11. Electricity Flashcards
(18 cards)
What is the plan to electrify everything?
- Decarbonise demand and supply
- Electrify other sectors
- Address harder to abate sectors
What are some examples of sectors that are harder to abate?
Industrial heat, air/ocean transport
How do short-term electricity markets work?
- Generators bid to supply electricity
- If markets are competitive then generators bid a price equal to MC
- Market operator orders bids according to price and forms a supply curve
What is electricity demand set at?
Real-time electricity use
Why is demand a vertical line?
Because electricity users don’t pay this wholesale price (not sensitive to price)
What is the benefit of commercial solar and wind for a graph?
They have zero marginal cost so when energy is available they push the supply curve outwards lowering the wholesale price
How does Rooftop solar generation impact the wholesale markets?
It reduces demand for electricity rather than increasing supply as it doesn’t participate
What profit does the marginal generator make?
It loses money
What are the four methods to resolve negative generator profits?
- No market: Government monopoly
- Market power: Raise price above MC
- High price caps
- Capacity payments to directly cover fixed costs
What is considered by investors when setting up new capacity?
- Upfront Capital expenditures
- Expected fuel costs
- Expected proportion of time generating
What is the levelised cost of electricity?
A measure of long run costs that incorporates all of the investor considerations
What is a downside of solar and wind?
Reliability - not guaranteed always
How do plants often avoid start-up costs?
Keep running, may bid negative prices to achieve this
What 3 questions should you ask yourself when evaluating policies?
- Did the policy work?
- How expensive was the policy?
- Who benefitted, who lost out?
How does a carbon price affect electricity generation?
- Costs are higher for all fossil-fuel generators
- Must increase prices which they bid to supply with the effect being larger for more emissions intensive generators
What do we call the order of plants?
‘Merit-order’
if the carbon tax is high enough, what will happen to electricity generation?
Overall emissions will be lower as more emissions heavy production slips down the merit-order but at the cost of higher electricity prices
What is non-linear pricing?
Non-linear pricing occurs when the total cost is not proportional to the quantity used.
In electricity, this is done to influence behaviour, reflect cost structures, or promote equity.
