Ask HN: Electricity Rate Arbitrage?

4 points by pc2g4d 2 years ago | 10 comments

One issue with solar and wind is their intermittency. But (my economics / engineering mind thinks) if we have a market for electricity where the price of electricity depends on current moment supply and demand rather than a fixed rate (time variable pricing, I think is the term) then the market itself should, over time, address the intermittency.

So, when the sun is shining and the wind is blowing and the price is negative, savvy operators of battery storage, pumped hydro, etc. stock up on energy for later.

Then, when it's the middle of the night and the wind's not blowing, the price spikes, and those who stored energy ahead of time make a profit providing that energy when it's needed most.

Of course this is an abstraction, and I'm not an expert, but... are there utilities whose rate structure enables execution of this kind of arbitrage business model?

toast0 2 years ago |

This is possible, and I suspect it will happen if it's not already. Of course, the more it happens, the less profitable it becomes.

The thing is though, this type of thing only really works if you have sufficient interconnection and are paying / recieving the market rate. You've got to have a pretty big system to get to interconnect at market rates. Home based tarrifs aren't going to cut it, because those are usually not refundable, at best your cost goes to zero, which probably doesn't justify your investment in batteries.

Now, if you were putting in batteries anyway, there may be peak shaving options in the controller to charge off peak and discharge on peak. May as well use some of the capacity you installed for redundancy on a regular basis to reduce your energy costs. Especially if you have other generation options. Maybe peak shave down to 60% capacity, if the remaining 40% still covers your use for several hours and you have a generator you can run when you hit 20%. Or if you have solar, peak shave down to whatever leaves you enough power to make it to the next sunny day (or just the next day if you're feeling lucky)

brudgers 2 years ago |

Typically electricity demand goes down at night because commercial and industrial operations tend to cycle with the workday.

In the US, it is not uncommon for KWh prices to go down off peak at night.

Also in the US, utilities are regulated and the political impact of changing rate structures upward usually requires public hearings.

Finally utilities infrastructures are capital intensive and the investment models are based on long maturity bonds. Utilities operations are structured to the goals of investors who buy long maturity bonds. I.e. utilities are operated for low risk and stable cash flows that bond holders expect.

Basically, if you have the financial wherewithal to arbitrage utilities, there might more fruits on lower branches than what you describe.

I could be wrong of course and your billions of dollars could prove it.

Good luck.

2rsf 2 years ago |

What's in it for you as an individual? With electricity prices ranging 25 - 50 ¢/kWh (random number from Google, but I guess it is close enough) and a battery of 500kW (6-7 old Tesla batteries maybe?) you will get up to a whopping 125$ per day , probably much less due to delivery costs. On the other hand such an installation will require a lot of real estate and the solar panels/wind turbines will cost a small fortune.

LUmBULtERA 2 years ago |

Time of use rates do exist around the US. Also, there is a massive amount of battery storage in interconnection queues right now. We should expect a lot of that capacity to be added in the next 10 years, which will help smooth out pricing through arbitrage.

quickthrower2 2 years ago |

This is for shorter term fluctuations, but: https://www.pv-magazine.com/2022/07/27/tesla-big-battery-beg...

Ekaros 2 years ago |

It is realistic. Only problem is that costs of storage have to be lower than the delta. Which is the problem for renewables + storage.

Basically you need to be able to cover the whole cost of installation in reasonable time by doing this arbitrage. And that possibly isn't simple.

starbase 2 years ago |

https://www.tesla.com/support/energy/tesla-software/autobidd...

kasey_junk 2 years ago |

This is how the electricity market currently works? I’m not sure what you are asking.

csomar 2 years ago | |

I am guessing the OP is not from the US/EU. Many parts of the world still operate with a fixed rate because solar penetration is quite low.

dexwiz 2 years ago |

Look up ISOs.