[martinald]

It's worth thinking how this would work if it didn't work like this though? Nearly all 'commodity' markets clear this way.

If you switched to 'people get paid what they bid' it's almost certain the market would just converge back to this anyway - but with a lot more gaming and guesswork (wind guessing the gas marginal price to try and get the highest price).

[heyitsmedotjayb]

Unregulated free markets optimizing for the least efficient, and highest possible price to the consumer? That's interesting, because its 100% the opposite of what I've been told my whole life.

[ZeroGravitas]

It's not the highest possible price, it's roughly the same price but with less transparency and some fudge factors added due to uncertainty.

In a world where renewables are cheaper the transparency speeds the transition

[heyitsmedotjayb]

It floats oil and gas profits with huge public subsidy while ensuring nobody in the market realizes benefits from alternate sources. It slows/blocks the transition.

[ZeroGravitas]

I have no idea what you are talking about.

I'm open to the idea that oil and gas are protected and subsidized in many different ways.

Accurate information on how much more they costs than renewables I don't see the link.

Accurate prices are good. Actions that stop the market acting on the accurate prices are bad.

[heyitsmedotjayb]

Why would anyone address the additional challenges and reliability concerns of renewables, when oil can be purchased for the same price? What kind of incentive does that set up?

[adrianN]

It is unclear to me what that has to do with the way we price electricity.

[maxerickson]

Why do you see it that way?

The idea behind the regulation is that it's providing the maximum incentive to bring cheaper electricity to market.

If you try to mandate that high cost producers charge less, they will do what makes sense to control costs and then quit altogether once they are losing money.

[stevesimmons]

That's only true for spot pricing, right? Longer term supply contracts can embody more "strategic" criteria.

[martinald]

Yes of course but the spot market and associated futures has a very big impact on any "OTC" deal that a supplier and generator does.

Like you are not going to agree a eg 3 year supply deal with $SUPPLYCO at a significantly lower price than what you could get on the spot market for it (or what you could hedge out on futures).