Capacity markets

[markslawson + 1,057]

A paper on the performance of wind power in Denmark produced last year by Gordon Hughes, a professor of economics at the University of Edinburgh, says this about power markets following the advent of renewable energy.

"Market prices are determined by the variable costs of operating marginal plants. During periods of moderate or high solar or wind production, market prices are low and occasionally negative. At other times, gas plants are the marginal suppliers but in the last decade they have not earned a sufficient marginal price to keep open existing gas plants, let alone build new ones.
The consequence is that electricity systems have to rely on capacity contracts for backup generators or providers of storage services in order to maintain electricity supplies. The costs of such
contracts plus subsidies for renewable generators are funded by fixed consumer levies, with the result that the gap between market prices and the prices paid by users has grown and will continue
to increase. In effect, the power market is becoming a market that determines short term dispatch, but it is substantially separate from the energy market for industrial and other consumers." 

My point in quoting this part of his paper is to illustrate the lengths to which grid operators have to go to keep grids functioning 24/7, and the additional expense required. Renewables are not easy or cheap. They are expensive and hard to manage.