Seems to already be happening in the contingency markets, prices have been supressed for the last couple of months by batteries mostly running the same bidding platform, all of them taking a price taking strategy. While good for the consumer in the short term this could have flow on effects into the future with investment signals broken. Funnily enough most of these batteries were funded by government grants...
Thanks Smudge - I haven't got the insights to attribute falling contingency prices to bidding platforms, but it is something that price forecasters have been predicting for a long time (and predicting it would have happened sooner than it did!). If the bidding platforms are just acting as price takers in FCAS and collapsing the price, we might see some new strategies evolve, but may just reflect a saturated market. In terms of investment signals, my understanding is that FCAS revenue was always a tricky one to factor into an investment case (in part because of those falling price forecasts), so possibly the shift to energy arbitrage revenue is going to strengthen the investment case.
Thanks Nick! Don't want to overly focus on the risks - there are also some compelling upsides to batteries in the wholesale market, but as always, things for regulators to think about in a changing market
What protectionism are you referring to? Stuff raised specifically in the article or the global trend towards protectionism? Agreed that the geopolitical stuff doesn't bode well for competition. With respect to the article though, my main thrust was trying to set out how to protect and promote competition. With algorithmic bidding, some of the answers may be counterintuitive!
Great article, Declan! This issue isn't much different to the rules in games of cards I used to play as kid with my siblings, cousins and friends.
You might expect a reasonably fair and enjoyable contest of skill and chance if players don't signal to one another opportunities for each of them to collude to their own advantage. In my house, you were inviting a good serve from your siblings when there was any collusion between you and a friend against them - no one was allowed to show their cards or otherwise exchange information about them to keep the contest fair.
Occasionally, a cousin or some other non-player watching the game might look at some players' cards and use that knowledge to advise them all what to do, which would also raise objections (understandably). There was less objection to having a more experienced non-player coaching each player separately if they were playing the hand on its merit, not according to the information they had of others' hands - but only as a limited training exercise, given its very hard to un-know what you've seen!
Seems to already be happening in the contingency markets, prices have been supressed for the last couple of months by batteries mostly running the same bidding platform, all of them taking a price taking strategy. While good for the consumer in the short term this could have flow on effects into the future with investment signals broken. Funnily enough most of these batteries were funded by government grants...
Thanks Smudge - I haven't got the insights to attribute falling contingency prices to bidding platforms, but it is something that price forecasters have been predicting for a long time (and predicting it would have happened sooner than it did!). If the bidding platforms are just acting as price takers in FCAS and collapsing the price, we might see some new strategies evolve, but may just reflect a saturated market. In terms of investment signals, my understanding is that FCAS revenue was always a tricky one to factor into an investment case (in part because of those falling price forecasts), so possibly the shift to energy arbitrage revenue is going to strengthen the investment case.
Great read Declan, some interesting thoughts and real concerns for bidding behaviour in the future. Keep em coming boys, always appreciated.
Thanks Nick! Don't want to overly focus on the risks - there are also some compelling upsides to batteries in the wholesale market, but as always, things for regulators to think about in a changing market
So more protectionism to create greater competition.......its over.
What protectionism are you referring to? Stuff raised specifically in the article or the global trend towards protectionism? Agreed that the geopolitical stuff doesn't bode well for competition. With respect to the article though, my main thrust was trying to set out how to protect and promote competition. With algorithmic bidding, some of the answers may be counterintuitive!
Great article, Declan! This issue isn't much different to the rules in games of cards I used to play as kid with my siblings, cousins and friends.
You might expect a reasonably fair and enjoyable contest of skill and chance if players don't signal to one another opportunities for each of them to collude to their own advantage. In my house, you were inviting a good serve from your siblings when there was any collusion between you and a friend against them - no one was allowed to show their cards or otherwise exchange information about them to keep the contest fair.
Occasionally, a cousin or some other non-player watching the game might look at some players' cards and use that knowledge to advise them all what to do, which would also raise objections (understandably). There was less objection to having a more experienced non-player coaching each player separately if they were playing the hand on its merit, not according to the information they had of others' hands - but only as a limited training exercise, given its very hard to un-know what you've seen!