• 11 Posts
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Cake day: October 22nd, 2024

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  • Due to how the pricing is regulated in the market there is a perverse incentive for electricity producers to keep expensive gas plants running

    You’re probably talking about the day-ahead market (1). The price per kWh is indeed where bids and asks meet.

    Only a small portion of electricity is traded on that market. It’s a marginal factor.

    Most is traded OTC, longer term. There’s also the intraday-market. Finally, there’s the balancing price.

    That is a naive way of looking at how the electricity market currently functions and is regulated.

    I’ve worked as energy trader.

    it highly disincentivizes producers to retire their remaining expensive gas plants and invest in better transmission and energy storage.

    It is a fundamental problem of technology. Here in Belgium the government started subsidising gas plants, passing the costs on to end-consumers, as they’re necessary for balancing the grid, but unprofitable to run. (1)

    As an analogy: it’s like buying a fleet of sailboats. As long as there’s a need for cargo to travel regardless of weather, you’ll still also be maintaining a fleet of motorized boats.




  • Unreliable power generation needs on-demand backup generation, typically natural gas based. That’s the perverse effect of renewables: as grid scale seasonal storage is impossible, it increases dependence on gas. In Belgium we’ve even retrofitted jet engines to turbines as kerosine based emergency generation.

    Now we’re paying for both the renewables and fossil infrastructure, both scaled to peak power usage. During dunkleflaute, you pay an arm and a leg. When unpredicted clouds or fog appear, you pay emergency balancing prices.

    End result: Annualized price is high.