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The reasonable thing is to create a stable framework and let wind and nuclear duke it out. May the best one capture the most market share. Abolish all subsidies, guaranteed rates etc etc, and just introduce a high tax on carbon dioxide emissions.

It's inherently silly to sell baseload on marginal pricing spot markets. Fixed prices makes sense for baseload as a market structure even more than as an infant industry protection.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 22nd, 2012 at 03:36:07 PM EST
[ Parent ]
I don't disagree. Still, even in a marginal-cost pricing structure, individual consumers (big and small) can and indeed do make long-term fixed power deals with the generators. My utility offers the options of spot pricing for my power, and also fixed price contracts lasting for 1, 2, 3, 5 or 10 years.

Ironically, such contracts undermine the efficiency of the power market, at least when small consumers who aren't likely to stop using power when the price spikes, are given such options.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Jul 23rd, 2012 at 06:42:26 AM EST
[ Parent ]
Which is why you need to have three different sorts of contracts: Fixed-price, fixed-volume, forward-price, scheduled-volume, and flexible price, load-following volume.

Ideally, Joe Q. Consumer would have a contract structured so that he has a baseline quota, which can vary over the day, week and year, and then pays a higher spot charge for going over that baseline.

The utility would then offer Mary Q. Producer a fixed rate for delivering power at the convenience of the producer, a higher forward rate for delivering on 24 hour notice, and a still higher rate for delivering at the convenience of the consumer. The utility would make money on the spread, and on the fact that Joe Q. Consumer will normally be within his quota (because he is risk-averse and because he has noise in his demand profile), which allows the utility to diversify out the noise in individual consumer profiles and to exploit its lower risk aversion.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 23rd, 2012 at 08:06:01 AM EST
[ Parent ]

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