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I know very little about how the energy market actually functions so this might be a silly question.
Actual firms use mostly cost+ pricing. That is one of the most accessible empirical critiques of neoclassical economics. Yet the energy market is dominated by a spot market using marginal pricing that doesn't seem to work for anyone. Why?
by generic on Sun Feb 24th, 2013 at 05:40:49 PM EST
Ideology-driven. Electricity provision really needs to be monopolistic to be efficient, and this is in contradiction with the dominant paradigm.

Long-term "guaranteed" baseload is necessarily cost-plus (witness the comedy in the UK where the govt is reduced to asking EDF how much they want for new nukes). Renewables are inherently marginally priced, hence the need for minimum guaranteed prices.

Where renewables start to displace baseload, it would appear that you effectively need to nationalise the grid and the baseload plants (or contract it under strong central control).

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Mon Feb 25th, 2013 at 05:29:37 AM EST
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