It's correct for the day ahead price [1]. Of course the most expensive producer needs to be actually needed to satisfy the demand side.

[1] https://en.m.wikipedia.org/wiki/Merit_order

Which is to say that it's determined by both the supply and demand side: if the price were lower there would be people willing to buy at that price but not enough to sell them, and if it were higher there would presumably be people willing to sell at that price but not enough buyers. It is, in some fairly fundamental sense, the actual market price of electricity at that point in time.

Yes but renewables & nuclear suppliers would be willing to deliver for a lot less money. The question I answered was, why is it so expensive when we don't use so much gas. The price however gets set by the most expensive supplier. As soon as you need to use gas to deliver electricity, the price skyrockets.

> The price however gets set by the most expensive supplier.

Because that's how the auction works, but it's misleading, it's the cheapest supplier that can deliver the final GW hour required to satisfy the projected load. Other multiparty auctions with a volume requirement work the same way.

The parent is providing valuable and spesific information on how energy market works, you are incorrecting him by reciting a generic market principle that everyone learns at school, without any insight of how it applies to situation at hand.

Hardly. Merit Order is just a particular way of setting the price similar to an auction, it still creates a normal(ish) market for electricity and demand and supply still largely determine the price, albeit not in the exact same way as a completely free market.

Saying that price is "determined by the most expensive producer" without further context is still wrong.

> a completely free market

Is a 'completely free market' if not a spherical cow in a vacuum on a frictionless surface i.e. a purely theoretical concept that can never exist in real life?

Presumably a 'completely free market' allows cartells, bribes are not illegal, and there is no authority to throw me in jail if I lie about my product? So either it would collapse into a cesspool of fraud, or you have to introduce rules and then it's not free any more?

That’s not entirely true. The prices of the underlying different electricity sources is different but they can’t be traded separately. As a result the market is very dysfunctional.

> As a result the market is very dysfunctional.

You're stating that without evidence, but the kind of auctions that the electricity market requires are similar to opening auctions for stocks. Would you claim they're very dysfunctional?

The kind of trades that are currently happening in Europe for electricity are removed from the reality on the ground. You can look through this Twitter thread for some good commentary on what is happening: https://twitter.com/yakutsavas/status/1563529006997450752?s=...

Probably, but that's evidence of a free market in operation, craziness happens sometimes but it sorts itself out. There is a massive supply squeeze, these things are to be bound to happen.