Below is the fundamental hypothesis behind electricity markets: > Efficient plants with low fuel/opportunity costs usually set the price, and prices rise sligh

Below is the fundamental hypothesis behind electricity markets: > Efficient plants with low fuel/opportunity costs usually set the price, and prices rise slightly to bring on less efficient plants during peak hours. You'll see it everywhere someone discusses electricity markets. The only problem is that this hypothesis is wrong in practice … It's not so much the marginal price that sets which energy source start and stop, but mostly the technical flexibility of the produce mean. First of all, marginal price doesn't really exist in the first place[1], and different means of electricity production have very different ramp-up delay and costs, which is totally unaccounted by the marginal price hypothesis. [1] and this isn't just the case in the electricity market, but pretty much everywhere: marginal price is a economic concept that just doesn't refer to anything existing in the real world, as illustrated by the work of Nobel Prize winner Maurice Allais.