4 ms·

It's going to have both effects simultaneously. Production is not going to increase very much overnight, because coal mines are not particularly elastic. Howe

It's going to have both effects simultaneously. Production is not going to increase very much overnight, because coal mines are not particularly elastic. However, most coal consumers are actually in the market for electricity, so high coal prices will encourage substitution with alternatives like solar.

tialaramex 5y ago
High electricity prices also eliminate the cost of (some) subsidy schemes for sustainable energy. Which almost can't help but encourage more such schemes. The UK's CfDs (Contracts for Difference) pay schemes like wind farms a fixed price for their output, allowing projects to go out to market saying look based on our plans we're going to make so-and-so-many MWh of electricity, the UK promises to pay so-and-so-much £££ for that electricity, therefore lend us (much less) £££ to build it and we'll pay you a nice return. This means investors only need to care about whether your wind farm proposal actually makes electricity, not guess what the price of that electricity will be when it's sold. Normally these schemes cost the government money. Say electricity is selling for £50 per MWh, and your wind farm's CfD specifies £80 per MWh, the government hands over £30 per MWh extra to make up the difference. But, when prices sky rocket the government actually gets paid the difference. When electricity sells for £200 per MWh and your wind farm's CfD said £80 per MWh, you only get £80 per MWh as promised, the other £120 per MWh goes into the general fund to buy missiles or feed orphans or whatever.
- makomk 5y ago
  Part of the problem in the UK is that the amount of wind was at something like a 40-year low earlier this year, meaning that wind farms weren't producing that much at all. As the amount of renewable power increases and fossil fuels get phased out and become more expensive, we can expect high electricity prices to coincide more and more with times when renewables are producing very little power and low prices with times when they're producing lots of it. So even if CfD prices look good on paper compared to average electricity wholesale prices the government is still likely to lose a lot of money on the deal due to when that electricity is produced, which ultimately comes out of all our electricity bills.
  - solotronics 5y ago
    How do you even heat a house with wind? Aren't most homes in the US and EU are heated with gas?
    - mjmahone17 5y ago
      If a home has a heat pump (most AC systems), heating primarily with electricity isn’t that hard, at least in milder cold temperatures. Most homes in the colder areas of the US heat with gas because the cost per joule of gas is a lot less than for the equivalent electricity. But a lot of homes can supply most their heat with electricity, and would if the economics made sense. And even more would build that capability if gas was 2x the cost per joule as electricity.
      - tialaramex 5y ago
        Also even ignoring the direct price of the fuel, unlike for most things for heating it makes practical sense to burn gas in your house to make it hotter, not burn gas in a power station, then ship the power to your house and use that to make it hotter. A modern home boiler is very efficient, because what you wanted was heat, which is exactly what you get by burning gas. The gas turbine at a power station has to do the same conversion (burn gas to make heat) but then also convert the heat into electricity, and that's before transport loss. In the ideal world, the choice is between "Burn gas in your home" (bad, accelerates climate change) and "Use renewable electricity" (good, although maybe expensive depending on policy decisions). But for many people today there is no choice, resistive electrical heating would still burn gas in a power station and just cost them a lot more. Heat pumps tilt the scales, if they're practical for you, it really is possible that a heat pump running on electricity that's actually produced by burning gas works out cheaper and more environmentally friendly than just burning the gas yourself. And of course a heat pump powered by wind is entirely practical and potentially quite cheap.
        pfdietz 5y ago
        > A modern home boiler is very efficient, A gas-driven heat pump could be even more efficient; that is, it could deliver > 100% of the thermal energy content of the fuel to your home (in the form of low grade heat). This is a consequence of avoiding, at least partially, the large second law loss in a typical furnace where very hot flame transfers heat to rather cool air. Any time you see a large entropy generating process like that in a system it's an opportunity for improvement.

tialaramex 5y ago

High electricity prices also eliminate the cost of (some) subsidy schemes for sustainable energy. Which almost can't help but encourage more such schemes. The UK's CfDs (Contracts for Difference) pay schemes like wind farms a fixed price for their output, allowing projects to go out to market saying look based on our plans we're going to make so-and-so-many MWh of electricity, the UK promises to pay so-and-so-much £££ for that electricity, therefore lend us (much less) £££ to build it and we'll pay you a nice return. This means investors only need to care about whether your wind farm proposal actually makes electricity, not guess what the price of that electricity will be when it's sold. Normally these schemes cost the government money. Say electricity is selling for £50 per MWh, and your wind farm's CfD specifies £80 per MWh, the government hands over £30 per MWh extra to make up the difference. But, when prices sky rocket the government actually gets paid the difference. When electricity sells for £200 per MWh and your wind farm's CfD said £80 per MWh, you only get £80 per MWh as promised, the other £120 per MWh goes into the general fund to buy missiles or feed orphans or whatever.

makomk 5y ago
Part of the problem in the UK is that the amount of wind was at something like a 40-year low earlier this year, meaning that wind farms weren't producing that much at all. As the amount of renewable power increases and fossil fuels get phased out and become more expensive, we can expect high electricity prices to coincide more and more with times when renewables are producing very little power and low prices with times when they're producing lots of it. So even if CfD prices look good on paper compared to average electricity wholesale prices the government is still likely to lose a lot of money on the deal due to when that electricity is produced, which ultimately comes out of all our electricity bills.
- solotronics 5y ago
  How do you even heat a house with wind? Aren't most homes in the US and EU are heated with gas?
  - mjmahone17 5y ago
    If a home has a heat pump (most AC systems), heating primarily with electricity isn’t that hard, at least in milder cold temperatures. Most homes in the colder areas of the US heat with gas because the cost per joule of gas is a lot less than for the equivalent electricity. But a lot of homes can supply most their heat with electricity, and would if the economics made sense. And even more would build that capability if gas was 2x the cost per joule as electricity.
    - tialaramex 5y ago
      Also even ignoring the direct price of the fuel, unlike for most things for heating it makes practical sense to burn gas in your house to make it hotter, not burn gas in a power station, then ship the power to your house and use that to make it hotter. A modern home boiler is very efficient, because what you wanted was heat, which is exactly what you get by burning gas. The gas turbine at a power station has to do the same conversion (burn gas to make heat) but then also convert the heat into electricity, and that's before transport loss. In the ideal world, the choice is between "Burn gas in your home" (bad, accelerates climate change) and "Use renewable electricity" (good, although maybe expensive depending on policy decisions). But for many people today there is no choice, resistive electrical heating would still burn gas in a power station and just cost them a lot more. Heat pumps tilt the scales, if they're practical for you, it really is possible that a heat pump running on electricity that's actually produced by burning gas works out cheaper and more environmentally friendly than just burning the gas yourself. And of course a heat pump powered by wind is entirely practical and potentially quite cheap.
      - pfdietz 5y ago
        > A modern home boiler is very efficient, A gas-driven heat pump could be even more efficient; that is, it could deliver > 100% of the thermal energy content of the fuel to your home (in the form of low grade heat). This is a consequence of avoiding, at least partially, the large second law loss in a typical furnace where very hot flame transfers heat to rather cool air. Any time you see a large entropy generating process like that in a system it's an opportunity for improvement.