Re:Financing offshore wind
by tialaramex on Saturday September 24, 2022 @12:33PM
(#32964207)
> that wouldn't actually save us money, because those subsidies weren't structured as CfDs.
Ah, maybe I wasn't clear, I'm not thinking about generators who get subsidised, I'm thinking about the effect of the generation landscape on market prices. Even when there aren't enough wind generators to mean we don't need to buy any gas having more wind allows us to get better prices for the gas generation we need.
Right now there's about 7GW of wind power online and about 15GW of gas turbines. Lets ignore for now the fact we're just selling most of the wind power to our neighbours, that's 7GW which could otherwise have been supplied by the gas turbines. 7GW worth of higher gas turbine price bids were ignored because (of course) bids for wind power are basically zero.
What if it was 15GW of wind and 7GW of gas? The auction still hinges on a gas price, but now it's not the cheapest 15GW of gas, it's the cheapest 7GW of gas. If I built my gas turbine station on expensive land and thus I want higher prices to recoup my mortgage costs, I need to choose, take a loss with a lower bid or risk bidding too high and getting nothing until next auction ? Overall the effect is lower prices with more wind generation.
I agree that CfDs are the right mechanism by the way, and it shouldn't be tricky to find me talking about that long before gas prices shot up, and even before COVID, although you might not find it before Putin stole Crimea because I don't think I knew how this worked back then.
Ah, maybe I wasn't clear, I'm not thinking about generators who get subsidised, I'm thinking about the effect of the generation landscape on market prices. Even when there aren't enough wind generators to mean we don't need to buy any gas having more wind allows us to get better prices for the gas generation we need.
Right now there's about 7GW of wind power online and about 15GW of gas turbines. Lets ignore for now the fact we're just selling most of the wind power to our neighbours, that's 7GW which could otherwise have been supplied by the gas turbines. 7GW worth of higher gas turbine price bids were ignored because (of course) bids for wind power are basically zero.
What if it was 15GW of wind and 7GW of gas? The auction still hinges on a gas price, but now it's not the cheapest 15GW of gas, it's the cheapest 7GW of gas. If I built my gas turbine station on expensive land and thus I want higher prices to recoup my mortgage costs, I need to choose, take a loss with a lower bid or risk bidding too high and getting nothing until next auction ? Overall the effect is lower prices with more wind generation.
I agree that CfDs are the right mechanism by the way, and it shouldn't be tricky to find me talking about that long before gas prices shot up, and even before COVID, although you might not find it before Putin stole Crimea because I don't think I knew how this worked back then.