when the wholesale price rises, well, declare bankruptcy, and start a new company doing the same. Rinse and repeat.

Regulators should really step up the game, making sure that retailers are properly hedged etc. Or then forget this idea of "deregulated" electricity markets.

The org I mentioned in my previous post was not a reseller but an energy producer; they were the largest producers of energy both in our country and the neighboring countries.

The calculations for plant scheduling took a gazillion of parameters into account (CO2 emission rights, pricings of different kinds of fuel, weather predictions, ...)

These markets not only trade energy, but also fuel, logistics, CO2 emissions, ... (using direct quantities, options, leveraged products, things like insurance, ... If you could imagine it, there was probably someone trading it.)

If you are into this stuff: I built the prototype that validated their portfolio position with the other suppliers; it was a protocol called EPM (Electronic position matching), developed by the EFET (European Federation of Energy Traders). I am not sure how it evolved, as this was the first iteration of the protocol...

In France nuclear + water + wind + solar, all low marginal cost, cover the consumption at 99%+ timestep in the day-ahead market, but there is like 18GW of interconnect, so gas + fuel + coal are running to power our neighbours, in the electricity market the last called capacity in the cost curve set the same price for the whole time step (with some provision for interconnect capacities). Without interconnect French day ahead power price would be at like 17€/MWh, but thanks to our neighbours it is at 150. But still the day ahead market doesn't set the price paid by the consumer, there is long term futures, and 100TWh/year of nuclear offered at 42€.

Changes in the marginal price affect the whole market. The value of exports has shot up, so the export interconnects are probably working at full capacity, resulting in marginal generation being brought online to meet domestic need.

Overworking actually - they've been running a couple of the interconnects on the South Coast of England at 50% over capacity. Not surprisingly, this eventually overheated and ignited the oil-fired cooling, burning one of them down.

<<The fire at the Interconnexion France-Angleterre (IFA) site broke out in the early hours of Wednesday. The site was evacuated and there were no reports of casualties.

After the fire an electricity interconnector running under the English Channel was "not operating", the National Grid said in a statement.>>

https://www.bbc.co.uk/news/business-58579829

(If you are looking for the angled quotes ('«', '»'), depending on your system and layout, try [RightAlt]+[<] and [RightAlt]+[>]. There are keyboard layouts using four layers - regular, shifted, alternate and shifted-alternate, together with the combinations (e.g. [RightAlt]+[:], [u] → 'ü') )

Thanks, but sadly doesn't work on this laptop, (UK keyboard), hence taking the lazy option.

You are writing in English and quoting an English statement, why not use the native ("") quoting style ?

They are ambiguous as used for both quotation and figurative rhetoric. So some prefer to disambiguate: '«veni, vidi, "vici"», said the epigone of Pyrrhus'.

Because the quoted text included quotes. I'm an IT Developer, I instinctively shy away from ambiguous nesting.

Ooft - I'd heard about the fire, but not that it was caused by overworking it!

Many many homes in Europe are natural gas fuelled. Combined with low-efficiency heating systems (no heat pumps), and bans on fracking (like here in the UK) means that countries have an over-dependence on a resource that they import and have no-or-low production of at home.

I'm not sure fracking is viable enough to make a difference in the UK.

I can only read the opening paragraph and first graphic, so I’ll have to guess: my guess is the European grid plays a big part in levelling energy costs within the EU? One of the UK-France power connections failed recently, which is why the UK is much more expensive than (at least) France and Germany: https://www.reuters.com/world/uk/uks-national-grid-says-fire...

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