| Same as in Germany actually. It's true that even 2% of usage being gas, means 100% of the demand pays the gas price. But (!) that's only true for the spot market at that particular point in the day. And that changes all the time. Example: if you use zero gas for 80% of the day, and use just 10% gas for remaining 20% of the day, then that day gas was just 2% of total demand, like we said earlier. But it's not true that gas prices dictated 100% of the price that day. After all, gas prices dictated only 20% of the day's prices. The remaining part of the day there was no gas demand, and thus it did not dictate the price. And that happens more and more often. The more renewables + storage are built out, the more time of the day that gas is displaced, not used and thus not part of the price mechanism. Second, if the market pays at the gas price, the renewables reap all the profits (because their costs are far below the gas price). This incentivizes further renewable capacity build-out, eventually displacing gas entirely. This incentive structure pushes the market the fastest towards lowest-cost generation, which is renewable nowadays. edit: terrific 15m explanation on spot pricing: https://www.youtube.com/watch?v=Paun0siu67o |
What I never understood from this arrangement: can a renewable provider legally refuse to accept the gas-price (either by charging less, or simply refunding a large chunk of the difference?
I understand growth may appear to suffer if renewables refunded the difference between gas prices and renewable prices+profit+moderate-growth-expenses; but it would also mean the public would flock massively to that provider, which may allow for faster growth under certain conditions.
Are renewable bound by law to accept the instantaneous peak-demand-electricity-prices (typically gas peaker prices)? And even if they were forced to accept that payment, are they explicitly forbidden to return a large chunk of the extortionate difference to their customers, in order to comply with acceptance of the price while reimbursing their customers?
This may sound contradictory, but if a major expense for renewables is the siting and commissioning of a renewable wind/solar farm, it may be possible to rake in more profit by growing customer base instead, and then use that money to outcompete the competitors in the siting and commissioning landscape?
A bureaucrat can dictate that x Euro's correspond to y Dollars, but the free market tends to find a price rediscovery mechanism returning closer to true rates. Do we really believe that of the huge search space of all possible policies that this pricing strategy (of forcing everyone to sell at the instantaneously most expensively generated energy) happens to be the most optimal trajectory at a fundamental level? Or do we believe some undiscovered or unused known policy could actually grow renewables faster? If the real world differs from fiat, the market will find a way to bypass fiat and unmask its weak points, at the end of the day money talks.
Furthermore the current setup may result in unintended consequences: at a certain point renewables may be disincentivized to expand capacity, as it would decrease the percentage of time the peakers are needed, and thus decrease their income! It's almost a politically introduced stranglehold, to prevent gas peakers from being displaced.