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Comment by rurounijones | Hacker News Reader

Electricity pricing in the UK is dictated largely by the price of Gas. This is a good video that goes into it: https://www.youtube.com/watch?v=IEnFmrgEbWo

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Gas is the yang to winds yin. What other dispatchable power source is there that Britain could use?

Whatever the dispatchable power source, it would have to last weeks at a time in the coldest months of the year.

The issue is that if my electricity I am using now is 99% renewable and 1% gas then I am paying as if 100% is gas. That is why prices are so high.

The video goes into much better detail but the keyword if you want to search yourself is "marginal cost pricing.

You can still have dispatchable gas without this pricing structure.

You can have dispatchable gas without that pricing structure, but having a grid without that pricing structure can't really function without major nationalization of power generation.

Marginal pricing is one of those things that at first sounds crazy, but when you delve into the topic, it's the only sensible way to have market pricing on electricity generation. The only real alternative would be a fully nationalized grid where the government buys up all the dispatachable power sources.

Do you have anything I can read on why marginal pricing is the only sensible way to have pricing?

EDIT: Ah, apparently it aligns market forces well, by making cheap energy sources massively profitable to run, so more and more get added.

Perversely, though, it seems to me that it also incentivizes an entire renewable grid to not expand to 100%, so they all enjoy a much higher price.

As long as there's a large variety of producers competing with eachother though, there's not really any good mechanism for them to collude to avoid expanding to 100%, especially when you add battery power providers and private persons with rooftop solar into the mix.

I think more likely than deciding to stop building more renewables, the renewable providers are just going be incentivized to start installing large batteries wherever they install renewable generation, so that they can flexibly decide if the current spot price is worth selling to the market, or whether it's better to just store the electricity that they generate so that they can sell it in 10 hours or whatever when the price is higher.

Which is great, because it creates a market pressure to build more storage, and at the most efficient place for that storage to be created (right next to where it's generated).

Hmm interesting, so it does seem like marginal pricing aligns incentives well.

I know less about the UK's electrical grid, but at least in Germany, if renewables plus batteries are enough to cover electricity needs for normal day-to-day weather, there is more than enough biogas production in the country to save and store that biogas for the weeks-at-a-time periods where renewable shortfalls happen and batteries won't be enough to cover it.

On any given day Germany generates 7-8% of its electricity from biogas, which means that if instead of burning that gas each day for electricity, we stored it in our network of gas reservoirs, then every 13 days of the year that we don't dip into those reserves, that's a full day of electricity generation in gas that's stored.

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Even if this is done with fossil-gas instead of biogas though, simply having enough renewables + batteries to cut gas out of day-to-day electrical generation, and using it only for backup would be enough to drastically lower prices for the majority of the year.

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