← Back to context

Comment by silvestrov

2 days ago

Steel factories cannot shutdown temporarily due to high electricity prices. They need a steady source of electricity.

This needs to be taken into account. I don't know if factories can be made with better insulation so they can "hibernate" somewhat when electricity is expensive.

So they might want to be located in a location with both wind, solar and hydro to ensure a (somewhat) stable price.

Denmark has a lot of wind mills and use hourly pricing for most consumers. This means that the price can vary a lot from hour to hour. 21st of June the price of electricity itself (excl taxes and transmission) was negative 3 cents at 2pm and 18 cents at 8pm. That is a difference of 21 cents over 6 hours.

3 comments

silvestrov

Reply
jillesvangurp  2 days ago

They need some local buffers batteries, and some fallback power generation via the grid. But it benefits them if they can run on cheap renewables most of the time. And of course steel production processes can be adapted to be more flexible as well. Current steel production isn't optimized but when the choice is between shutting down for a few days or falling back to some relatively expensive power source, shutting down might be the more economical option. The idea behind flexible pricing is that large consumers of energy can optimize for that with batteries and storage. Charge when it's cheap, discharge when it isn't. Sell power when it gets really expensive.

Chilko  2 days ago

This really depends on the pricing mechanisms & contracts that large industrial users have with their energy provider. Many users may contract out of wholesale spot prices in favour for a more predictable contracted price - and demand response could form part of that contract. Depending on the market, financial hedges are also an option.

For instance, in New Zealand we have an aluminium smelter (Tiwai point) that constitutes about ~13% of national electricity demand. The smelter recently re-contracted its electricity supply with several of the major power companies (a 20-yr agreement) which includes a component for demand response when required. NZ has a ~80% renewable grid with hydro and wind as major variable sources, which creates both hourly and seasonal variation in the wholesale spot price (dependant on wind and rain resource). In the event of a major drought that pushes up prices due to a lack of hydro (this happened last year), the agreement with the smelter means it will shutdown some of its operating lines in exchange for demand response payments. This is exactly what occurred, whereas other industrial users that did not have such agreements in place or chose to take advantage of previously low spot prices without adequate hedging were then exposed and also shut down, without being paid to so.