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Wholesale electricity prices track gas exposure, not renewables share. (janrosenow.substack.com)
submitted 4 months ago by to c/energy@slrpnk.net
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What this means is that wholesale price doesn't drop until gas -burning power plants are not being used. So it takes quite high renewables+ battery deployment to lowe wholesale price.

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[–] [S] 2 points 4 months ago (5 children)

Wholesale electricity markets tend to be set up like this:

  • Companies submit bids for each unit of time
  • The lowest set of bids for any given unit of time get paid and supply electricity
  • The highest of those low bids sets the price that every generator gets paid

This causes the marginal supplier price to set prices for everybody. So long as any gas is being burned, they're usually the marginal supplier, so the price of gas sets the price.

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  • [–] 3 points 4 months ago (4 children)

    Yes, I know. Like I said, "can't" do the math expected of their employees for their work. Theare able to measure the kilowats going into millions of homes, but can't measure the kilowatts they consume. So they get potentially 90% of the electricity dirt cheep, but charge everybody as if they paid the highest price on the market for all of it.

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  • [–] 1 point 4 months ago (3 children)

    It's not that they "cant figure it out", its that its a reverse auction where everyone gets paid the lowest price that is needed to provide the last bit of capacity. Why should a solar plant get paid 20% of what the gas plant gets paid just because they are more efficient?

    That marginally cheap sources like solar or nuclear get paid a large profit for each kwh is a good thing, it encourages more of them to be build and over time push out the expensive marginal cost of gas (and coal where it's still used).

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  • [–] 1 point 3 months ago (2 children)

    Are you sure that is what is happening? I doubt the utility is paying the solar supplier more than their stated price. That is not how Capitalism works over here.

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  • [–] 1 point 3 months ago (1 child)

    That is exactly what happens, each potential provider says "I will sell you Y amount of power for at least X price" the grid tots up the offers going from cheapest up until they have enough generating capacity and then pay all the providers the highest price they needed to get to. This is all public so they cant pay the cheap provider less than the expensive one, because they can just turn round and raise their price to that same highest price, knowing that the provider wold lose more money to go to everyone else.

    (They actually do it the other way round, start at the highest price and keep lowering it and having providers drop out, until too many drop out and then the previous price is set for everyone that's still in. But it has the same end result, everyone gets paid the lowest price that enough people are willing to sell at in order to cover demand.)

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  • [–] 1 point 3 months ago

    Well, I'm somewhat disturbed to find you are basically right. I gather it's partly due to the insane complexity of the market - even here on our side of the pond. The article I linked described pricing in real-time rather than for the annual auctions your reference described. A quote from the end of the article:

    It’s tempting to think electricity prices are simply the product of supply and demand, but the reality is far more choreographed. From fuel markets to regulators, the system is layered and opaque. Consumers think they are paying for power; in reality, they are funding infrastructure projects, policy goals, and investor returns.

    On the bright side, it does mean the wind and solar renewable energy producers are probably making bank. This explains why investment continues to accelerate even without subsidies.

    Eventually, capacity (in theory) will get so high for renewables that the "last provider in the chain" will not be a ludicrously expensive resource. That'd be nice. I'll believe it when I see it.

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