Comment by jstimpfle
2 days ago
What I am saying is that those spot prices may not represent all of the reneweables' marginal costs. Question is, will the end consumer prices ever go down, and by how much?
2 days ago
What I am saying is that those spot prices may not represent all of the reneweables' marginal costs. Question is, will the end consumer prices ever go down, and by how much?
> Question is, will the end consumer prices ever go down, and by how much?
No, electricity is not likely to become a deflationary product. It hasn't been in my lifetime and I don't see that changing. Products which do that are weird and they don't tend to do it for very long.
There was a period (last century, more than fifty years ago) when Oil was deflationary in the US, as the very easily extracted Saudi Oil came online and US import bans ended - you'd pay the same dollar price to fill a car with gasoline in one year as the next and of course wages continued to grow so that oil is getting cheaper in real terms. But that's a long time ago, a time when gasoline was 30 cents per gallon.
Solar PV is just straight up cheaper than any fossil power. Solar Farms the UK agreed to subsidise in 2022 came online early last year and even in those more normal times (before Trump started a war in the Middle East) the "subsidy" amounts they were paying us totalled a few million quid a year because the fossil power was so expensive. Once Trump got into it, we were being paid like £3-4M per month in "subsidy" because of course the fossil fuel costs more now but sunlight is still free.
But that does not translate into lower prices for consumers, at most it means their prices might not rise as quickly.
The prices of so many things have gone down with times due to increased efficiencies. Why not electricity? If solar PV is cheaper than fossils, I would, naive as I am, expect prices to go down.
(I acknowledge fossils have been going up for various reasons, and have become more scarce, and energy demands are rising)
There's a situation like with Amdahl's law here, which I'm guessing you're familiar with since this is HN but if not then I'm sure you can read about it. Consumer prices - the thing you're experiencing - have multiple inputs, and wholesale price is the only one that's subject to this change by generation technology so that dilutes the consequence of any such change for consumers.
If you're paying 25 cents per kWh and and the wholesale price was $100 per MWh then 10 of those 25 cents were for wholesale electricity, but you're paying 15 cents per kWh for "other things". Maybe a huge improvement to generation technology reduces that wholesale price to $90 per MWh, amazing, but alas general inflation increases your suppliers other costs to 16 cents per kWh and so you pay... 25 cents still.
If that wholesale price somehow halved and it was all passed on (good luck with that) your 25 cents per kWh goes to 20 cents, only a 20% drop.
The learning curve for solar is shallowing, and while it's steeper for offshore wind and especially floating offshore wind, those are both way more expensive than solar, so you'd need much more price decrease for them to be cheaper than say, coal.