I don't know enough about the English power market to draw comparisons, but I'll outline a little bit about how the Australian NEM (National Energy Market) works and how it deals with situations like this. My understanding is derived primarily from an old house mate who did his electrical engineering honours around the NEM.
A while back the various disparate energy grids in Australia were more-or-less unified into one big grid (well, a few small grids with intercouples), the NEM was established, and the newly formed company NEMCO tasked to govern it.
The NEM is a bidding market, where various energy providers (and interestingly consumers, more on this later) provide bids detailing how much energy they are willing to provide and at what cost. These bids are placed, I believe, at least one day in advance though they can be revised after being placed.
If a providers bid is successful, its output gets adjusted automatically by the NEM to fulfil the quota allocated to it (note: "NEM" is used to describe both the market and the computer system that manages it, as far as I can tell). The providers will be paid whatever the current 'spot-price' is, regardless of the original bid price.
The spot-price is determined by, essentially, greedily consuming the cheapest energy possible until demand is met. Demand is met when the frequency lies within an acceptable bracket (around 50Hz). So a coal power station with high base-load capacity will place low bids for the majority of its capacity, to ensure that it gets picked first when demand is being met. It costs a lot of money to turn a station like that off, so they price their bids accordingly. Gas turbine engines have extremely low start and stop costs but their operating costs are significantly higher. These turbines will price themselves so that they get turned on only when demand is high and the spot-price has increased accordingly.
During some heatwaves in the summer the spot-price can increase to thousands of dollars per megawatt/hour and it is extremely profitable to have a diesel generator hooked up to the grid to take advantage of precisely these situations.
I mentioned before that some consumers will place bids. The realities of power generation mean that a station shutting down can be a long and expensive process. They need to ensure that someone is buying their electricity so that that doesn't happen. Typically this comes in the form of a brokered agreement with a large consumer, such as an aluminium smelter. The smelter agrees to buy a large amount of energy at a certain price (the details are a bit fuzzy to me) and the station ensures that they never drop below minimum load. The thing is, there is a point where the difference between the spot-price on the market and the brokered purchase price is larger than the value of the aluminium that can be smelted with that energy. When this happens, the smelter shuts down its smelting operations and sells the energy back to the market instead.
Now its not so simple as the greedy algorithm I outlined before, for precisely the same reasons as brokered deals happen - physical and political constraints. It's an incredibly complex job to schedule power station ramp-ups and ramp-downs while still balancing the load, but for the most part it's handled by the NEM. It takes into account renewable energy quotas (what my house mates thesis was on), maintenance shut-downs, water supply (for hydro stations) and much more.
One thing in particular that I found interesting was the cost of transporting the energy. There might be tariffs on intercouples between states, but the main cost is actually the distance the energy has to travel. You can't simply turn a coal power station up when a town in the middle of the desert has a power spike, as the attenuation between those two points (well, the closest station that has excess capacity as a result of the increase) means the demand isn't met. Instead, a diesel generator near the town might need to be turned on, which can be very expensive. The grid has a number of way to mitigate issues like this, but it's still very interesting.
The point is, a well written system makes this market work efficiently, but the domain of the problem is still huge. The (mostly) free market takes care of many of the load balancing issues, however human intervention seems unavoidable because there are simply so many things that can go wrong.
[Edit]
NEMCO is now called the Australian Energy Market Operator (AEMO) and their website is at [0]. It has lots of good stuff to look at for the interested. In particular [1] has lots of nice details about the history and structure of the Australian Energy Markets.
Most electricity markets are highly regulated markets, and the regulations are enforced. You are "free" to trade if you follow the rules.
Read some of the PDFs for http://www.google.com/search?q=electricity+market+design
and you can see some of the issues and some of the suggested solutions. Market rules are designed to create a functioning market - like a system architecture - to achieve network reliability, price stability, reduce political interference, and prevent gaming the system (Enron, but gaming can happen anywhere in the system).
Physical electricity connections for consumers are often natural monopolies, and thus require regulation. Imagine you could only buy power from an unregulated AT&T and that there was only one AT&T :-)
It is a very specialised job to design the rules and enforcement systems for a market so that the players (independent suppliers, consumers, and network operators) have the correct incentives to acheive systematic goals.
When the regulations fail, you get Enron and Southern California. When the market rules are not designed correctly, Iraq consumers have blackouts even though their next door neighbour has power to spare, because there is no incentive to build or run a transmission connection between them (e.g. due to fuel subsidies, or political instability). When contracts or the free-market fails, they cause Germany to dump excess wind turbine power to a buyer in another country, but they overload the network of a third party country stuck in-between the generator and load. Regulations are set up to help prevent the whole US eastern seaboard blacking out due to domino effects of network failures and individual incentives of the players to avoid costly redundancy or over-capacity.
99.9xx Reliability costs huge money, and rules help incetivise players to be capable of handling black swan events. Most consumers care about reliability, but most are too small to have any purchase power to effectively influence power producers/network operators (networks have monopolies on connections to consumers, only a very limited number of huge consumers have independent connections).
Deeply hard problems: political, economic, and technical.
700 million people blackout! Long article, but not very technical, contains some excellent quotes and sound like free anarchy at individual, corporate and government levels - corruption, politics, theft, fraud, overload, fatalaties.
I liked this quote: "No one is taking care of the grid — the network of transmission lines, interconnectors and transformers that is essential to life as we know it; two, supply cannot keep up with demand; and three, rate-setting is a political rather than an economic process. It should not come as a shock, so to speak, that neglect, failure to prepare and playing politics with essentials should lead to disaster ... No less than the American Society of Civil Engineers said in a report released in April that the [US] grid could break down by 2020 unless investment in it is increased immediately by about one billion dollars a year. Why so much? Because, according to the report, more than two-thirds of the system’s transmission lines and power transformers are at least 25 years old, and 60 percent of the circuit breakers have been in use for more than 30 years."
Here are some of my favorite quotes:
..."At 13:30 EDT, the MISO EMS engineer went to lunch. However, he forgot to re-engage the automatic periodic trigger."
..."Also at 15:42 EDT, the Perry plant operator called back with more evidence of problems. “I’m still getting a lot of voltage spikes and swings on the generator . . . . I don’t know how much longer
we’re going to survive.”
..."At 15:46 EDT the Perry plant operator called the FE control room a third time to say that the unit was close to tripping off: “It’s not looking good . . . .We ain’t going to be here much longer and you’re
going to have a bigger problem.”
A great read both for its tutorial and historical value.
> "So a coal power station with high base-load capacity will place low bids for the majority of its capacity, to ensure that it gets picked first when demand is being met. It costs a lot of money to turn a station like that off, so they price their bids accordingly"
Nuclear puts in bids of zero since adjusting the power output of those is difficult. Coal is quite flexible once the turbines are running so can be used to deal with upcoming demand (ie if you realise that you need more generation in 30mins time) - apparently this is because they run most efficiently at 70% of max output. Gas generation/stations are most efficient at 90-something-percent of max output, so they have less short-term flexibility than coal. Hydroelectric storage is the quickest to respond but also the most expensive (generation within minutes - some folks I knew called it the 'emergency button' :).
That's all random stuff I learnt years ago over a summer in the industry.
This is very interesting. I can add to this that the NSW and Victorian governments passed some legislation that all retailers of electricity must offer a percentage of power used be fed into the grid through renewable sources.
Some people go for 100% renewables - this means that if they consume 3Mw power then 3Mw power will be guaranteed to be generated from renewable sources. Would love to know how they calculate this.
The kicker is that they pay for the privilege of using renewable energy, yet they still have to pay a carbon price on their power.
My understanding is that the Renewable Energy Target is actually set by the Commonwealth. Though since it's not really something directly under any S.51 heading I imagine they do it by paying the States and then the States pass the laws to make it work. [1]
I too find it weird that the RET stayed after the introduction of the carbon tax. The entire point of putting a price on emissions is to allow the market to sort out the most efficient way to abate them.
Buuuut of course the RET was started by Howard et al to prop up sugar cane farmers and now it's propping up Gillard's mob in the Parliament. So for now it's unkillable.
[1] On the other hand, when has the concept of limited heads of power ever stopped the High Court from giving the Commonwealth what it wants? I guess they could shove it under 51(i) (interstate commerce) or 51(xx) (the corporations power).
They work out how much renewable generated energy they're obligated to provide (or estimate) and ensure that they have at least that much renewable energy generation capacity. The actual electricity supplied to the households doesn't have to be generated from renewable sources.
The current (conservative) government in Victoria is no friend to renewables. It's brought in rules saying that anyone within 2km of a proposed wind generator has total veto rights, regardless of whether they can see or hear it from their property. There are also six areas in the state where wind generators are simply not allowed, period - most are around coal stations.
I used to work for a company where the owner was also involved in the wind power industry, and every now and then we'd hear things like the above. It ain't exactly being encouraged by our state government, that's for sure.
In the UK, I believe that the electricity companies have to provide a certain percentage of renewable, but electricity paid for by people who want "100% renewable" counts towards that target so people are paying the electricity company to do what it was mandated to do anyway. It's not like the electrons coming into your house are in any way connected with a specific type of provision anyway.
>The thing is, there is a point where the difference between the spot-price on the market and the brokered purchase price is larger than the value of the aluminium that can be smelted with that energy. When this happens, the smelter shuts down its smelting operations and sells the energy back to the market instead.
That seems odd, Aluminum smelters are even harder than coal fired power stations to power cycle. The cells have to kept constantly molten, freezing damages them.
Pot-lines can be turned off for periods of seconds to hours because they have plenty of thermal inertia (assuming the control systems are modern enough, and the power regulations make it profitable for the smelter to do so).
They can also temporarily shift taps (change voltage and power draw) to increase or decrease load, within some constraints.
Only if the pot is turned off long enough to solidify is it a problem - and even in that case if base load prices shift enough it can be profitable to do so in a functioning electricity market, e.g. for a pot cathode that is nearing replacement time they could turn it off earlier than otherwise. In New Zealand they once turned off a whole Aluminium smelter for months when we had a long dry spell and the country ran out of hydro-power (I recall the frozen pots had a > 50% possibility of getting restarted too - the chemistry is somewhat of an art so some luck involved!).
I have two friends who work architecting whole electricity markets (for a whole countries). They have masters degrees in operations research. Pretty cool designing how to set up the pricing, bidding, and rules to optimise for changes base load, spot load, failures, network limits, etc etc. It is hard to design bidding systems to avoid market failures - think Enron & California!!!
If you ever get a chance to visit a smelter, do it, they are damn cool engineering. High current at low voltage (the pots are like huge molten batteries) and the bus-bars cause very large magnetic fields and are apparently dangerous if you were to carry a magnetic tool! IAAEE - I am an electronic engineer - even though I do full-time JavaScript development ;-(
Also a smelter essentialy only has two variables that control its profitability - the price of electricity and the price of aluminium. A smelter wants to have a long term futures contract for electricity supply, and matching long term futures contracts for selling aluminium on the commodities market.
They have some control over the price of electricity - the control is via:
* long term electricity supply options (e.g. the New Zealand government gave a smelter here a special decades long contract, so a company would set up a smelter in NZ, even though the bauxite is mined in Australia and shipped thousands of kms).
* possibly owning their own generation capacity (the NZ smelter had a large hydro dam built for it, and they had contractual control over its power).
* most importantly to optimise where to put the smelter to best take advantage of long term cheap power (cheap base load prices, supply reliability, political stability).
Shipping bauxite to NZ from AU is not far. Lots of bauxite is shipped from Australia to Norway to be smelted. Because NO has cheap hydro power, this is considered economical!
Interesting, I guess on those time-scales it does make sense. I was Qatar a few years ago when a series of power failures caused all the pot-lines on Qatalum's brand new smelter project to freeze.
My understanding is somewhat limited, as that is a second-hand anecdote.
They probably don't turn the smelters off completely, instead simply scaling production down to a minimum. This seems like the most reasonable action in any case, as they would want to continue smelting as soon as the spot-price dropped.
For me the most interesting part of this was the fact that energy brokers existed (not that surprising) and that the free market allowed for instruments like this to be developed.
There are quite a few levels of distribution as well, and each of those implement different market instruments to optimise for reduced risk and costs.
A hard problem that is starting to emerge is actually based on both how distributors amortise risk, and the emergence of smart meters.
Smart meters should be able to help regulate the entire market, because they give us better control over the load profile. The thing is, a typical consumer buys their energy from a retailer, who themselves will have agreements with wholesalers, who in turn work with energy providers and the NEM. Who should have control over the smart meter, its data and operation? Who should benefit from the cost savings and reduced risks?
At the moment the cost savings seem to be shared fairly equally, but ownership of data and control varies based on legislation (state to state in Australia). There is definitely a lot of room for innovation in this space; I'm looking forward to seeing how things progress as more and more of these devices are deployed.
The UK used to have that kind of system (from about 1990 to 2001). Since that time a more complicated system has operated known as NETA[0].
In the current system, generators and consumers (domestic supplier companies are "consumers") trade freely with each other but have to submit notifications to the system operator of the trades that they have done. You trade electricity in half-hours but 1 hour before each half-hour in question you must submit your final notification of your traded position. This profile is what the operator expects you to product/consume over that half hour.
You may also participate in the balancing mechanism[1]. This is where you also submit bids/offers to produce/consume more/less during that half hour. The National Grid will accept bids/offers in order to balance what it sees at the difference between your traded position and forecast demand. If you get your traded position wrong, the grid will have to balance things up by accepting bids/offers and the cost of doing so will fall to you (plus a bit more to teach you a lesson).
The Balancing Mechanism works on a minute to minute type level, to handle second by second fluctuations there is also a service known as Frequency Response which the more flexible generators may provide to the grid. This is a mostly automated system in which their generation equipment continually adjusts to compensate for the changes in frequency.
In the film we saw, at least one Hyro plant was ready to come on. We're not told whether it had sold its power on the open market or had had a bid accepted on the Balancing Mechanism. However, when the French inter-connector trips the Grid brought on another hydro plant. This would probably have been via the Balancing Mechanism. The operators of the inter-connector would have had to pay for failing to meet their traded position.
I worked in Western Power (Western Australia's distribution power utility) for a short while.
The thing with the smelting plants is that they are usually located far away from population centres, and close to a port (or they have their own port!). This doesn't help with the situation, as they are usually quite a long way from the generation plant. But it usually means they have a very substantial connection to the grid.
I'd love to go back there and learn more about this stuff. Power engineering is fascinating.
The corresponding graph is very interesting as well [0].
Demand rose steadily from 4:30am through to its peak at 4:30pm. Just after this the spot-price jumped from ~$100 where it had been fairly steadily throughout the day to ~$2300. The market quickly corrected itself, but that half an hour would have been expensive.
Assuming an average price of $2350 per unit, for 2800 units, that half an hour would have cost around $3.43M. In all likelihood the market would have corrected much more quickly than that, but even at half that price it is still a lot of money.
[Edit]
The market is actually calculated in 5 minute intervals, and this graph [1] shows it broken down like that. From it we can see that for 5 minutes the load was at 3050 units, and the price was $12750. The price is an hourly rate, so if this had continued for the hour it would have cost $38.9M. As it was for only 5 minutes, it was actually 'only' $3.24M
Looking at the half-hour averages, this seems to match up, so maybe we were fairly close to begin with.
1,500 miles of high voltage transmission lines would cost a lot ($billions). Much more than the economic benefit of sharing power resources across the distinct markets.
AEMO's National Transmission Network Development Plan [0] describes in great detail how they foresee investments in the (eastern) grid infrastructure. As a frame of reference, just upgrading a couple transformers to increase the transfer capacity between South Australia and Victoria will cost tens of millions.[1]
A while back the various disparate energy grids in Australia were more-or-less unified into one big grid (well, a few small grids with intercouples), the NEM was established, and the newly formed company NEMCO tasked to govern it.
The NEM is a bidding market, where various energy providers (and interestingly consumers, more on this later) provide bids detailing how much energy they are willing to provide and at what cost. These bids are placed, I believe, at least one day in advance though they can be revised after being placed.
If a providers bid is successful, its output gets adjusted automatically by the NEM to fulfil the quota allocated to it (note: "NEM" is used to describe both the market and the computer system that manages it, as far as I can tell). The providers will be paid whatever the current 'spot-price' is, regardless of the original bid price.
The spot-price is determined by, essentially, greedily consuming the cheapest energy possible until demand is met. Demand is met when the frequency lies within an acceptable bracket (around 50Hz). So a coal power station with high base-load capacity will place low bids for the majority of its capacity, to ensure that it gets picked first when demand is being met. It costs a lot of money to turn a station like that off, so they price their bids accordingly. Gas turbine engines have extremely low start and stop costs but their operating costs are significantly higher. These turbines will price themselves so that they get turned on only when demand is high and the spot-price has increased accordingly.
During some heatwaves in the summer the spot-price can increase to thousands of dollars per megawatt/hour and it is extremely profitable to have a diesel generator hooked up to the grid to take advantage of precisely these situations.
I mentioned before that some consumers will place bids. The realities of power generation mean that a station shutting down can be a long and expensive process. They need to ensure that someone is buying their electricity so that that doesn't happen. Typically this comes in the form of a brokered agreement with a large consumer, such as an aluminium smelter. The smelter agrees to buy a large amount of energy at a certain price (the details are a bit fuzzy to me) and the station ensures that they never drop below minimum load. The thing is, there is a point where the difference between the spot-price on the market and the brokered purchase price is larger than the value of the aluminium that can be smelted with that energy. When this happens, the smelter shuts down its smelting operations and sells the energy back to the market instead.
Now its not so simple as the greedy algorithm I outlined before, for precisely the same reasons as brokered deals happen - physical and political constraints. It's an incredibly complex job to schedule power station ramp-ups and ramp-downs while still balancing the load, but for the most part it's handled by the NEM. It takes into account renewable energy quotas (what my house mates thesis was on), maintenance shut-downs, water supply (for hydro stations) and much more.
One thing in particular that I found interesting was the cost of transporting the energy. There might be tariffs on intercouples between states, but the main cost is actually the distance the energy has to travel. You can't simply turn a coal power station up when a town in the middle of the desert has a power spike, as the attenuation between those two points (well, the closest station that has excess capacity as a result of the increase) means the demand isn't met. Instead, a diesel generator near the town might need to be turned on, which can be very expensive. The grid has a number of way to mitigate issues like this, but it's still very interesting.
The point is, a well written system makes this market work efficiently, but the domain of the problem is still huge. The (mostly) free market takes care of many of the load balancing issues, however human intervention seems unavoidable because there are simply so many things that can go wrong.
[Edit]
NEMCO is now called the Australian Energy Market Operator (AEMO) and their website is at [0]. It has lots of good stuff to look at for the interested. In particular [1] has lots of nice details about the history and structure of the Australian Energy Markets.
[0] http://www.aemo.com.au/
[1] http://www.aemo.com.au/About-the-Industry/Energy-Markets