5 ms·

> or example, if at a given moment you need 100 MW of solar at €10, 100 MW of wind at €12, and 1 MW of gas at €150, consumers will be billed €150 for each and e

> or example, if at a given moment you need 100 MW of solar at €10, 100 MW of wind at €12, and 1 MW of gas at €150, consumers will be billed €150 for each and every MW they consume. Since the power is exactly the same, people don't buy a MW of solar or wind, they just buy a MW, regardless of the source. If you were (owning) a generator, why would you sell your electricity for €12/unit when people are willing to buy it at €150/unit? And since it's a free market, otherwise a middleman will come swooping in to rake in the difference. Market dynamics dictate that when people/businesses are no longer willing to buy a MW for €150, the demand drops, the most expensive generators are not needed anymore and the overall price drops to the new equilibrium price. Also: my fixed contract price per kWh is about €0.81 always, which is, uh, a lot. A friend of mine recently switched to a dynamic tariff and payed about €0.30-0.40 when I last asked him about it. Pondering...

implements 4y ago
> Market dynamics dictate that when people/businesses are no longer willing to buy a MW for €150, the demand drops, the most expensive generators are not needed anymore and the overall price drops to the new equilibrium price. Not an economist, but “inelastic market / supply” answers that, I think.
- ragebol 4y ago
  It might drop, but a little only. Apparently, paying €150 for a MW is acceptable for companies. But the alternative is shutting down, so the cost gets forwarded to consumers of their products eventually. This is of course dampened by middlemen who sell for a fixed price and take the risk of having buy for a high price. And a few small NL energy companies (or rather middlemen) have gone bankrupt when they didn't have the reserves.
dustymcp 4y ago
I Also switchede from static to variable billing and saved about 50% on my bill, the static pricing contracts are not worth it currently, they where in August tho, at that point my contract was 50% cheaper than the variable price..
Al-Khwarizmi 4y ago
What you explain was also implicitly included when I said "I get the intended logic" (just didn't want to make my post too long). The thing is that this so-called free market works well for generating companies, but makes no sense for consumers. It doesn't matter how cheap producing the bulk of the electricity is, as long as gas isn't turned off completely the consumer always pays the price of gas. In a country evolving from (say) 100% gas to 90% renewables and 10% gas (I know I'm simplifying, these simple mixes don't really exist) the cost of electricity generation would fall through the floor, but the consumer would pay exactly the same. This is clearly dysfunctional, regardless of how nice it can be in theory. It's also not inevitable. You can set a cap to the prices, but then compensate sources that go over the cap (in practice, gas) so they don't operate at a loss. This is what the Iberian exception system is doing, and it works.
- Gwypaas 4y ago
  What you will accomplish with trying that is that producers will bid what they expect the price to be, instead of their production cost. Thus we still get the marginal cost like all other raw resource markets, but with extra complications. That is a much less efficient system with larger risks.
  - Al-Khwarizmi 4y ago
    They already do that with the existing system. It often happened in Spain (pre Iberian exception) that gas isn't even used, but the price of hydro was set to something like (expected price of gas - 5 €) because they knew they could. So we end up paying the price of gas even when we don't use gas! Honestly, some people talk about the existing system as if it's this perfect free market... but in practice the bar is very low. The Iberian exception system is already showing in practice that it works better.
- ragebol 4y ago
  Also an option indeed, but eventually the consumers pay for this difference. The incentive with the 'normal' merit order model is that the most expensive generator is that they make barely a profit if at all. Not too attractive. Better build generation capacity that has lower operating costs (ie. no fuel, ie. renewables). At least, that is the theory. I really wonder what happens to this model and the incentives once renewables are the majority and stretch further along the merit-order curve's X axis, pushing out fossil fuels.

implements 4y ago

> Market dynamics dictate that when people/businesses are no longer willing to buy a MW for €150, the demand drops, the most expensive generators are not needed anymore and the overall price drops to the new equilibrium price. Not an economist, but “inelastic market / supply” answers that, I think.

ragebol 4y ago
It might drop, but a little only. Apparently, paying €150 for a MW is acceptable for companies. But the alternative is shutting down, so the cost gets forwarded to consumers of their products eventually. This is of course dampened by middlemen who sell for a fixed price and take the risk of having buy for a high price. And a few small NL energy companies (or rather middlemen) have gone bankrupt when they didn't have the reserves.

dustymcp 4y ago

I Also switchede from static to variable billing and saved about 50% on my bill, the static pricing contracts are not worth it currently, they where in August tho, at that point my contract was 50% cheaper than the variable price..

Al-Khwarizmi 4y ago

What you explain was also implicitly included when I said "I get the intended logic" (just didn't want to make my post too long). The thing is that this so-called free market works well for generating companies, but makes no sense for consumers. It doesn't matter how cheap producing the bulk of the electricity is, as long as gas isn't turned off completely the consumer always pays the price of gas. In a country evolving from (say) 100% gas to 90% renewables and 10% gas (I know I'm simplifying, these simple mixes don't really exist) the cost of electricity generation would fall through the floor, but the consumer would pay exactly the same. This is clearly dysfunctional, regardless of how nice it can be in theory. It's also not inevitable. You can set a cap to the prices, but then compensate sources that go over the cap (in practice, gas) so they don't operate at a loss. This is what the Iberian exception system is doing, and it works.

Gwypaas 4y ago
What you will accomplish with trying that is that producers will bid what they expect the price to be, instead of their production cost. Thus we still get the marginal cost like all other raw resource markets, but with extra complications. That is a much less efficient system with larger risks.
- Al-Khwarizmi 4y ago
  They already do that with the existing system. It often happened in Spain (pre Iberian exception) that gas isn't even used, but the price of hydro was set to something like (expected price of gas - 5 €) because they knew they could. So we end up paying the price of gas even when we don't use gas! Honestly, some people talk about the existing system as if it's this perfect free market... but in practice the bar is very low. The Iberian exception system is already showing in practice that it works better.
ragebol 4y ago
Also an option indeed, but eventually the consumers pay for this difference. The incentive with the 'normal' merit order model is that the most expensive generator is that they make barely a profit if at all. Not too attractive. Better build generation capacity that has lower operating costs (ie. no fuel, ie. renewables). At least, that is the theory. I really wonder what happens to this model and the incentives once renewables are the majority and stretch further along the merit-order curve's X axis, pushing out fossil fuels.