> why nobody is doing anything about it

> I've read somewhere

Before wondering why someone, somewhere is not doing something, confirm that the thing is actually happening in the first place.

EDF, the French electricity provider is able to produce electricity at about 20€/MWh. It is forced to sell it to leeches (read: "competition"), up to 100TWh, at 42€/MWh through a mechanism called ARENH. Should they need this 100TWh (and they do), they are forced to buy it at current market prices, or anywhere between 530 and 715€/MWh.

The "competition" are resellers that have not installed a single MW of production, essentially leading to starving what used to be the most talented and biggest energy producer in Europe, all under the pretense of the free market. The resellers are actively dropping clients so they do not have to not buy on the open market.

It is happening, and is happening with the blessing of our leaders just greasing billionaire pockets.

OK, you have confirmed my worries there is some well-connected mafia operating in that market.

Can they produce electricity though? Half their nuclear reactors are down.

Because of delayed checkups caused by COVID, and thanks to the independence of the ASN who could unilaterally stop the plants to fix unplanned corrosion. Most of them are starting to come back up, and 90% of usual production is planned to be back by December.

Or, said in other ways, it took an extremely rare event that lasted long enough to throw off plans that are made on the scale of years, in addition with a bit of bad luck, and lasts a few months. I'd say they damn well can produce electricity in normal times, yes. But indeed, their need to buy electricity is compounded by that.

> It is forced to sell it to leeches

By whom?

EDF is owned at 80% by the state, and the state has instituted the ARENH through law. Needless to say, EDF not going into this would mean someone else is replaced at the head and it still goes on. It's a classic starve the beast play.

Enron was in the wrong market!

Not Czech but how it works here:

* I choose energy provider x

* Friend has bought a part of those remote solar plants and also connected to provider x

* Friend sells his surplus energy to provider x at low price

* Provider x can now sell the power to:

a) His customers (me), and make next to nothing

b) Sell it to the international grid and make bank, then proceed to buy energy for me at going rates making me foot the whole bill.

Guess what happens, and who gets rich. This is market liberalization at work. You reap what you have sown.

>Friend sells his surplus energy to provider x at low price

Sorry if this is a dumb question but why can't he sell at the going rate for international grid?

The grid operator won't make an agreement to move a little bit of power that is advantageous to the small producer.

So in essence, because they can't get it there.

Sounds like they're exploiting their monopoly over the connections that small producers need.

Sure, more or less. But there are real costs and financial costs of getting the power to the other market, and they are probably being forced by regulation to buy the power at all (prices won't always be tipped in the one direction).

I have no clue about Czechia but that’s basically happening in Austria. Austria mainly produces energy from renewables which did not go up in price buy since the price on the exchanges is determined by the most expensive source we still pay exorbitant prices. Producers are making all the money right now.

The marginal cost of production didn’t go up for renewables, but that’s not the price setting mechanism, the Austrian people demanded more electricity than renewables could provide, so the price rose until it was high enough to justify turning on the gas fired plants and where the Czechs and Germans would be willing to sell power to the Austrians…

Also the people that are “making all the money” now that power prices are super high, stood to loose money if power prices were super low, why shouldn’t they be compensated for bearing that risk?

> the Austrian people demanded more electricity than renewables could provide, so the price rose until it was high enough to justify turning on the gas fired plants and where the Czechs and Germans would be willing to sell power to the Austrians…

That’s not what is happening. If Austria was an isolated market the prices were significantly lower at the moment. But I would not want to separate the markets just because it works out better to us at the moment.

It has been happening here in Romania for more than a decade now, our previous president even called them out as “the smart guys from the power industry” (where “smart” was used in a derogatory way), of course that nothing came out of it all.

There were also a couple of curious deaths happening in the industry (the head of our State-owned hydro company, who died in his late 30s, the local boss of a power utility, who just threw himself from his balcony), but nothing came out of that, either.

Most probably part of the huge proceeds end up in the accounts connected to our intelligence agencies (the heirs of the former Securitate, which have split into several agencies after 1990).

Is that a recoil from the Eastern-Bloc era worship of intellectuals, or is it completely separate, or something else? Americans are often accused of undervaluing people who pursue intellectual professions and propping up "Joe the Plumber," which is why I ask.

I think it dates to before WW2, it's the spirit of "he was smart enough to fool the State/those in command, he deserves all our respect".

which would give more producers (and wana-be-producers) the incentive to invest in renewables to take a piece of that profit pie.

Doesnt seem like a bad outcome tbh.

Considering most Europeans won’t be able to afford electricity and there is no increased investments into renewables as a result of this insanity it looks like an abysmal outcome. In fact it’s so bad that very likely it will slowly set into motion all kinds of bad workarounds that will utterly destroy the economy.

Wait, if they invest too much, then natural gas will not be needed, and prices will steeply fall. So better not invest (too much), right?

By “producers” of course you mean “those producers that invested in sovereign energy sources (nuclear, solar, wind, …)”

Sounds like good investments are paying off, and bad investments (Germany collaborating with Putin despite Trump’s prescient advice & mockery) are not.

Capitalism at it’s finest! Too bad average people are paying the price, but in democracy, that’s literally what they voted for (non-sensical top-down EU bureaucratic green energy mandates, instead of investments into better tech & bottom-up sovereign energy investments).

I’m not sure what you are trying to say. The reasons for the energy prices have nothing to do with any European bureaucracy. If anything more investments into green energy would have put us into a better position.

The European bureaucracy is what dismantled all the old cheap energy production and forced massive investment and massive subsidies in renewable energy that can't actually cope with the real load.

The drivers of high prices are broken nuclear power plants, high gas prices due to a war and record draughts causing issues for hydro. None of these are caused by European bureaucracy.

Isn't the inability of nuclear plants to keep production up part of the problem? If anything, the screwed up electricity markets in Germany killed oil and gas plants by favoring flexible production costs. And there it is solar/eind followed by hydro and coal on third. Germany even built new coal plants, the latest of which didn't get a legal construction permit and thus operations oermit in the first place. Bad environmentalists, paid by Putin to push for any energy source other than gas for electricity!

To use your words, Germany already collaborated with the good old old communist USSR under Brechnev. Thing is, so, Germany isn't using Russian gas (which was delivered reliably since the 60s) to produce electricity but for heating, industry and chemicals.

Funny, I remember when we had similar discussions about negative electricity prices and people mockes those capital intensive legacy producers. Well, history is so old and context too complex to bother if polemism does as well.

No idea about the Czech, but that's exactly what's happening in Norway. Due to trade agreements with the EU, we can not discriminate between national and EU customers when selling electricity. To be completely accurate, we aren't selling on a German exchange, we're selling on local ones, but those local exchanges are experiencing price pressure from EU customers due to export capacity recently being increased due to the completion of several new power cables to the EU and UK.

The grandparent could have done a better job explaining what she meant. You've explained it much better. EU rules forbid discrimination between domestic and EEA customers in electricity markets. Therefore, any significantly interconnected country to the rest of the EU will have similar prices.

Countries like Norway, which have abundant, cheap, generation, are paying EEA prices in its highly interconnected bidding zones (NO1,NO2). The next few months, if prices persist, are likely to see lots of pressure from Norwegians to curtail exports (i.e. close off transmission capacity to EEA). This would significantly decrease prices for Norwegians, but damage the EU's integrity. The same can be said of other countries with abundant, cheap generation that are suffering the consequences of other EEA countries' actions w.r.t their electricity supply.

I say this as a supporter of the EU, but the integrated electricity market's future is in peril this winter.

OK, what's the truth then? I am not an expert on this, though just today I saw some LinkedIn post of some trader explaining merit price on energy market and in the chart the nuclear power was two orders of magnitude cheaper than gas/combined power but the final price was at the level of gas/combined power.

In Spain (and according to a sister comment, in Austria too, so maybe it's EU-wide) the price of every MWh is set by the last MWh that enters the market (apparently it works like an auction). The last to be sold is the most expensive, thus renewables are being priced like combined due to this rule. In fact there was some scandal in Spain I seem to remember because apparently energy companies were doing the expected according to the incentives set, which is manipulating production so that combined is always used, increasing profit by doing nothing.

Don’t know about other countries but several people were arrested today in Croatia cos of similar business practices:)

This. Exactly this. Truth is old school.

You must have omitted something in your example because it makes no sense.

>Czechs produce electricity at 0.1EUR/MWh

so far so good. Now you have -0.1EUR and 1MWh of power.

>then sell it to an exchange in Germany

suppose the market price is 400EUR. after selling it to an exchange you have 399.9EUR and 0 MWh of power

>and buy it back for the "market" price.

so you buy it back at the market price. Now you have -0.1EUR and 1MWh of power. That leaves you off... in the same position as step 1? What's the point in selling it to the exchange and buying it back?

Moreover, I don't see anything interesting happening here. You can replace "electricity" with "oil" and you basically describe how petro states work (ie. pump oil out of the ground, sell it on the global market for far more than it costs for you to pump it out of the ground).

There are several energy markets, not just one. The most energy is bought and sold on private contracts on very long term. Then there is the "next-day" market, which is what this app shows. Then there is an hourly market to match instant demand and supply variations.

It is possible Czech producers sold energy to Germany for a very low price a few years ago on a let's say 5 year contract which is still valid. Now Czech Republic needs to buy at a high price the energy from Germany because it cannot meet its own demand. Again, this is speculation on how that could work.

the OP meant that the producer is allowed to sell to the higher priced exchange, rather than being forced to sell it at a low price to the consumer. Therefore, the OP is assuming that someone at the exchange is going to profit nicely without having done any work by arbitraging the sale of electricity.

I'm guessing that the missing variable is "cost plus" pricing for consumers? By selling the electricity on the market and then buying it back they can increase the price for consumer.

That would be two different people/organizations.

That would almost certainly be the price per kilowatt-hour, not megawatt-hour, which would make a MWh ~100EUR. Anybody that is getting rich on the energy markets right now is either because they're better at betting on future energy prices than their rivals, or they have the ability to produce electricity when demand for it is extraordinarily high (both of which would qualify as 'a reason').

Thanks, will need to find the source again and see if it was indeed 0.1/kWh and not MWh (talking about production costs at a cheaper country with nuclear power plants fully paid for in the past).

EDIT: Just found out production costs from another source:

Dukovany Nuclear Power Plant - 20.31EUR/MWh

Temelin Nuclear Power Plant - 34.52EUR/MWh

10 cents for a megawatt of electricity is an unheard of marginal cost in any situation.

your local costs in the US range from 5-25 cents per kilowatt hour (1/1000 of that), with ideal solar being the cheapest amortized at roughly 3 cents/kwh

I just cross-checked the source and the claim by one of their members of parliament was the price was 0.25CZK/MWh which is ~0.01EUR/MWh in fact.

This suggests that either the MP is incorrect, or they were misquoted, or some sort of accounting shenanigans are going on (infrastructure costs already paid for, etc.)

One of those for sure. My guess is that the MP was trying to score with their voters and bent the numbers.

Some politicians in Latvia are using the same rhetoric: our hydro plants have a production cost of 0.1x/MWh, but nordpool price is xMWh. Somebody is stuffing their pockets!!

What they don't say is: some of our hydro plants are being maintained and the rest are capable of generating a fraction of country's needs. Sure, some of the money goes to small privately owned plants, but the most goes to large state-owned plants, who are (ideally) using the money to upgrade their equipment and the rest goes to government as dividends, which will probably be spent to support heating expenses in winter..

I was starting to wonder the same. Are prices essentially going up, filling state coffers, so that politicians can promise subsidies to voters? What a weird way to make cash flow.

That's how a market works. You say "Czechs" but it's Czech producers and Czech consumers (respectively) making those transactions. Where the market is situated is irrelevant.

If you're making electricity that cheaply right now you are indeed getting rich, and so you should.

The market is what is doing something about it. Prices will moderate over time as inefficient producers are pushed out and as consumers reduce their usage due to high prices.

Rules for this market are a lot more complex than a straightforward producer / consumer one though. That give a lot of room for biased / non-optimal behaviors

For example, only gaz-based electricity producers « needs » to be paid such a high price. Nuclear or renewable would be perfectly fine with much lower price.

Or, if we had not one market, but one market per type of energy used to produce electricity, we would also have a « market driven » pricing, however the end-result would likely be much much different.

There's one market for grid delivered electricity because within the grid, electricity is mostly fungible. There's details of course, but if I need X kW @ 240VAC to run my house, business, or factory, my equipment doesn't care if it's from wind, solar, nuclear, or lemon batteries, as long as it's within the specifications, well synchronized and continuous.

There's some amount of market preference for different generation types, but that's a small portion of the load, so it's handled outside of the grid operation marketplace. It's also true that grids with limited interconnection have separate markets.

You could run a grid on a cost plus basis, but you lose the benefits of market economics as well as the negatives.

Yes but it's a multi-buyer multi-seller simultaneous auction for a required electricity load.

Some sellers will get more than they offered, but that's how the auction works, there can only be one market price to secure the given quantity of electricity.

> Prices will moderate over time as inefficient producers are pushed out and as consumers reduce their usage due to high prices.

Electricity isn't optional. "The market" didn't make water, or housing, or waste, or healthcare, or telecoms, etc, cheaper once privatized. In fact, it didn't make energy cheaper in the countries that privatized it.

"You just don't understand the market."

Any sufficiently big scam can waived away with "the market has spoken". It's like a religious belief

>Electricity isn't optional

food isn't optional either. How well did nationalized food production work out?

>"The market" didn't make water, or housing, or waste, or healthcare, or telecoms, etc, cheaper once privatized.

I can get the source for each of those claims? Some of them seem dubious, eg. housing. Was housing ever not privatized?

>In fact, it didn't make energy cheaper in the countries that privatized it.

well if we're talking about "energy" in general (ie. not just electricity), I can point out a counter-example of PDVSA going to shit after it was nationalized.

Many successful governments subsidize food production and delivery in many, many ways. Your talking points are tired and debated to death; mostly by people who don't actually have much interest in learning anything and would rather invent straw-men to pwn.

If you really want to challenge your view, I'm sure you can read a book that lays it out better than I could in a quick YC comment.

For example, here's Chomsky's take:

"Privatization does not mean you take a public institution and give it to some nice person. It means you take a public institution and give it to an unaccountable tyranny. Public institutions have many side benefits. For one thing they may purposely run at a loss. They're not out for profit. They may purposely run at a loss because of the side benefits. So, for example if a public steel industry runs at a loss it's providing cheap steel to other industries. Maybe that's a good thing. Public institutions can have a counter cyclic property. So that means that they can maintain employment in periods of recession, which increases demand, which helps you to get out of recession. Private companies can't do that in a recession. Throw out the work force because that's the way you make money."

You missed the step where the public institution gets broken up into many smaller private competitors who are then incentivized to provide better/cheaper service to gain marketshare. The Soviet Union missed that step too when it collapsed. Monopolies are trouble whether private or public. Unfortunately, energy markets have a tendency to be dominated by local monopolies of both the public and private variety.

You talk of OP's tired points - which I agree with - then cite Chomsky... can both "stupid extreme capitalism" and "stupid surrender leftism" be put to rest finally.

I have no idea what "surrender leftism" is supposed to mean, in relation to Noam or otherwise.

However, if we'd paid a little more attention to Noam's points about war (clandestine and overt, economic and military) and the media a few decades ago, we the people would be tens of trillions of dollars better off.

Millions of brown skinned folk would still be alive, tens of millions wouldn't have had to become refugees, and South America would be immeasurably better off.

If you have some kind of beef with Chomsky I suggest you take it up with him; I hear he's quite good at responding to people.

If you could make electricity for 0.1€/MWh, you’re going to get quite rich anyway. (That cannot be the right cost.)

IIRC they are mostly using nuclear power plants, i.e. from cheap Russian fuel rods stockpiles.

The estimate of western nuclear generation is around 330x the cited figure.

https://www.nei.org/news/2018/cost-of-nuclear-generation-rea...

Fuel is an insignificant part of the cost of nuclear.

Even for nuclear power plants built 40 years ago and already fully paid for/amortized?

Yes, operational costs are still the huge factor.

It's only partly true and the difference is not that extreme. The reason for this is simple: (to my knowledge) in EU electricity is traded via central stock in Germany. See e.g. this debunk article https://www.irozhlas.cz/zpravy-domov/overovna-energie-elektr... (Czech national radio / in Czech)

That very much sounds like you're calling for the collapse of the integrated european energy market. This is not meant as an attack on you, just an observation that these nationalistic calls will continue growing louder from every part of the continent, and it is not even September yet. Already Norway has publicly commented on the possibility of rationing exports.

We have yet to even scratch the surface of the effects of this crisis

During the time of energy crisis why would the integrated energy market be the highest priority? Is it more important to trade, or to keep economy running utilizing whatever local advantages available?

There is an energy crisis across all regions of Europe; disrupting trade may help some places but hurt others much more and would make it worse in aggregate, so EU treaties prohibit that.

I mean, whenever electricity is being exported at high cost, that high cost is an indication that this other place has it even worse; and blocking trade would make electricity cheaper at the exporting place, but cause a larger spike (and possibly even blackouts with the associated economic disruption) at the importing place and also remove the economic incentives to increase surplus production at places who can do it cheaper than others.

That's in theory; in practice there is a bunch of resellers that are making crazy amount of money due to "merit pricing" that makes sense in a stable market, but not now. The places you mention are much worse off than by a simple price ceiling per electricity type.

That is true, and why not also ignore the frictions created by a single currency, free movement of labour and people, or the harmonization of judicial systems during times of crisis. Surely under such strain, it is only fair that Germany no longer subsidizes Italian public debt, institute border controls for the transport of gas and oil, eventually instituting controls for all energy-derived products of any kind where a pricing inefficiency is being exploited by any neighbour. It would mean Putin responded to our sanctions by destroying 70 years of European cooperation, and doing so without even so much as firing a single bullet.

Energy is the economy, and the failure of an integrated energy market means the failure of so much more.

That sounds like a fallacy of composition. Energy market is just one part of the whole and right now a very weak part. Capping the profits/restructuring the market temporarily would benefit the whole more than keeping running the same old approach that is literally destroying the economy right now.

This is really a contentless comment. It sounds like they are doing something that you deem problematic and nefarious according to your own ideology? So what?

Assuming that these statements are entirely true (sibling comments suggest otherwise), then "somebody over there" had the foresight or luck to install generating capacity ahead of tremendous demand.

If they hadn't done so, someone else might be getting even-more rich (per kWhr) by charging higher prices across an even wider geography.

Those nuclear power plants were built during communism there so nobody had any kind of foresight.

Purely speculative but sounds more like greenwashing to me: sell grey energy on market at loss, buy back mixed or even green due to some loophole, collect subsidies which cover the difference or even more.

I've read somewhere that Earth has 4 corner simultaneous 4-day, and that was from the wisest man on earth.

Best not to believe everything you read :)

>I've read somewhere that Czechs (day ahead price of 463EUR/MWh) produce electricity at 0.1EUR/MWh

No, that's entirely unrealistic. 0.1EUR per KWh is realistic, so my guess is that you misremembered the units. The price per MWh would then be 100 EUR. But not even that is realistic anymore for the Czech Republic, given they produce most energy from fossil fuels[1], and the prices recently have skyrocketed.

Now you may ask why they'd be selling to an exchange and buying it back for more (if that actually happens to a degree that matters). One reason is of course profit. Although one must not confuse the production price with the final consumer price or even the exchange price. Production is one thing, getting the power to where it's needed is another thing, accounting, taxes and so on.

Another reason for putting it into exchanges, is that they might at times produce more than needed, so selling off excess production seems somewhat reasonable as the kind of plants they are running cannot be started and stopped at will. At other times, they might not be producing enough, and then need to buy at exchanges.

It's not as easy as assuming somebody is just grabbing a lot of money. Although some money grabbing is most likely part of the answer as well.

Germany is selling energy as well, by the way. Germany has thus far net exported around 20 TWh this year[2]. The entire energy need of Germany is around 540 TWh per annum. That would suggest Germany (thus far) has exported a little over 5% of it's energy production to other European nations in this crisis year. It may have something to do with France currently having temporarily shut down 32 of its 56 nuclear reactors[3], with a net 10 TWh being exported from Germany in the direction of France. And it probably has something to do with Germany producing a lot more energy than it needs when the sun is shining and the wind is blowing nicely.

The Czech Republic on the other hand exported 6 TWh net to Slovakia and another 4 TWh to Austria. But in turn Slovakia exported almost 9 TWh to Hungary[4].

That is to say... it's complicated.

[1] https://www.iea.org/countries/czech-republic

[2] https://www.energy-charts.info/charts/energy/chart.htm?l=en&...

[3] https://www.france24.com/en/france/20220825-france-prolongs-...

[4] https://www.energy-charts.info/charts/import_export/chart.ht... (might be lagging behind a little)

That doesn't happen.

that's the advantage of the Single Market

You either accept capitalism and free market or you don't.

I don't like it but if that's the system we need to accept the pros and cons.