4 ms·

These are wholesale prices, not retail, but yes the two are linked. $9000/MWh isn't crazy for a few intervals once a year, but if a generator clears 200 MW for

These are wholesale prices, not retail, but yes the two are linked. $9000/MWh isn't crazy for a few intervals once a year, but if a generator clears 200 MW for each hour of the day for a day in the day ahead market and then has issues and can't provide that power in the real time market, it has to buy back that power at the spot price. That can get insanely expensive fast. Now imagine the owner of that generator has other generators in the same boat and it just stacks. These aren't trivial prices. Similarly, the load serving entities have to buy power at that spot price if they don't have it locked in at a lower price in the forward market (hard to do when events occur over multiple days). A little googling will turn up some chatter about many of those companies nearly defaulting from the ERCOT scarcity pricing during the February event.

rsj_hn 5y ago
>$9000/MWh isn't crazy for a few intervals once a year, but if a generator clears 200 MW for each hour of the day for a day in the day ahead market and then has issues and can't provide that power in the real time market, it has to buy back that power at the spot price. That can get insanely expensive fast. Exactly! And it should be 30K, not 9K, due to my arguments above. You are pointing out that renewables, while unreliable, are so cheap they are driving the reliable electricity out of business. That means something isn't being correctly priced, because we as a nation require reliability. So I propose to put a price on that reliability, and you point out it can drive the unreliable provider out of business, which is kinda the point -- that unreliable provider will need to purchase insurance from the reliable provider to cover them, or "side payments" as you call it, in case something goes wrong. This puts a price on having the nuclear provider available in case the wind doesn't blow, and creates payments to that provider, but via market mechanisms. If the wind provider is confident in their battery storage they don't need to purchase insurance from the nuclear provider. But the point is to stop externalizing the costs of unreliable power. This is to end up in a situation where we as a nation are able to fund reliable sources of electricity rather than everyone switching to wind and the nation going dark when the wind stops blowing, throwing up it's hands and saying "oops", or "wow, I can't afford this. Gonna declare bankruptcy now, see you on the other side with more cheap spot prices". That's how you do it with the market mechanisms - by putting much bigger penalties on unreliability than we have now and requiring proof of insurance for being able to handle those payments. > These are wholesale prices, not retail Of course, because we are talking about how much to penalize providers for disrupting the lives of households - remember we are trying to price reliability. The providers pay wholesale, so that is the relevant cost function to target, not retail.

rsj_hn 5y ago

>$9000/MWh isn't crazy for a few intervals once a year, but if a generator clears 200 MW for each hour of the day for a day in the day ahead market and then has issues and can't provide that power in the real time market, it has to buy back that power at the spot price. That can get insanely expensive fast. Exactly! And it should be 30K, not 9K, due to my arguments above. You are pointing out that renewables, while unreliable, are so cheap they are driving the reliable electricity out of business. That means something isn't being correctly priced, because we as a nation require reliability. So I propose to put a price on that reliability, and you point out it can drive the unreliable provider out of business, which is kinda the point -- that unreliable provider will need to purchase insurance from the reliable provider to cover them, or "side payments" as you call it, in case something goes wrong. This puts a price on having the nuclear provider available in case the wind doesn't blow, and creates payments to that provider, but via market mechanisms. If the wind provider is confident in their battery storage they don't need to purchase insurance from the nuclear provider. But the point is to stop externalizing the costs of unreliable power. This is to end up in a situation where we as a nation are able to fund reliable sources of electricity rather than everyone switching to wind and the nation going dark when the wind stops blowing, throwing up it's hands and saying "oops", or "wow, I can't afford this. Gonna declare bankruptcy now, see you on the other side with more cheap spot prices". That's how you do it with the market mechanisms - by putting much bigger penalties on unreliability than we have now and requiring proof of insurance for being able to handle those payments. > These are wholesale prices, not retail Of course, because we are talking about how much to penalize providers for disrupting the lives of households - remember we are trying to price reliability. The providers pay wholesale, so that is the relevant cost function to target, not retail.