I seen the argument made by Robert Bryce and Alex Epstein, who don’t suggest economic models, but the reason it’s at least not obvious to me is that we need to consider supply, demand, price as functions of time. Solar produces a glut of electricity during the day. It makes sense to me that it would increase the price of electricity in the early evening, when solar isn’t generating but demand is still high. It would do so by reducing the profitability of building natural gas plants to supply those hours, which results in either fewer natural gas plants (if demand is elastic) or the prices rising until they’re profitable (if demand is inelastic). How this affects the average price throughout the whole day I don’t know.
No. Average price must go down. The evening price might go up—it might go up even to the level where the average price doesn’t change at all, but it can’t go up to the level where average price would rise.
Think about it. You run a nuclear plant. Suddenly, due to solar competition, the day price went to 10%. You can’t turn nuclear off just during the day, so you keep it running and lower your day price to 10% as well. Your costs didn’t change, so to keep the same level of profitability, you need to rise the night price to 190%. This way your revenue doesn’t change.
There is no reason why you would be able to rise the price above that level.
Assuming I’ve understood your toy model correctly, if you add that due the solar competition during the day, the nuclear plant only sells half of what it used to during the day, it’d need to raise the night price to 195% to keep revenue fixed, and now the average price is up.
No. Nuclear plant has a fixed output, zero elasticity of production. It has to sell all the electricity it produces, even if it should sell it for 0.
But, it doesn’t really matter. There certainly exists such a day price that nuclear is competitive with solar and is able to sell the same amount of produce as before.
I’d add that part of the answer is: as various other relevant technologies become cheaper, both the solar farm and nuclear plant operators (and/or their customers) are going to invest in some combination of batteries and electrolyzers (probably SOECs for nuclear to use some of the excess heat) and carbon capture equipment and other things in order to make other useful products (methanol, ammonia, fuels, other chemicals, steel, aluminum, etc.) using the excess capacity.
In solar-heavy areas before batteries (and without hydro), electricity in the early evening was provided by natural gas peaker plants, which can and do quickly shut off. Consider a scenario with growing demand. Prices in the early evening have to get pretty high before it’s worth paying for a whole natural gas plant just to run it for only a few hours.
The natural gas generation capacity that you need to cover for solar when it’s cloudy is, of course, less than what is required to make up for loss of solar after sundown.
Context: right now gas peaker plants with ~10% utilization have LCOE of about 20 cents/kWh, about 3-5x most other energy sources. I think in the proposed scenario here we’d be more like 20-40% utilization, since we’d also get some use out of these systems overnight night and in winter.
If this became much more common and people had to pay such variable prices, we’d also be able to do a lot more load shifting to minimize the impact on overall energy costs (when to dry clothes and heat water, using phase change materials in HVAC, using thermal storage in industrial facilities’ systems, etc.).
I seen the argument made by Robert Bryce and Alex Epstein, who don’t suggest economic models, but the reason it’s at least not obvious to me is that we need to consider supply, demand, price as functions of time. Solar produces a glut of electricity during the day. It makes sense to me that it would increase the price of electricity in the early evening, when solar isn’t generating but demand is still high. It would do so by reducing the profitability of building natural gas plants to supply those hours, which results in either fewer natural gas plants (if demand is elastic) or the prices rising until they’re profitable (if demand is inelastic). How this affects the average price throughout the whole day I don’t know.
Oh, right, that’s the important bit. Solar glut can’t increase the instantaneous price but its effects on average (mean?) price are less clear
No. Average price must go down. The evening price might go up—it might go up even to the level where the average price doesn’t change at all, but it can’t go up to the level where average price would rise.
Think about it. You run a nuclear plant. Suddenly, due to solar competition, the day price went to 10%. You can’t turn nuclear off just during the day, so you keep it running and lower your day price to 10% as well. Your costs didn’t change, so to keep the same level of profitability, you need to rise the night price to 190%. This way your revenue doesn’t change.
There is no reason why you would be able to rise the price above that level.
Assuming I’ve understood your toy model correctly, if you add that due the solar competition during the day, the nuclear plant only sells half of what it used to during the day, it’d need to raise the night price to 195% to keep revenue fixed, and now the average price is up.
No. Nuclear plant has a fixed output, zero elasticity of production. It has to sell all the electricity it produces, even if it should sell it for 0.
But, it doesn’t really matter. There certainly exists such a day price that nuclear is competitive with solar and is able to sell the same amount of produce as before.
I agree with this reasoning.
I’d add that part of the answer is: as various other relevant technologies become cheaper, both the solar farm and nuclear plant operators (and/or their customers) are going to invest in some combination of batteries and electrolyzers (probably SOECs for nuclear to use some of the excess heat) and carbon capture equipment and other things in order to make other useful products (methanol, ammonia, fuels, other chemicals, steel, aluminum, etc.) using the excess capacity.
In solar-heavy areas before batteries (and without hydro), electricity in the early evening was provided by natural gas peaker plants, which can and do quickly shut off. Consider a scenario with growing demand. Prices in the early evening have to get pretty high before it’s worth paying for a whole natural gas plant just to run it for only a few hours.
You need to pay anyway for the gas plant if you want to have electricity even on days where the sun isn’t shining.
The natural gas generation capacity that you need to cover for solar when it’s cloudy is, of course, less than what is required to make up for loss of solar after sundown.
Context: right now gas peaker plants with ~10% utilization have LCOE of about 20 cents/kWh, about 3-5x most other energy sources. I think in the proposed scenario here we’d be more like 20-40% utilization, since we’d also get some use out of these systems overnight night and in winter.
If this became much more common and people had to pay such variable prices, we’d also be able to do a lot more load shifting to minimize the impact on overall energy costs (when to dry clothes and heat water, using phase change materials in HVAC, using thermal storage in industrial facilities’ systems, etc.).