[ViewTrick1002]

That's how all commodity markets works. All of Europe runs on the same scheme.

Do you think the Saudi's price their $10 per barrel oil at $10? The average price? Median? Or marginal?

They price at at the marginal price.

In the UK what this means is that cheap production like renewables and storage are incentivized to get built while the most expensive fossil production is shutting down.

Then at some point renewables start to become to marginal producer and prices crater. Which is already happening.

[heyitsmedotjayb]

Saudi's use the government to price their oil internally low... on the free market they sell it at the price dictated by supply and demand. Renewables and storage are disincentivized because oil and gas is legally blocked from ever taking a loss. Whats stopping O&G from raising prices to keep their marginal producer status and ensuring a race to the bottom?

[ViewTrick1002]

How can they be legally blocked from ever taking a loss? It is a market. They bid.

There's a plethora of producers with varying equipment, startup times, ramp times, costs and so on.

As renewable penetration expands the most expensive, or least flexible ones are called in fewer and fewer hours until they shut down. If one oil and gas producer tries to raise prices a competitor steps in and fills the demand.

Did you think there was this one monopoly oil and gas power producing able to dictate prices at will?

[crote]

> How can they be legally blocked from ever taking a loss? It is a market. They bid.

I don't know enough about oil & gas to tell you what is happening there, but not every market truly operates as a free market.

For example, nuclear power plants almost always have a contract with the government for a specific electricity price: if the market pays more the profits will go to the government, if the market pays less the government subsidizes production. Something similar happened with early wind power.

[ViewTrick1002]

Yes, that is a CFD. CFDs are allocated in bidding processes to get them as cheaply as possible.

Oil and gas plants in Europe are very much not on CFDs. They can bid out their power using futures. But that is like any other market.