32
votes
Accepted
How can power/electricity prices be negative?
Yes, customers who were exposed to day-ahead wholesale market prices were paid to use electricity.
It is a combination of several different factors that make the day-ahead wholesale electricity ...
- 8,123
24
votes
Why is the spot price of electricity determined by the highest price that gets offered? Can't they scale it according to the actually offered prices?
There are two major issues to consider here, first is the difference between a typical uniform price auction used in many electricity markets and the pay as bid mechanism you're recommending. The ...
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23
votes
Why is the spot price of electricity determined by the highest price that gets offered? Can't they scale it according to the actually offered prices?
most energy markets work using "spot markets", where everyone puts in an offer for how much electricity they can provide and at what price, and then everyone gets paid the highest price ...
- 54.4k
7
votes
Why is the spot price of electricity determined by the highest price that gets offered? Can't they scale it according to the actually offered prices?
Because it incentivizes the cheaper producers to ask for higher prices. If the solar farm costs basically \$0/MWh and the gas turbine costs \$1000/MWh, then the solar farm has to predict whether the ...
- 1,000
7
votes
Why is the spot price of electricity determined by the highest price that gets offered? Can't they scale it according to the actually offered prices?
I get that might incentivize the cheaper producers asking for higher prices and thus partially negating the intended effect, but there must be a way around that?
You answered it yourself. The spot ...
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6
votes
Accepted
If 1% of the solar energy of the Sahara can power the entire world, why isn't it happening?
It's lots of things, which added together means it's not going to happen.
Firstly, the initial calculation of area required was just to illustrate how small the world's energy use is, compared to the ...
- 8,123
6
votes
How can power/electricity prices be negative?
As many have stated before me, you can't just throw electricity away if you produce too much—it has to go somewhere. If you put more power into the system than the resistant (or consumption) in the ...
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6
votes
Why is the spot price of electricity determined by the highest price that gets offered? Can't they scale it according to the actually offered prices?
The basic idea of the market is to incentivise consumers to reduce consumption at times of high demand, and producers with high-cost (inefficient) plant to keep it operable to supply into such peaks ...
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4
votes
How can power/electricity prices be negative?
This reflects the problem of electricity storage. With most other commodities, there is some way to store it ahead of future need, but in general this option is not so readily available with ...
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4
votes
How can power/electricity prices be negative?
Basically negative prices reflect that there is produced more electricity than the market asks for. In all other markets, this is not a problem as you can just refuse to sell, but for electricity, ...
- 141
4
votes
Was the 2008 financial crisis caused more by the US subprime mortgage lending or more by an international energy and oil pricing crisis?
It's worth differentiating between the financial crisis of 2007-2009, and the recession that began in December 2007.
The financial crisis was indeed caused by a run on wholesale funding that was ...
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3
votes
Accepted
Uniform price vs. pay-as-bid auctions in energy markets
I believe "Auctions of Homogeneous Goods: A Case for Pay-as-Bid" by Pycia and Woodward answers your questions theoretically. This is quite recent and their results are striking. They also ...
- 5,270
3
votes
If renewable energy is now cheaper than non-renewable energy, why are we still worried about the climate?
To some extent, your suspicions are correct (notice some of the nuance you could add to your four main concluding points):
Renewable adoption trends are slow.
Not just slow, but there is a wide ...
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3
votes
Benchmarking an Energy Investment
At its simplest, you just look at the cost of capital: if the household would have to borrow to pay the debt, then what's the borrowing rate? If they are currently saving, what interest rate would ...
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3
votes
Accepted
Are there any drawbacks to a hypothetical climate policy?- Carbon tax for reducing Income tax
Prominent economist Greg Mankiw has been a prominent advocate of the kind of change you describe (he invites people to join "The Pigou Club", named for Arthur Pigou who first proposed these kinds of ...
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3
votes
Accepted
Electricity as inelastic good
It is. And it is not.
Electricity markets are generally not set up for the demand-side to do much active participation at all. So the short-run demand curve as seen in, for example, Nordpool Spot, is ...
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3
votes
How do you convert or move from a linear cost function to a quadratic cost function?
Your eq (2.10) is not more general than (2.9), but corresponds to an alternative specification. A more general version would be:
$$ C_i(Q_i)=FC_i+a_{1,i}Q_i+a_{2,i}Q^2_i. $$
This specification allows ...
- 3,144
3
votes
Modelling effect of renewable energy investment on GDP (via integrated assessment models)
A useful starting-point would be Nordhaus's Nobel Prize Lecture, especially the sections headed Integrated Assessment Modelling and Mathematical Representation, and the references at the end of the ...
- 8,311
2
votes
Accepted
Energy saving technology and energy service price
A problem with using energy service prices is that they might reflect competition conditions (e.g. monopoly/oligopoly, or the big six in the UK) rather than the true cost of energy to firms.
A ...
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2
votes
Are risk-costs a form of external costs?
In the particular case of nuclear power plants, yes, the risk cost can be considered as a negative externality.
That's because nuclear power plant operators are explicitly limited by law in their ...
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2
votes
Are there any drawbacks to a hypothetical climate policy?- Carbon tax for reducing Income tax
I think it's broadly a good idea; but as you've asked specifically for the downsides, here you are:
Having a steadily increasing carbon tax can actually accelerate the rate of investment in fossil ...
- 8,123
2
votes
Accepted
Principal Components Analysis in Economic analysis
I know this is a old post, but since I found it and I know the answer I might as well share it.
I would go further than the first component, but it also depends on how much of the variance is ...
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2
votes
What are the implication of state-run oil production vs. private production from leases?
Like many international markets, the crude oil market is a mix of private and public participants.
From most perspectives, it really doesn't matter whether oil production is state-run or run by ...
- 8,123
2
votes
Accepted
Benchmarking an Energy Investment
It may be more "profitable" to present your analysis here for detailed discussion. It is particularly relevant to tell us what sort of retrofit you are considering (Insulation upgrade? Triple-pane ...
- 1,808
2
votes
Accepted
Energy Costs by Source over Time
PV is already cheaper than gas or coal in most of the world, on a like-for-like basis. So that sort of answers your main underlying question.
It's estimated that new PV will be cheaper than existing ...
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2
votes
Electric Vehicle effects on family and macro-economics?
Macro
One of the big issues with EVs is that several countries collect a lot of revenue from taxes on fossil car fuels. Those revenue streams will shrink, meaning that something else will have to be ...
- 8,123
2
votes
Accepted
Costs of transportation
The paper "The impact of scale on energy intensity in freight transportation" by Gucwa and Schaefer has some of the information you need. Figure 5 from that paper is presented below:
The site ShipMap....
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2
votes
Accepted
Does countries building gas plants result in rising gas prices?
If everything else stays constant then increase in demand will lead to increase in prices.
However, in real life everything constantly changes. For example, if gas producers increase production of gas ...
- 2,673
2
votes
Why we’d need carbon tax when we have nuclear plants?
Why we’d need carbon tax when we have nuclear plants?
The point of carbon tax is to discourage companies from investing and producing carbon goods. Carbon tax is how you incentivize companies to ...
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Only top scored, non community-wiki answers of a minimum length are eligible