3 ms·
Econ 101: with a marginal cost equal to zero, a competitive electricity market (with a price driven to marginal cost because of competition) cannot be sustainab
by littlestymaar 2y ago
Econ 101: with a marginal cost equal to zero, a competitive electricity market (with a price driven to marginal cost because of competition) cannot be sustainable because electricity price it cannot pay for the fixed costs.
Solution: we must stop electricity pricing based on energy produced (which made sense when using fossil fuel) and switch to a pricing mechanism where you pay for available power because that's where the marginal cost is increasing.
- bryanlarsen 2y agoMany markets already do this: for example California pays generators a mixed rate per kWh and kW. But just pricing per kWh can work. If the limit is available capacity at 6PM, then those kWh are the most profitable and capacity will be built to meet demand at 6PM.
- digdugdirk 2y agoI'm intrigued. But with an electrical grid that requires a constant match between electricity generation and consumption, how would you ensure the stability of a thing when its controlling mechanism (pricing) is its own derivative?
- littlestymaar 2y agoI don't understand your question. But let me clarify something the grid requires constant match between generation and consumption power to match.
- pyrale 2y agoThat's the goal of the capacity market. https://energy.ec.europa.eu/topics/markets-and-consumers/capacity-mechanisms_en https://energy.ec.europa.eu/topics/markets-and-consumers/cap...