4 ms·

I always get a slight headache when I think of electricity prices and how one could improve the pricing mechanism. The marginal cost of production mechanism is

I always get a slight headache when I think of electricity prices and how one could improve the pricing mechanism. The marginal cost of production mechanism is resonable, it's basically how it works for any other market. Except that all electricity in a grid is basically infinitely fungible with zero transaction cost so all goods cost the same. But at the same time, it's something fundamentally different about hydro or nuclear compared to solar or wind. It will "always" work (except for maintenance etc). At least in Sweden it's not that uncommon for it to be dark (cold) and calm winds all over the country at the same time. The EU grid is somewhat connected, but the transfer lines doesn't have infinite capacity. Wouldn't it kinda make sense to have different markets, or some kind of derivate mechanism, that makes it profitable to either have base load power sources, or seldomly used fossil based power plant "backups"?.

davedx 4y ago
But a supply demand market already benefits baseload. When intermittent generators like wind are low output, prices increase, and nuclear makes more money
- filleokus 4y ago
  Sure. But as consumers, I'm guessing we only accept intermittent generators given that baseload providers exist. It seems "unfair" that I can build a wind turbine and profit when the wind blows 80-90% of the time, causing me to be the marginal producer and heavily outcompete nuclear. And then during the critical hour/day/week when neither I, nor any other windmill can produce power, the expensive nuclear power plant has to come and save the day. Sure they'll get paid, but not enough to finance it the rest of the year. (The devil is of course in the dynamic details. How big is the correlation between output of different intermittent producers, how much can consumption reduce etc). I'm not sure I understand the lingo in TFA, but I think a similar (but probably worse) mechanism could be: All providers much sell "baseload" power, regardless of how it's produced. You sell yearly contracts on MW capacity. If you are a nuclear plant, you can just sell rated capacity. If you are a wind turbine, you have to hedge the risk of it not blowing. Either by buying baseload capacity from nuclear or some other reserve, buying batter power, or by over provisioning the amount of installed capacity etc.
  - imtringued 4y ago
    Since when do grids depend on nuclear power to save the day? They usually rely on gas. Nuclear power is generally used to displace coal over longer periods.

davedx 4y ago

But a supply demand market already benefits baseload. When intermittent generators like wind are low output, prices increase, and nuclear makes more money

filleokus 4y ago
Sure. But as consumers, I'm guessing we only accept intermittent generators given that baseload providers exist. It seems "unfair" that I can build a wind turbine and profit when the wind blows 80-90% of the time, causing me to be the marginal producer and heavily outcompete nuclear. And then during the critical hour/day/week when neither I, nor any other windmill can produce power, the expensive nuclear power plant has to come and save the day. Sure they'll get paid, but not enough to finance it the rest of the year. (The devil is of course in the dynamic details. How big is the correlation between output of different intermittent producers, how much can consumption reduce etc). I'm not sure I understand the lingo in TFA, but I think a similar (but probably worse) mechanism could be: All providers much sell "baseload" power, regardless of how it's produced. You sell yearly contracts on MW capacity. If you are a nuclear plant, you can just sell rated capacity. If you are a wind turbine, you have to hedge the risk of it not blowing. Either by buying baseload capacity from nuclear or some other reserve, buying batter power, or by over provisioning the amount of installed capacity etc.
- imtringued 4y ago
  Since when do grids depend on nuclear power to save the day? They usually rely on gas. Nuclear power is generally used to displace coal over longer periods.