Despite wind energy being in excess in Scotland AFIR end users are still paying very high prices due to marginal pricing used in the UK - electricity cost is set by the most expensive source of energy (even if it is 0.1% of the mix) and most of the time gas is the most expensive source. I think marginal pricing is detrimental but there is no political will to axe it.
“Marginal pricing” is just how a market economy works.
If there weren’t marginal pricing, nobody in the private industry would build more wind farms or submarine power lines or battery capacity - which are lucrative because they produce peak-time power cheaper than imported gas — and these are the things that will drive power prices down eventually.
It sounds like there’s some sort of rule in the UK where al of the suppliers have to charge the same price per watt (or something), and they’ve named this rule “marginal pricing”? So, it is not entirely the same as a market based pricing.
Whether it is better or not, I have no idea. One could probably see an argument for allowing renewables to price themselves below the sustainable rate for petrochemical based fuels—let them outcompete based on price. Of course that gives them less money to reinvest.
On the other hand, power grids are never entirely market based; the grid needs some dispatchable power for stability sake, and it is hard to get consumers to express their tolerance of power outages in terms of how much extra they’ll pay to keep unused plants in reserve…
What if the datacenter buys bulk energy from a single provider and only uses the grid for excess demand? Can also go the xAI route with massive batteries smoothing out power use.
The idea behind it is that everyone who supplies energy gets paid the same
E.g. it would be unfair to pay wind farms 10p/kWh and gas turbines 20p/kWh when the electricity they supply is the same and fungible
If there was enough grid storage this wouldn't be an issue, but because there isn't, there are always times where we need gas turbines to top up and those turbines won't turn on for less than it costs them, which is a lot
The upside of this is renewables are very profitable and incentivised
If that's the case, doesn't it make a huge amount of sense for the utility to tell the silk incinerator selling it 0.001% of its electricity for 40p/kwh, "Bugger off, we'll buy batteries"? Cutting its overall power costs in half for a tiny operational shift.
You don't actually need the 0.1%. There are easy ways to make it up. There AREN'T easy ways to make up 7%, though.
Simplifying wildly: Electricity producers sell their electricity at auction. They all offer a bid (x Wh at price y), the utility accepts bids from lowest to highest until demand is filled, and then everybody gets paid the highest accepted price to fill demand. Wind and solar pretty much always bid their forecasted capacity at $0, because they have no additional costs between producing and getting curtailed.
So the silk incinerator only gets to sell electricity if demand is extremely high and the utility needs to accept even the highest bid.
Batteries would fix a lot of this, but western nations have extremely long interconnection queues (project waiting to be allowed to be connected to the grid), mostly because of stupid bureaucratic reasons.
The utility will bill the 40p/kWh to its industrial customers (and residential customers on “agile” smart meter tarriffs), and the customers can decide whether they need the power even at 40p, or whether they shut down their bitcoin mine/aluminium smelter/EV charger/floodlights for those two hours.
In the longer term, price spikes like this incentivise the building of batteries - which might be marginably profitable most of the time but profit big time (and help big time) in periods of price spikes.
It is nice that is keeps renewables extra profitable, but if they could price down a bit they could just run fossil fuels out of the market entirely… so, it doesn’t seem like a great favor to them.
OTOH treating all units of energy “fairly” ignores the added value of dispatchable generation, so it doesn’t really seem fair at all.
On the gripping hand, if pricing was set by the market, customers could be incentivized to help fix the intermittence problem by making their loads dispatchable, which seems like it would be an all-around win…
It depends on the specific load, dishwashers can be configured to run when the price drops a bit, heating can be configured to allow your house to get a little colder, and if the market provides enough incentive, adding insulation will become economical.
I mean it is a big pile of interests that needs to be optimized. One option is to expose it to the market and let the supply and demand optimization process have a go at it.
>it would be unfair to pay wind farms 10p/kWh and gas turbines 20p/kWh when the electricity they supply is the same and fungible
It is not the same, supply from gas turbines is more flexible/predictable, this might be worth an extra premium.
> Despite campaigning for more data center development two years ago, not much has come to fruition in Scotland. In December of 2021, Oracle closed the Sun Microsystems data center in Linlithgow, Scotland. DataVita has opened a new data center in Glasgow in its parent company’s office development, as well as expanding its Fortis data center in August 2022. No major construction projects have been announced since the campaign began.
https://www.datacenterdynamics.com/en/news/scotland-continue...
Why would you open a datacenter in Scotland when the UK rules mean the electricity price is the same throughout the UK, regardless of supply and demand? This is precisely the issue that OP highlights - the UK electricity auction is at a national level, but transmission is limited and the actual supply and demand is not evenly distributed, causing huge curtailment payments to have to be made.
