Installing batteries on the grid is similar to high frequency trading, Casey Handmer argues:
Mismatch between supply and demand in the grid is signaled via tiny shifts in frequency. Coupled to this, local energy spot price has historically been manipulated by gas peaker plants to maximize revenue generation. For example, in Australia prior to the installation of the Horndale (Tesla) battery, the spot price routinely climbed to the cap of $14000/MWh as gas generators delayed ramping up to maximize revenue.
Installing batteries is similar to high frequency trading (HFT) in that it exploits market inefficiencies to both improve the functioning of the market, provide liquidity, and generate revenue.
It is different to HFT in several important ways, however.
There is an advantage to geographic collocation for battery services adjacent to areas of variable supply and demand, due to the fixed and variable costs of long distance power transmission. It’s not quite as extreme as installing the HFT server directly adjacent to the stock exchange, though!
The fixed frequency of the power grid (60 Hz in the US) does not demand incredibly sophisticated high speed electronics, like that used in financial HFT. In other words, the fixed frequency of the grid means that the first generation of batteries will not be rendered obsolete by a subsequent arms race as seen in financial HFT.
Combined, these two key differences to financial HFT mean that there is a strong first mover advantage in the battery grid stabilization space. I contend that this advantage outweighs the risk of future battery systems delivered at lower cost. In fact, the EROI on battery system is so short, and their revenue so high, that the only practical constraint to their deployment today is, and has been for several years now, manufacturing capacity no matter how fast it ramps.
That comparison is full of sh*t, and that is putting it mildly. Might as well claim that supermarkets are HFT.
Battery storage is doing arbitration on a commodity where price fluctuations are well known and fairly predictable. The most crucial and obvious distinction is that the battery actually takes delivery of the product and discharges it at a later time.
More elegant are the bitcoin miners in Texas. They monitor the electricity spot prices and when the spot prices rise sufficiently they stop mining bitcoins and resell their electricity – presumable from fixed price long-term contracts – to the market.
“… the EROI on battery system is so short, and their revenue so high …”
Whatever happened to common sense? If that statement were true, then the world would be filled with traders with big battery stacks.
Obviously, the statement is arrant nonsense. Grid-scale batteries exist only in very unusual situations (eg Fairbanks, Alaska) or in places where mandates & subsidies force their use.
The globe doesn’t have enough known lithium deposits to make enough batteries for every car in California, much less the entire USA. And that’s not counting the energy grid backup.
HFT is fake. It’s not “exploit[ing] market inefficiencies to both improve the functioning of the market, provide liquidity, and generate revenue.” That’s a lie. There’s no super clever algorithm making razor-thin profits on thousands and thousands of smart trades faster than the human eye can follow. The algorithm is dumb: all it’s doing is watching for big orders, then sneaking little orders in ahead of them with its silicon speed and a geographical latency advantage. It’s pretty much front-running, except instead of robbing their customers, the HFTers rob everybody. In a decent society it would be illegal.
We should have so many nuclear reactors so fast and so hot that when people (read: autistic white nerds) can’t find a use for all the electricity even when it’s free we’re forced to dispose of the overflow with football fields of heat dissipators in a desperate last-ditch bid to stave off total nuclear meltdown, warm up the atmosphere and fight off Global Cooling, and keep the looming P3 Ice Age safely at bay. Heil Hitler.
What was the date when we were taken over by libertarian economists with stacks of equations purporting to model the world but lacking any room for a negative sign, and it all has to be forced on us by government diktat?