How Markets Set Power Prices

Jenny Chase

Chapter 10 in Solar Power Finance Without the Jargon, 2019, pp 65-70 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Energy is a sector in which even the most ardent proponents of the free market admit the need for some regulation. The decisions made — what sort of power plants to build, whether to add gas pipelines, whether to invest in the power grid — will affect the country for the next 30–50 years, and conditions may change significantly. Building a fleet of gas plants at a time when gas is cheap leaves a country vulnerable to higher gas prices or disruption in supply in future. Building a coal plant today risks higher coal prices and carbon taxes in future. Solar and wind plants will not suffer from higher input costs in future, but new plants will get cheaper, and when solar or wind becomes a substantial part of electricity supply, intermittency becomes a problem. (Back in 2006, when no country had more than 2% of its electricity from solar, I thought ‘what happens at night?’ was a dumb question because there was no risk of running out of backup. It’s not a dumb question today, although it is generally asked by people who don’t actually want to discuss possible answers. It’s also not become a huge problem yet, even as some places — Greece, Italy, California — edge toward 10% solar in their total electricity generation. Chapter 22 discusses this)…

Keywords: Climate Change; Energy Economics; Solar Power; Renewable Resources; Sustainable Technology; Finance (search for similar items in EconPapers)
JEL-codes: G20 G30 Q01 Q40 Q43 (search for similar items in EconPapers)
Date: 2019
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