4 ms·

That's just marginal pricing, which is the pricing in many (most?) markets. It just means that the price is determined by the price where the demand curve cros

by Epa095 8mo ago

That's just marginal pricing, which is the pricing in many (most?) markets. It just means that the price is determined by the price where the demand curve crosses the supply curve.

triceratops 8mo ago
> That's just marginal pricing, which is the pricing in many (most?) markets. I don't pay Johnnie Walker Blue Label prices for Jim Beam.
- Epa095 8mo ago
  But with power the final product it's the same, the production method is different. So it's more like this: I make a product for 5 and sell it for 6. My production facility is maxed, but there is still much demand. So I (or someone else) sets up another factory, making them for 8 and selling for 9 (there is demand enough). Now, will I keep selling at 6? No, my prices will also increase (to maximise my profit), and the final price will be where the demand curve crosses the supply curve. I am wind, the new one is gass. We both make the same product, we sell at the same price, but I make a larger profit.
  - Dylan16807 8mo ago
    You get simple supply and demand with uniform prices in commodity markets but I'm doubtful that's most markets in general.
  - triceratops 8mo ago
    Makes sense. But in a normally functioning market, production at 5 will rapidly ramp up to capture the excess profits to be made by selling at 8. Eventually this will drive everyone's prices to 6 and the ones stuck producing at 7 (natural gas) will be driven out of business. According to this comment https://news.ycombinator.com/item?id=46982118 https://news.ycombinator.com/item?id=46982118 there's additional "treasury" (is that the tax authority in the UK?) weirdness that prevents renewables from capturing these profits.
    - ainch 8mo ago
      The Treasury is the finance ministry in charge of all public income and spending.
    - tialaramex 8mo ago
      Treasury is the name for the government's economic ministry, ie the people who "have the money" (except that of course all modern governments run a huge debt) if you're American your equivalent department is also named Treasury. The UK's tax authority is HMRC, His Majesty's Revenue & Customs. It takes a lot of time to build electrical generators, so "rapidly" here means what... decades? Years at least. I think wind farms generally you need to do a bunch of paperwork and then if you get an OK (after the paperwork) maybe 3-5 years to build. The weirdness you're talking about is the other side of the Contracts for Difference subsidising the off shore (and historically onshore too) wind farms. A CfD works like this: You auction off the right to build generation and in the auction people can bid down for the price they'll be paid for say, 10 years of their electricity, this is called the Strike Price. Whatever they sell their electricity for, they always get that strike price. When the sale price was lower, the government is giving you free money - that's why this is obviously a subsidy. But when the sale price was higher the government (effectively the treasury, though actually via a for-purpose government owned company) takes every penny above your strike price, too bad. This subsidy is cheap for governments because it's about certainty, something they have and which private investors lack. The British government knows it will have tax revenue in 2036, but a private investor would want a fat premium to cover that. Now, CfDs run out. If you have 10 years of CfD obviously the wind turbine you bought doesn't magically explode after exactly 10 years, maybe maintenance prices get out of hand or the main blades reach end of life in 20 years and so it doesn't last forever, but eventually there's an unsubsidised generator, the situation today though is that there's a lot of very new generation, and so most of it is subsidised. Another issue is that it makes sense to build off-shore wind farms in particular on the Scottish coast, whereas it didn't make sense to build e.g. coal generation there, so the UK isn't set up to move a huge amount of power made in Scotland to the south where much of it is needed. This results in a situation where there's say 15GW of almost free electricity, but 5GW of it is the far side of a 2GW transit point, you can only have 12GW of that electricity, even though you made 15GW. Fixing this will take years and political will.

by Epa095 8mo ago

That's just marginal pricing, which is the pricing in many (most?) markets. It just means that the price is determined by the price where the demand curve crosses the supply curve.

triceratops 8mo ago

> That's just marginal pricing, which is the pricing in many (most?) markets. I don't pay Johnnie Walker Blue Label prices for Jim Beam.

Epa095 8mo ago
But with power the final product it's the same, the production method is different. So it's more like this: I make a product for 5 and sell it for 6. My production facility is maxed, but there is still much demand. So I (or someone else) sets up another factory, making them for 8 and selling for 9 (there is demand enough). Now, will I keep selling at 6? No, my prices will also increase (to maximise my profit), and the final price will be where the demand curve crosses the supply curve. I am wind, the new one is gass. We both make the same product, we sell at the same price, but I make a larger profit.
- Dylan16807 8mo ago
  You get simple supply and demand with uniform prices in commodity markets but I'm doubtful that's most markets in general.
- triceratops 8mo ago
  Makes sense. But in a normally functioning market, production at 5 will rapidly ramp up to capture the excess profits to be made by selling at 8. Eventually this will drive everyone's prices to 6 and the ones stuck producing at 7 (natural gas) will be driven out of business. According to this comment https://news.ycombinator.com/item?id=46982118 https://news.ycombinator.com/item?id=46982118 there's additional "treasury" (is that the tax authority in the UK?) weirdness that prevents renewables from capturing these profits.
  - ainch 8mo ago
    The Treasury is the finance ministry in charge of all public income and spending.
  - tialaramex 8mo ago
    Treasury is the name for the government's economic ministry, ie the people who "have the money" (except that of course all modern governments run a huge debt) if you're American your equivalent department is also named Treasury. The UK's tax authority is HMRC, His Majesty's Revenue & Customs. It takes a lot of time to build electrical generators, so "rapidly" here means what... decades? Years at least. I think wind farms generally you need to do a bunch of paperwork and then if you get an OK (after the paperwork) maybe 3-5 years to build. The weirdness you're talking about is the other side of the Contracts for Difference subsidising the off shore (and historically onshore too) wind farms. A CfD works like this: You auction off the right to build generation and in the auction people can bid down for the price they'll be paid for say, 10 years of their electricity, this is called the Strike Price. Whatever they sell their electricity for, they always get that strike price. When the sale price was lower, the government is giving you free money - that's why this is obviously a subsidy. But when the sale price was higher the government (effectively the treasury, though actually via a for-purpose government owned company) takes every penny above your strike price, too bad. This subsidy is cheap for governments because it's about certainty, something they have and which private investors lack. The British government knows it will have tax revenue in 2036, but a private investor would want a fat premium to cover that. Now, CfDs run out. If you have 10 years of CfD obviously the wind turbine you bought doesn't magically explode after exactly 10 years, maybe maintenance prices get out of hand or the main blades reach end of life in 20 years and so it doesn't last forever, but eventually there's an unsubsidised generator, the situation today though is that there's a lot of very new generation, and so most of it is subsidised. Another issue is that it makes sense to build off-shore wind farms in particular on the Scottish coast, whereas it didn't make sense to build e.g. coal generation there, so the UK isn't set up to move a huge amount of power made in Scotland to the south where much of it is needed. This results in a situation where there's say 15GW of almost free electricity, but 5GW of it is the far side of a 2GW transit point, you can only have 12GW of that electricity, even though you made 15GW. Fixing this will take years and political will.