Re:Why did renewables become so cheap so fast?
by leoedin on Thursday December 03, 2020 @04:44AM
(#25287293)
The scale of the required liquidity of the energy market is growing constantly. Every time a solar panel or wind turbine is installed, the need for variable power sources goes up. If we're going to go anywhere near the net zero target that many western nations have set, we're going to need _a lot_ of liquidity.
That's incorrect usage of terminology because energy is not an investment. Nobody buys a kWh of energy expecting it to net a return year over year. It's used as a consumable like food or water. If you buy low and sell high you are engaging in trading, not investment.
Trading is about providing liquidity and the maximum liquidity a market needs depends on its size, not the number of traders. Those traders basically have to share a market and if there are too many traders then the profit per trader will go down. This is the biggest reason why trading (not investment) is zero sum. At some point enough is enough but this isn't necessarily as bad as many people portray.
A lot of industries are like this. Once everyone got a smartphone or PC the only way to grow faster is to displace a competitor. Trading in the stock market is usually a poor choice because there are plenty of professional businesses that are already providing enough liquidity.
Trading in the energy market can be a good choice precisely because the market isn't crowded as you said.