[xnorswap]

Isn't the price tied to the marginal price, rather than the price of gas?

Even if they're typically the same, because CCGT is the best for on-demand generation, flattening the demand curve ought to slightly reduce that marginal cost.

I've seen the UK generation market attacked quite a lot lately, but to me it makes sense to price everything at the marginal cost, and doing so also helps encourage capital investment in generation that can have lower generation costs themselves, because the marginal cost is only slowly impacted rather than a boom and bust model.

[chippiewill]

I agree, although I think one of the disadvantages in the UK is that the suppliers aren't paying the cost for their own volatility. A renewable supplier can add 1GW supply to the grid, but 1GW of natural gas generation capacity is still required.

Fixed costs and capital costs end up being shouldered by the consumer which ironically ends up pushing overall costs up.

[lokeg]

This can be alleviated by the gas plant operator selling call options, effectively paying them for being reliable. The relevant keyword is "capacity markets".

[justincormack]

Yeah we still need some more renewable capacity (and transmission) before gas usage can go to zero much of the time (which will need more batteries to deal with short term fluctuations). Right now we are using around 10% gas, which is a decent amount. Prices are still going negative at night some of the time, like last night.