The price mechanism as introduced in the 1990s for a coal+gas system had two functions: match short-run supply and demand and provide investment signals. The problem in Oz and elsewhere was that the necessary investment was in gas peakers that would operate only occasionally, when the rest of the system was at full capacity. That could be achieved easily if enough if the price at that time was ultra-high. But no one wanted consumers to pay those high prices (it happened briefly in Texas, I think) and the cost of managing the associated price risk scared retailers. So, the price was capped and investment continued to flow into coal.
At least in Oz, the movement for the last ten years has been away from clever price signals and towards a half-baked version of planning, focusing on keeping the lights on while we close down what's left of coal.
The price mechanism as introduced in the 1990s for a coal+gas system had two functions: match short-run supply and demand and provide investment signals. The problem in Oz and elsewhere was that the necessary investment was in gas peakers that would operate only occasionally, when the rest of the system was at full capacity. That could be achieved easily if enough if the price at that time was ultra-high. But no one wanted consumers to pay those high prices (it happened briefly in Texas, I think) and the cost of managing the associated price risk scared retailers. So, the price was capped and investment continued to flow into coal.
At least in Oz, the movement for the last ten years has been away from clever price signals and towards a half-baked version of planning, focusing on keeping the lights on while we close down what's left of coal.
Enron. Gawd help us. Briefly a client & never a dull moment ...
I have heard ... stories