Comment by stavros
7 hours ago
Do you have anything I can read on why marginal pricing is the only sensible way to have pricing?
EDIT: Ah, apparently it aligns market forces well, by making cheap energy sources massively profitable to run, so more and more get added.
Perversely, though, it seems to me that it also incentivizes an entire renewable grid to not expand to 100%, so they all enjoy a much higher price.
As long as there's a large variety of producers competing with eachother though, there's not really any good mechanism for them to collude to avoid expanding to 100%, especially when you add battery power providers and private persons with rooftop solar into the mix.
I think more likely than deciding to stop building more renewables, the renewable providers are just going be incentivized to start installing large batteries wherever they install renewable generation, so that they can flexibly decide if the current spot price is worth selling to the market, or whether it's better to just store the electricity that they generate so that they can sell it in 10 hours or whatever when the price is higher.
Which is great, because it creates a market pressure to build more storage, and at the most efficient place for that storage to be created (right next to where it's generated).
Hmm interesting, so it does seem like marginal pricing aligns incentives well.