[Aurornis]

> Without trying to fall too hard into a potential late-stage-capitalism hole, what is the advantages on trading like this? Beyond the advantages of making money on futures

Trying to view things as “late stage capitalism” isn’t a good way to really understand anything. It’s a cynical Reddit trope that assumes malice from the start, which doesn’t leave much room for a real explanation.

The reality is that trading like this is a type of contract and it takes two parties to enter into the contract voluntarily. Nobody is forced to trade energy contracts this way, but it can be helpful for both parties to do things like lock in more predictable pricing, hedge certain types of risks, and agree to mutual contracts that benefit both parties’ businesses.

Energy prices going negative sounds like something evil or malicious or “late stage capitalism” to the uninitiated, but even without trading errors there are legitimate reasons to have negative energy prices at certain times of day. For example, certain types of power plants like nuclear can’t quickly ramp up or down as demand changes. A power company might come out ahead by pricing power negative (that is, paying people to consume it) for certain night time hours if it allows them to keep the power plant at a higher, continuous output in preparation for peak times. Energy hungry industries such as aluminum manufacturing or other industrial processes might gladly adjust their production schedules to operate during these times to take advantage of the low or negative pricing. Everybody wins.

There are numerous dynamics like this at play. It’s not a “late stage capitalism” thing, despite how some people like to sneer at anything they don’t understand. There are legitimate reasons to operate this as a market and let market participants work out optimal deals.

[tomatocracy]

The other main example of negative price offers into the market is renewables which receive some types of subsidy. For example, if you have a solar farm and receive $40/MWh subsidy, you might bid into the market at any price above -$40/MWh.

[blitzar]

Negative pricing also has an incentivising effect

If your output regularly drops to low / negative levels - invest in storage and sell when the price is higher. If it occurs grid wide - interconnect to neighbouring grids.

[movpasd]

I'd like to add a bit to your comment. I certainly agree that negative prices in this context don't mean anything remotely nefarious, but part of your comment suggests that "it's all consensual contracts" is a sufficient ethical justification for a system — which may or may not be what you actually think — and I wanted to touch on that.

Markets come in all shapes and sizes, and in reality you can't write up any contract you like — nor should you be able to. Indeed, electricity markets must be tightly regulated due to shared infrastructure, which is an example of the fact that these markets don't arise simply from the application of a fundamental "allow people to enter into whatever agreements they like" principle, but rather requires pragmatic _design_.

Ultimately, we, as collectives, decide what the rules of the game are. In the case of electricity, the need for innovation and flexibility to decarbonise the grid are perfectly acceptable justifications for adopting market solutions (the only real alternative being to allow the State to monopolise the whole system, which would come with its own serious and disruptive trade-offs); but ultimately, this is a _system_ that we decide on, and it doesn't arise out of natural rights, and systems can be more or less well-designed. I think you touch on this in your comment as well.

Markets aren't evil, but nor are they naturally good. They are a tool in our toolbox for constructing resource allocation systems. And the success of a system, and indeed _the_ system as a whole, must consider all the interlocking economic and social consequences — and it's anxiety about those that the "late-stage capitalism" trope really reflects. It's not something to dismiss altogether.