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I am not familiar with the German electricity market but if it operates according to the US norm (day ahead bidding etc). In simplified terms, the transmission system operator is basically receiving the bids for the quantity and cost for each hour of the next day by all producers who wish to bid and then assigns the dispatch based on the lowest cost producer until demand is met. All producers who dispatch get the marginal price of the last producer that dispatched.

This is effectively what allows the merit order effect to occur.

As a result even if the last producer only produced one kwh (theoretically) then that is the price of the system - as a result the cost of gas is very very relevant to the wholesale pricing of electricity as usually the gas plants are the swing producers.

Orthodoxy is not a religion.

by BalkanIdentity (balkanid _ at _ google.com) on Thu Jul 4th, 2013 at 02:43:00 AM EST
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Yes -- and this is why gas hates wind (and solar), because they reduce the number of hours when gas gets to fix the price, as well as reducing the number of hours of operation.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Thu Jul 4th, 2013 at 04:30:53 AM EST
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But even more so, it is why (fully amortized) legacy coal-burners hate wind.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 4th, 2013 at 03:32:59 PM EST
[ Parent ]
And nuclear even more... At least the gas plants are essentially free to build and can be shut down when the price is too low, and coal plants has to pay for coal. Nuclear is more or less 100% fixed costs and have to run 24/7.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Jul 5th, 2013 at 12:23:54 PM EST
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The private sector lacks the institutional will and aptitude to build and operate nukes anyway.

And government-run nukes don't need P&L statements.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jul 6th, 2013 at 07:38:22 AM EST
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