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>Once EU finally gets rid of the ridiculous pricing model where spot prices are dictated by the most expensive energy source (usually, gas), we might have a sit

>Once EU finally gets rid of the ridiculous pricing model where spot prices are dictated by the most expensive energy source (usually, gas), we might have a situation where grid costs exceed the cost of energy itself. Why is it ridiculous? From a pure mathematical economics point of view it's genius I think. It means energy producers can just set their price at production price, knowing they will get the best deal that way and thus don't need to speculate on the electricity prices. It makes electricity as cheap as possible when it's abundant and expensive when it's not, also incentifying users of electricity to shift their consumption. What's a better way of doing it?

nandomrumber 11mo ago
Any way that is more fair for the end user. Why should a solar generator, who has virtually zero inputs, demand the same rate as a gas or coal generator who’s costs are dominated by inputs? Where’s the promised savings to the end user? That’s right, there aren’t any. And people bang on about solar being cheaper. No it isn’t. Solar electricity is the same price as gas peaker-plant electricity. Everywhere I’ve looked, same story. And there’s no solar power without gas.
- pantalaimon 11mo ago
  If you can make a great profit from solar, you are incentivised to build more of it for an even greater profit. Soon there is so much solar that you don't need the expensive gas most of the time.
  - nandomrumber 11mo ago
    Isn’t that a self defeating loop. Great profit to be had from solar because of expensive gas. Let’s put aside that this isn’t good for the end user, as it openly admits the whole point of solar is great profit, rather than savings for the end user. Soon there’s no need for the expensive gas. Where’s your profit margin not?
    - istjohn 11mo ago
      > Let’s put aside that this isn’t good for the end user, as it openly admits the whole point of solar is great profit, rather than savings for the end user. The whole point of capitalism is that in a well-regulated, open, competitive market, an ecosystem of companies pursuing maximum profit drive down each other's profit margins as they compete for a limited pool of consumers. In other words, it is precisely the profit motive that creates savings for the end user.
      - glenstein 11mo ago
        Exactly. The same principles that apply for solar energy are already in place for natural gas and for every other form of energy and the fundamental logic of markets is that there's a price point consumers will pay that's also profitable for the company. That didn't newly become an issue for the first time once solar entered the picture. There should be a word for this type of argument where people relitigate settled principles because they're discovering them for the first time.
        nandomrumber 11mo ago
        It’s not like I’m discovering the concept for the first time. I just think when people say things like “solar is cheaper than gas” they should say for who. Solar is cheaper than gas for the capitalist. And there’s no guarantee the capitalists savings will ever be passed on to the consumer. In my market, Australia, the energy retailers are regulated to increase prices once a year. Increase prices. Never a saving for the retail customer. They’ve worked out that can skip all that messy market bullshit and just regulate annual increases. Good work if you can get it.
        defrost 11mo ago
        > In my market, Australia, the energy retailers are regulated to increase prices once a year. Increase prices. Never a saving for the retail customer. They’ve worked out that can skip all that messy market bullshit and just regulate annual increases. Have you actually read the regulation? The AEMC said the new rules were in response to requests from Australia's energy minsters. They will: * prevent retailers from increasing prices more than once a year * ban excessive charges like late-payment fees for all retail contracts * ensure all consumers are entitled to a fee-free payment method * prohibit retail fees for vulnerable consumers * ensure vulnerable Australians are receiving their retailer’s best offer * prevent retailers from charging more than the standing offer price if the customer's initial offer changes or expires. This will protect customers from paying higher prices for their loyalty. The rules to improve consumer confidence in retail energy plans will come into effect on 1 July 2026. Those that assist hardship customers take effect from 30 December 2026. There is a difference between A) regulation that forces a price rise once a year. and B) regulation that stops more than one price rise (if any) in any year.
  - thaumasiotes 11mo ago
    > Soon there is so much solar that you don't need the expensive gas most of the time. Unless it's night. Or, possibly, unless you have enough battery capacity to store the entire nighttime supply during the day.
  - manmal 11mo ago
    > Soon there is so much solar that you don't need the expensive gas most of the time. In the EU (winters with weak solar radiation) this only works if you can store power over multiple months. Getting rid of gas means purchasing and maintaining a giant amount of batteries. Slow storage won’t save you from outages during peaks. We do have very cheap power from solar, during the hot months. In winter, its wind and offshore turbines that are prevalent, but they are as unpredictable. So, solar and wind power is trivial. Storage is the issue. And consumers will pay that storage, in both grid cost, and spot prices. I don’t understand why peak producers should dictate prices for all levels of service. Make an exception for them that’s adequate, like a second peak market, and done? Why should a solar producer (who doesn’t buffer!) get 3x the price only because Russia turns up gas prices and the big producers start panic buying expensive gas futures, poisoning their whole lineup in the process? Solar producers just pump whatever’s coming out of their panels into the market, with no regard for grid stability.
    - CorrectHorseBat 11mo ago
      Right now providing grid stability is maximally rewarded because you get paid a lot when it's needed and little when there's a lot of electricity available. Storage providers can use this spread to make money and create grid stability. I'm not sure what you mean by second peak market? Let me turn around the question, why should a gas plant get more for its electricity when it's indistinguishable from solar electricity?
      - nandomrumber 11mo ago
        In the case of gas peaked plants: because they’re providing grid stability. Whereas solar generators are ruining grid stability.
        defrost 11mo ago
        Mini pumped storage dams and battery banks fix that issue cheaper than gas peaker plants. Eg: In your market, Australia, this was completed this year for $8 million AU https://www.westernpower.com.au/resources-education/network-improvements/network-upgrade-projects/walpole-mini-pumped-hydro/ https://www.westernpower.com.au/resources-education/network-...
- eldaisfish 11mo ago
  comments like this really show that many people with strong opinions do not understand how the electricity grid, electricity markets or electricity economics work. Electricity is priced at the edge entirely because demand must match supply at all times. You either meet all electric demand or someone will go without power. This is why marginal pricing exists and this is why the most expensive generator is always the last to be accepted. This is why electricity at night is cheaper that during the day. Please, if you do not understand what you are talking about, it's ok to just say that you don't know. Don't spread misinformation like this.
  - latentsea 11mo ago
    > Electricity is priced at the edge entirely because demand must match supply at all times. You either meet all electric demand or someone will go without power. There's also more to it than just that. Supply-demand imbalance affects the frequency on the grid. Too high or too low frequency damages the turbines in the base load power plants, and they will shut down to avoid damage if the frequency goes too far out of range. Hence, too little or too much power actually causes grid collapse. Solar actually has to be managed a lot more carefully than people realise.
    - eldaisfish 11mo ago
      This has almost nothing to do with how electricity is priced.
      - latentsea 11mo ago
        Electricity isn't priced only one way. In the Japanese market in summer during the day the spot price nose dives to almost nothing because of an oversupply of solar. Yet most installed solar is operating under the FIT system where all generation is guaranteed to be bought by the regional generation company for a fixed price, regardless of what the spot price is. This worked to incentivise bringing lots of solar online, but its paid for by adding a levy as a line item to everyone's electricity bill. To lower the financial burden the government is ending the FIT system and transitioning to FIP where from memory solar operators still make similar money as they did under FIT but it's sold on the spot market and then the government pays a premium on top. The TSOs have to manage the supply-demand balance and there's things like the balancing market to help with this. However the government is also changing the regulations to put more of the burden of managing the supply-demand onto the solar operators themselves and not lump it all on the TSOs. Lots of people invested in solar under the FIT system because operation and expected revenue was straightforward. Now with shifting to FIP it's less straightforward. Additionally when the burden finally falls to the solar operators to proactively manage the supply-demand balance, there aren't good systems they can readily leverage to do so, and the average Joe with solar panels on their roof isn't necessarily going to want to be submitting 30 minute generation plans to their regional TSO, hence they'll eventually have to wind up going through aggregators and such becoming part of a virtual power plant where you may have things occur like negawatt transactions to incentivising reducing demand to help manage the supply-demand balance etc. PPAs are also an increasingly popular option for purchasing/selling solar power. They're usually fixed price contracts, but depending on how it's setup money either changes hands directly between the generator and consumer (via a retailer) or sometimes the generator sells it all on the spot market and then settlement of the difference between the contract price occurs afterwards between the parties. Even with fixed price contacts the revenue isn't completely guaranteed because the TSO might need to issue curtailment orders to the generator in order to manage supply-demand balance when there is oversupply or grid congestion. It's not all sold on the spot market. Anyway, my comment was less about how it's priced more about hidden operational complexity of renewables non-industry folks aren't aware of. In particular turbines have inertia and so if you stop generating power they will still run for a while, and this helps keep the frequency on the grid stable, but solar doesn't have inertia since it isn't turbine based, so large swings in generation can have an instantaneous impact on grid frequency, which can be destabilizing, unless you do stuff with batteries and inverters to produce pseudo-inertia. TSOs need to manage fluctuations with frequency containment reserve, frequency restoration reserve, and replacement reserve. These costs all wind up as part of the wheeling charges which affect the bills in the end. There's also things like capacity payments/capacity market which impacts solar operators, but I don't know specifics on how that stuff works.
deleted 11mo ago
[deleted]
subscribed 11mo ago
From a profit-driven energy company it surely makes sense. From the customer perspective not so much: - https://www.businesselectricityprices.org.uk/media/n35dlcza/10-year-electricity-prices-kwh-chart.png?width=500& https://www.businesselectricityprices.org.uk/media/n35dlcza/... - https://www.endfuelpoverty.org.uk/energy-giants-see-457-billion-profits-as-consumers-bills-rise/ https://www.endfuelpoverty.org.uk/energy-giants-see-457-bill...

nandomrumber 11mo ago

Any way that is more fair for the end user. Why should a solar generator, who has virtually zero inputs, demand the same rate as a gas or coal generator who’s costs are dominated by inputs? Where’s the promised savings to the end user? That’s right, there aren’t any. And people bang on about solar being cheaper. No it isn’t. Solar electricity is the same price as gas peaker-plant electricity. Everywhere I’ve looked, same story. And there’s no solar power without gas.

pantalaimon 11mo ago
If you can make a great profit from solar, you are incentivised to build more of it for an even greater profit. Soon there is so much solar that you don't need the expensive gas most of the time.
- nandomrumber 11mo ago
  Isn’t that a self defeating loop. Great profit to be had from solar because of expensive gas. Let’s put aside that this isn’t good for the end user, as it openly admits the whole point of solar is great profit, rather than savings for the end user. Soon there’s no need for the expensive gas. Where’s your profit margin not?
  - istjohn 11mo ago
    > Let’s put aside that this isn’t good for the end user, as it openly admits the whole point of solar is great profit, rather than savings for the end user. The whole point of capitalism is that in a well-regulated, open, competitive market, an ecosystem of companies pursuing maximum profit drive down each other's profit margins as they compete for a limited pool of consumers. In other words, it is precisely the profit motive that creates savings for the end user.
    - glenstein 11mo ago
      Exactly. The same principles that apply for solar energy are already in place for natural gas and for every other form of energy and the fundamental logic of markets is that there's a price point consumers will pay that's also profitable for the company. That didn't newly become an issue for the first time once solar entered the picture. There should be a word for this type of argument where people relitigate settled principles because they're discovering them for the first time.
      - nandomrumber 11mo ago
        It’s not like I’m discovering the concept for the first time. I just think when people say things like “solar is cheaper than gas” they should say for who. Solar is cheaper than gas for the capitalist. And there’s no guarantee the capitalists savings will ever be passed on to the consumer. In my market, Australia, the energy retailers are regulated to increase prices once a year. Increase prices. Never a saving for the retail customer. They’ve worked out that can skip all that messy market bullshit and just regulate annual increases. Good work if you can get it.
        defrost 11mo ago
        > In my market, Australia, the energy retailers are regulated to increase prices once a year. Increase prices. Never a saving for the retail customer. They’ve worked out that can skip all that messy market bullshit and just regulate annual increases. Have you actually read the regulation? The AEMC said the new rules were in response to requests from Australia's energy minsters. They will: * prevent retailers from increasing prices more than once a year * ban excessive charges like late-payment fees for all retail contracts * ensure all consumers are entitled to a fee-free payment method * prohibit retail fees for vulnerable consumers * ensure vulnerable Australians are receiving their retailer’s best offer * prevent retailers from charging more than the standing offer price if the customer's initial offer changes or expires. This will protect customers from paying higher prices for their loyalty. The rules to improve consumer confidence in retail energy plans will come into effect on 1 July 2026. Those that assist hardship customers take effect from 30 December 2026. There is a difference between A) regulation that forces a price rise once a year. and B) regulation that stops more than one price rise (if any) in any year.
- thaumasiotes 11mo ago
  > Soon there is so much solar that you don't need the expensive gas most of the time. Unless it's night. Or, possibly, unless you have enough battery capacity to store the entire nighttime supply during the day.
- manmal 11mo ago
  > Soon there is so much solar that you don't need the expensive gas most of the time. In the EU (winters with weak solar radiation) this only works if you can store power over multiple months. Getting rid of gas means purchasing and maintaining a giant amount of batteries. Slow storage won’t save you from outages during peaks. We do have very cheap power from solar, during the hot months. In winter, its wind and offshore turbines that are prevalent, but they are as unpredictable. So, solar and wind power is trivial. Storage is the issue. And consumers will pay that storage, in both grid cost, and spot prices. I don’t understand why peak producers should dictate prices for all levels of service. Make an exception for them that’s adequate, like a second peak market, and done? Why should a solar producer (who doesn’t buffer!) get 3x the price only because Russia turns up gas prices and the big producers start panic buying expensive gas futures, poisoning their whole lineup in the process? Solar producers just pump whatever’s coming out of their panels into the market, with no regard for grid stability.
  - CorrectHorseBat 11mo ago
    Right now providing grid stability is maximally rewarded because you get paid a lot when it's needed and little when there's a lot of electricity available. Storage providers can use this spread to make money and create grid stability. I'm not sure what you mean by second peak market? Let me turn around the question, why should a gas plant get more for its electricity when it's indistinguishable from solar electricity?
    - nandomrumber 11mo ago
      In the case of gas peaked plants: because they’re providing grid stability. Whereas solar generators are ruining grid stability.
      - defrost 11mo ago
        Mini pumped storage dams and battery banks fix that issue cheaper than gas peaker plants. Eg: In your market, Australia, this was completed this year for $8 million AU https://www.westernpower.com.au/resources-education/network-improvements/network-upgrade-projects/walpole-mini-pumped-hydro/ https://www.westernpower.com.au/resources-education/network-...
eldaisfish 11mo ago
comments like this really show that many people with strong opinions do not understand how the electricity grid, electricity markets or electricity economics work. Electricity is priced at the edge entirely because demand must match supply at all times. You either meet all electric demand or someone will go without power. This is why marginal pricing exists and this is why the most expensive generator is always the last to be accepted. This is why electricity at night is cheaper that during the day. Please, if you do not understand what you are talking about, it's ok to just say that you don't know. Don't spread misinformation like this.
- latentsea 11mo ago
  > Electricity is priced at the edge entirely because demand must match supply at all times. You either meet all electric demand or someone will go without power. There's also more to it than just that. Supply-demand imbalance affects the frequency on the grid. Too high or too low frequency damages the turbines in the base load power plants, and they will shut down to avoid damage if the frequency goes too far out of range. Hence, too little or too much power actually causes grid collapse. Solar actually has to be managed a lot more carefully than people realise.
  - eldaisfish 11mo ago
    This has almost nothing to do with how electricity is priced.
    - latentsea 11mo ago
      Electricity isn't priced only one way. In the Japanese market in summer during the day the spot price nose dives to almost nothing because of an oversupply of solar. Yet most installed solar is operating under the FIT system where all generation is guaranteed to be bought by the regional generation company for a fixed price, regardless of what the spot price is. This worked to incentivise bringing lots of solar online, but its paid for by adding a levy as a line item to everyone's electricity bill. To lower the financial burden the government is ending the FIT system and transitioning to FIP where from memory solar operators still make similar money as they did under FIT but it's sold on the spot market and then the government pays a premium on top. The TSOs have to manage the supply-demand balance and there's things like the balancing market to help with this. However the government is also changing the regulations to put more of the burden of managing the supply-demand onto the solar operators themselves and not lump it all on the TSOs. Lots of people invested in solar under the FIT system because operation and expected revenue was straightforward. Now with shifting to FIP it's less straightforward. Additionally when the burden finally falls to the solar operators to proactively manage the supply-demand balance, there aren't good systems they can readily leverage to do so, and the average Joe with solar panels on their roof isn't necessarily going to want to be submitting 30 minute generation plans to their regional TSO, hence they'll eventually have to wind up going through aggregators and such becoming part of a virtual power plant where you may have things occur like negawatt transactions to incentivising reducing demand to help manage the supply-demand balance etc. PPAs are also an increasingly popular option for purchasing/selling solar power. They're usually fixed price contracts, but depending on how it's setup money either changes hands directly between the generator and consumer (via a retailer) or sometimes the generator sells it all on the spot market and then settlement of the difference between the contract price occurs afterwards between the parties. Even with fixed price contacts the revenue isn't completely guaranteed because the TSO might need to issue curtailment orders to the generator in order to manage supply-demand balance when there is oversupply or grid congestion. It's not all sold on the spot market. Anyway, my comment was less about how it's priced more about hidden operational complexity of renewables non-industry folks aren't aware of. In particular turbines have inertia and so if you stop generating power they will still run for a while, and this helps keep the frequency on the grid stable, but solar doesn't have inertia since it isn't turbine based, so large swings in generation can have an instantaneous impact on grid frequency, which can be destabilizing, unless you do stuff with batteries and inverters to produce pseudo-inertia. TSOs need to manage fluctuations with frequency containment reserve, frequency restoration reserve, and replacement reserve. These costs all wind up as part of the wheeling charges which affect the bills in the end. There's also things like capacity payments/capacity market which impacts solar operators, but I don't know specifics on how that stuff works.

deleted 11mo ago

[deleted]

subscribed 11mo ago

From a profit-driven energy company it surely makes sense. From the customer perspective not so much: - https://www.businesselectricityprices.org.uk/media/n35dlcza/10-year-electricity-prices-kwh-chart.png?width=500& https://www.businesselectricityprices.org.uk/media/n35dlcza/... - https://www.endfuelpoverty.org.uk/energy-giants-see-457-billion-profits-as-consumers-bills-rise/ https://www.endfuelpoverty.org.uk/energy-giants-see-457-bill...