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Because electricity is sold across the entire European market. Low cost producers are going to sell to those who pay the most, to maximise profit, unless they'r
by dkjaudyeqooe 4y ago
Because electricity is sold across the entire European market. Low cost producers are going to sell to those who pay the most, to maximise profit, unless they're unable to move the electricity ( or more likely 'contra' it) to where it is intended to be consumed.
Just like oil. The US has cheap oil but it's a global market, so everyone pays the (more or less) the same price regardless of how close they are to the oil.
- Ekaros 4y agoAlso because electricity market is bit special how it operates. Suppliers tell what price they will sell and and then buyer at what price they will buy. And the price for all transactions will be set at highest match of supply to demand. Because demand side has no upper price limit the whole market price can raise to very high. Ofc, this ignores cases of own production, futures and so on.
- konschubert 4y agoYou're describing an auction principle. It's called merit-order. It is very efficient at creating a transparent market and finding the "natural" market price. The same price that a free and transparent market would converge to. The alternative are price caps. Which could be considered. But it's a choice between free and non-free markets. Blaming merit-order is shooting the messenger.