This is a very terse note. Is there simply not more information available than "some price went negative on the market because someone made a mistake", or am I missing something that's implied here?
The market price is based off the cost of the marginal MW for some of these auctions. They tried selling power, but someone accidentally said they'd sell for a very large negative euro per MW hour amount and that set the price for the entire market and obligated them to pay the market to sell power. This is pretty rare, but not unheard of.
The seller (Norwegian Kinect Energy) will need to negotiate with other major marker participants to bail them out. But it’s likely in the interest of everyone of not to let them collapse.
The markets would be in disarray if there would be undo button for a trade. Preparations need to be made by large industry participants for every daily allocation.
It's Scando, so i would imagine that if the relevant ministers in FI SE NO all sign off, and no major market players (like Fortum) object, then they'll unwind it and fall back to replaying the previous day's bids. Or is this impossible ?
It's impossible to undo because a lot of bids are build on the top of other bids. You would need to undo tons of history. A lot of legit players and traders would lose money. They would sue for market manipulation.
Let one who makes mistakes to pay for them.
However this does not prevent doing other trades on the top this trade to other direction. It is the question who catches the falling dagger and pays for the mistake of others.
This is pretty clearly NordPool's fuckup. There's no way in hell this bid should have gone thru without human review. Seems clear that their UI is to some degree - in some critical spot - fragile, user-hostile, ill-designed.
You can say that in analogous cases, finance firms have been put out of business by bad bids caused by slipped fingers. Granted. But in this case you're throwing a wrench into a power grid, with the potential to cause a system disruption, in winter no less.
There are many market participants, some of whom start trading on this information immediately. The Finnish grid is connected to the rest of Europe so a market participant could in principle flow this cheap energy from Finland all the way to Spain if the cables had capacity. I would guess it was too late the moment it happened.
Sometimes it's a mistake, sometimes there really is a pile of power that has been contracted for, and is coming, and enough sinks that needed power which don't need any more power. There are power storage plants here and there - hydroelectric aside from small batteries. No doubt if one were on the path to this it might sink some of this power but they might be full or the grid in between the two spots might be full or they might already have their own contract in place sinking some nuclear power or who knows.
If it were on purpose I'd still expect the bid to not be so extreme. For example, maybe -5€/MWh and not the -250€ or whatever the number was. They could have still secured the sale without losing so much.
They prob didn't notice until the market closed. Even then, you can't just undo a bid like that unless they have some kind of emergency clause to fix mistakes like this.
I think it's all there. The company in questions bid provides ~5800 MW for 24h, paying 203€ to those that use that power. Other companies will have accepted that bid (automatically) and will now tomorrow expect that power to be delivered (and get money for it), while other providers are planning to do something else with their power. The company mentioned may or may not have that much power available.
> "We are working with other market parties to solve this extreme situation," it said.
Sounds like they are working on an agreement with the others to avoid their mistake turning out to be as costly as that.
It’s probably in the interest of all of the participants that this is resolved with a less costly outcome. After all, who knows which of them will be the one making a similar mistake next time. It’ll be good for them then, if they played nicely now as that can inspire how future happenings will play out.
this is similar to how knight capital lost 440 million us dollars one afternoon in a trading bot bug and had to get merged with one of their competitors. this isn't quite that big
Well, electricity consumption in Finland will very likely spike tomorrow. People with a certain type of contract for their electricity will actually earn money for using a lot of electricity. Don't know what the implications for the network are, but I don't think such unnatural spikes in consumption are good for it.
My current transfer fee is 0,03€/kWh. There is also the electricity tax (0,028€/kWh) and energy sales commission (0,004€/kWh). With hourly energy rate of -0,50€/kWh any usage will lower my energy bill for the current month even considering all the above costs.
Ah thanks. The rule of thumb "you don't earn" applies to "ordinary" negative energy prices caused by favorable weather. Obviously here the price was so extreme that old wisdoms no longer apply.
Myself I enjoy the comfort of a fixed rate contract. No efforts in trying to optimize consumption profile over days and weeks.
At first I thought your math was wrong, because that doesn't match the numbers in the article. But then I checked the day-ahead prices at epexspot[1], and it's indeed showing -500 euro/MWh in the afternoon, from 14h00 to midnight!
It is an auction and everyone pays the same price. During the afternoon tomorrow every household in Finland will be paid significantly for their power usage unless they have a fixed price agreement, which is not that common
According to Finnish Energy Authority (energiavirasto.fi), at the end of 2022 only 13,7% of customers had a contract where pricing is tied to the hourly market rate. It is much more common to have either a fixed price contract (usually for a term of 12 or 24 months) or a contract where the pricing is set by for example monthly averages of the market price.
I'd suspect that actually fixed-price agreements are very common, and represent the overwhelming majority of contracts for residents/individuals.
I know that after the war started spot-prices rose sharply and a lot of people made the jump. Some, unfortunately, locking themselves into relatively expensive prices.