The principles are simple. Anyone (with the license) can buy and sell electricity either off-market (typically with long-term contracts and stable prices) or on-market. The market is such that anyone who can deliver at the market price does that.
There are no caps. That is, if there's a severe shortage the rules don't weigh price against availability at all. There could have been rules to decide which users are shed if production is too low (or put differently, prices are too high), but such rules don't exist. Instead there's an assumption that some users will just stop buying electricity. The market decides.
I gave up after a while, when they just talked about how it's bad that "the market" decides, no talk about best achievable result might be or how to achieve that, or how to achieve anything better than what we have. Did anyone later in the video talk about that? In particular, did they talk about the power companies that have decided to use ~100% long-term contracts instead of the market's spot prices? (I'm a customer of such a provider. No price increase for existing customers, probably no new customers accepted.)
>There could have been rules to decide which users are shed if production is too low (or put differently, prices are too high).
Is that putting it differently? They aren't both sides of the same coin. One is essentially rationing to cap demand, one is pricing to cap demand.
I believe some large energy users are on contracts that allow the suppliers to cut them off when demand is high, that's generally a short term measure though.
The current problem isn't really one of supply in the traditional sense though, that's the issue. The market has been designed to deal with spikes when the England game finishes and everyone puts the kettle on, not multi month periods of high prices. It could no doubt be changed so that not everything is priced at the most expensive option, but there are probably reasons why that hasn't already been done.
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[ 2.6 ms ] story [ 13.6 ms ] threadThere are no caps. That is, if there's a severe shortage the rules don't weigh price against availability at all. There could have been rules to decide which users are shed if production is too low (or put differently, prices are too high), but such rules don't exist. Instead there's an assumption that some users will just stop buying electricity. The market decides.
I gave up after a while, when they just talked about how it's bad that "the market" decides, no talk about best achievable result might be or how to achieve that, or how to achieve anything better than what we have. Did anyone later in the video talk about that? In particular, did they talk about the power companies that have decided to use ~100% long-term contracts instead of the market's spot prices? (I'm a customer of such a provider. No price increase for existing customers, probably no new customers accepted.)
Is that putting it differently? They aren't both sides of the same coin. One is essentially rationing to cap demand, one is pricing to cap demand.
I believe some large energy users are on contracts that allow the suppliers to cut them off when demand is high, that's generally a short term measure though.
The current problem isn't really one of supply in the traditional sense though, that's the issue. The market has been designed to deal with spikes when the England game finishes and everyone puts the kettle on, not multi month periods of high prices. It could no doubt be changed so that not everything is priced at the most expensive option, but there are probably reasons why that hasn't already been done.
BTW. How would you design a market to deal with long spikes such as what's expected this winter?