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> Electricity is not sold on a "free market" anyway - I can not just hook up my nuclear power station without paying a specific tax aimed at just nuclear power

> Electricity is not sold on a "free market" anyway - I can not just hook up my nuclear power station without paying a specific tax aimed at just nuclear power generation - here in Sweden it is called "effektskatt" (output-power based tax) and is responsible for making it very hard or impossible to profitably run nuclear power stations [1]. The government went so far as to change the leadership for the state-owned power company Vattenfall because the existing leadership was not deemed to be cooperative in leading the change to "renewable" power sources. The "effektskatt" was removed in 2018. > On the other hand I may be able to put a wind turbine on my premises and get subsidised for doing so which has the opposite effect of the mentioned tax on nuclear power in that it makes it easier to generate wind power profitably. The subsidies for wind power in Sweden was phased out in 2021 due to not being necessary anymore.

the_third_wave 4y ago
That these taxes are changed does not change the fact that they, and others, existed (for many decades) and exist and will continue to be imposed. The electricity market is not a "free market", it is a controlled market and as such it would not be "meddling with the free market" to change the control to remove some of the negative effects of such. The marginal pricing mechanism is a prime example of something in need of change.
- Gwypaas 4y ago
  The marginal pricing mechanism is near impossible to change on a market made up of multiple players. Unless you want to fundamentally alter the market to a more monopolistic market where the state selects or owns the power generation. Like the nice market P&G have in California. How would you do it? If you keep the current market with multiple independent actors then they would try to predict the most expensive generation required and bid at that price. Or you could tell them that since you are "coal" you get this price. But then that would be unfair to someone who made a different business case based on their availability, or their costs, or whatever. You essentially end up in a quagmire of 5 year planned production. Marginal pricing solves this, and is what is applied to all raw resource markets due to these issues. If you do not like marginal pricing you have all the possibility in the world to buy electricity futures, which of course nets you less income as a power generator and costs more for customers, because the risk is still exists.
  - the_third_wave 4y ago
    If 90% of the electricity sold on the exchange - Nordpool [1] - has a price of 0.30€/kWh, 8% 0.60€ kWh and 2% 1.20€/kWh the resulting market price would be 0.342€/kWh. This would be the hourly rate at which electricity is sold to consumers. The market would work just like it does now with producers proposing generating capacity at a certain rate. All producers put in their offers, demand prognoses set the day-ahead rates. If predicted demand at 1 hour before the set time outstrips the prognosis for a certain hour the rate goes up just like it does now - at 00.00 the prognosis showed a rate of 22.39 öre/kWh (SEK) while the actual rate was 48.76 öre/kWh. Suppliers get paid their accepted rates, consumers pay the weighted average of all rates. In this example they'd pay 0.342€/kWh while they would pay 1.20€/kWh using the current marginal pricing mechanism. Just like now suppliers know up front how much they are likely to sell at what price, just like now they will put in offers at a level which makes it likely for their offers to be accepted. The market aims for the lowest price given desired characteristics so suppliers who offer above market rates can only expect to be accepted once the supply of cheaper energy is exhausted. This means peak power plants can still sell their higher-priced power without setting the price for consumers like they do now. To return to sane prices one extra step may need to be made depending on the transfer capacity from a region or country to one neighbouring it which has markedly higher prices: consumer prices need to be disconnected from export rates if the transfer capacity and export demand is high enough to saturate the national generating capacity or prices will still be pushed up unduly. Just like with many other goods there may need to be an export market running parallel to the domestic market with the domestic market being the first one to run its auctions. Is this a fully worked-out proposal? No, it is not but the weighed average pricing mechanism proposed has all of the benefits and none of the downsides of the marginal pricing mechanism, at least from a market perspective - producers probably prefer the marginal pricing mechanism which allows the final kWh to be generated by the CEO sat astride a home trainer with a generator attached. [1] https://www.nordpoolgroup.com/en/ https://www.nordpoolgroup.com/en/
    - deleted 4y ago
      [deleted]

the_third_wave 4y ago

That these taxes are changed does not change the fact that they, and others, existed (for many decades) and exist and will continue to be imposed. The electricity market is not a "free market", it is a controlled market and as such it would not be "meddling with the free market" to change the control to remove some of the negative effects of such. The marginal pricing mechanism is a prime example of something in need of change.

Gwypaas 4y ago
The marginal pricing mechanism is near impossible to change on a market made up of multiple players. Unless you want to fundamentally alter the market to a more monopolistic market where the state selects or owns the power generation. Like the nice market P&G have in California. How would you do it? If you keep the current market with multiple independent actors then they would try to predict the most expensive generation required and bid at that price. Or you could tell them that since you are "coal" you get this price. But then that would be unfair to someone who made a different business case based on their availability, or their costs, or whatever. You essentially end up in a quagmire of 5 year planned production. Marginal pricing solves this, and is what is applied to all raw resource markets due to these issues. If you do not like marginal pricing you have all the possibility in the world to buy electricity futures, which of course nets you less income as a power generator and costs more for customers, because the risk is still exists.
- the_third_wave 4y ago
  If 90% of the electricity sold on the exchange - Nordpool [1] - has a price of 0.30€/kWh, 8% 0.60€ kWh and 2% 1.20€/kWh the resulting market price would be 0.342€/kWh. This would be the hourly rate at which electricity is sold to consumers. The market would work just like it does now with producers proposing generating capacity at a certain rate. All producers put in their offers, demand prognoses set the day-ahead rates. If predicted demand at 1 hour before the set time outstrips the prognosis for a certain hour the rate goes up just like it does now - at 00.00 the prognosis showed a rate of 22.39 öre/kWh (SEK) while the actual rate was 48.76 öre/kWh. Suppliers get paid their accepted rates, consumers pay the weighted average of all rates. In this example they'd pay 0.342€/kWh while they would pay 1.20€/kWh using the current marginal pricing mechanism. Just like now suppliers know up front how much they are likely to sell at what price, just like now they will put in offers at a level which makes it likely for their offers to be accepted. The market aims for the lowest price given desired characteristics so suppliers who offer above market rates can only expect to be accepted once the supply of cheaper energy is exhausted. This means peak power plants can still sell their higher-priced power without setting the price for consumers like they do now. To return to sane prices one extra step may need to be made depending on the transfer capacity from a region or country to one neighbouring it which has markedly higher prices: consumer prices need to be disconnected from export rates if the transfer capacity and export demand is high enough to saturate the national generating capacity or prices will still be pushed up unduly. Just like with many other goods there may need to be an export market running parallel to the domestic market with the domestic market being the first one to run its auctions. Is this a fully worked-out proposal? No, it is not but the weighed average pricing mechanism proposed has all of the benefits and none of the downsides of the marginal pricing mechanism, at least from a market perspective - producers probably prefer the marginal pricing mechanism which allows the final kWh to be generated by the CEO sat astride a home trainer with a generator attached. [1] https://www.nordpoolgroup.com/en/ https://www.nordpoolgroup.com/en/
  - deleted 4y ago
    [deleted]