ThomasHL t1_jae2lou wrote on February 28, 2023 at 7:42 PM

Reply to comment by OrganizationLast8480 in Britain breaks 'green grid' record with latest 100 per cent clean power milestone by m_Pony

There are a couple of reasons. The first is most homes in the UK heat themselves with gas directly instead of electricity. So we still use a lot of gas.

The second thing was the 100% part was just for one day. The renewables in our grid are increasing but mostly at the expense of coal power plants, not gas.

And the final component is the UK grid system pays every electricity producer the price of the most expensive energy producer. If 1% of the grid is gas, 100% of the grid pays gas prices. Even on this one day, there was a gas power plant running as a back up (it just wasn't used).

That last one is part of why very few UK homes have electricity based heating systems. There will never be a time when electricity costs less than gas, so gas has been the cheaper option.

61746162626f7474 t1_jaeynpw wrote on February 28, 2023 at 11:13 PM

That’s how all markets work with undifferentiated goods.

Company A can make 500 widgets for a cost of £1 each, company B can make 300 widgets at a cost of £2 each. But the total market size is 700 widgets, company A does not sell its 500 widgets for for £1.05 ( a small profit margin) it sells them for £1.99 (just undercutting company B and ensuring it sells all 500 of its widgets) while B makes up the rest of the market selling 200 of its 300 widgets for just over £2 each.

Any other strategy makes no sense for any market participant. If company A sold its widgets for £1.05 it would be leaving money on the table. The companies that make up the market demand of 700 widgets would all scramble and bid for the cheaper widgets from company A driving up their price as they compete to buy from company A. Rather than be forced to buy company Bs more expensive (but identical) widgets. Since company B can’t make the widgets for less than £2 assuming it’s rational it wouldn’t sell for less than it’s cost so the price equalises around £2, company A makes a huge profit and company B makes little or no profit.

PrivateFrank t1_jaeiese wrote on February 28, 2023 at 9:23 PM

>And the final component is the UK grid system pays every electricity producer the price of the most expensive energy producer. If 1% of the grid is gas, 100% of the grid pays gas prices. Even on this one day, there was a gas power plant running as a back up (it just wasn't used).

>That last one is part of why very few UK homes have electricity based heating systems. There will never be a time when electricity costs less than gas, so gas has been the cheaper option.

Iirc all of the European energy market works like that.

And it wasn't 25 consecutive hours, either...