zlacker

>>RobinL+(OP)
One thing that I find hard to understand is how the electricity prices in the UK have gone up so dramatically (blaming gas prices) when a large amount of the electricity is not generated from gas. Is the price being artificially inflated?

>>nategu+e8
Author of the article here

Electricity prices in the UK (and most other places) are set by the marginal unit, which is the most expensive unit that needs to be turned on to meet demand. All other generation for that time period gets paid the same price. The marginal unit in the UK is usually gas, hence the sensitivity to gas prices

>>archyd+3a
Is that a good idea? It doesn’t sound very sensible to price everything at the cost of the most expensive unit, why do they do that?

>>grey-a+Mp
The reasoning is that it incentives electricity producers to offer max amount of electricity at low prices without speculating how to maximize profit (as their sell offer will practically speaking have zero effect on the spot price). Nuclear plants, wind power, solar can just offer to sell at everything at around 0c/kWh.

It's claimed that another type of market would cause companies to speculate with their sell offers and thus generate less electricity. It would be interesting to see how this kind of market would work in reality, though.