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That is the very simplistic explanation for prices that is great when talking to those that don't work in the industry, but in reality the impact of congestion
by 4thaccount 8y ago
That is the very simplistic explanation for prices that is great when talking to those that don't work in the industry, but in reality the impact of congestion and losses also factors into the prices as well as reserves in most markets (sometimes the impact is huge).
Also, the adding up of offers from cheapest to most expensive doesn't actually happen. In reality, there is complex OR software running an optimization algorithm behind the scenes. I fully agree though that what you're saying is fine from a conceptual point of view. This is how it was done a long time ago btw, but that was indeed long ago. I'm talking about the US markets btw... I'm sure some place in the world still uses the method you refer too.
- jabl 8y agoWhat is then a good market design for a decarbonized grid consisting of mostly ~zero marginal cost producers like wind, solar, hydro and nuclear? Seems dispatching on marginal cost doesn't make sense in such a world?
- 4thaccount 8y agoBingo! This very subject is being discussed in industry. However, it's important to point out that we're still pretty far from 100% renewables throughout the day. Both the ERCOT & SPP markets have had renewables as a percentage of load as greater than 50%, but that is generally during the night with low load and high wind. I'm not sure what markets will look like in 20 years, but they could be very different if we have 100% renewables and a high amount of grid level storage.