>For example Octopus Agile is charging under 5p/kWh from 2230-2300 today, and from 0600-0630 actually paid its customers 4p/kWh
I understand that, the market is trying to deal with an inefficiency in the system. What I don't understand is how removing those inefficiencies will lead to higher prices. If anything it should do the opposite.
The cap is incidental, I don't like it but it doesn't really have much to do with this.
It increased the demand from 2230-2300 (assuming Denmark either has higher demand at that time, or could itself export to Germany)
If the cost in the UK is 5p/unit and in Denmark is 7p/unit, the price will stabilise at 6p/unit as the UK sells to Denmark, decreasing UK supply thus pushing price up
If the cost in the UK is 42p/unit and in Denmark it's 40p/unit, the price will instead by 41p/unit as the UK buys more from Denmark, increasing supply, thus pushing the price down
I understand that, the market is trying to deal with an inefficiency in the system. What I don't understand is how removing those inefficiencies will lead to higher prices. If anything it should do the opposite.
The cap is incidental, I don't like it but it doesn't really have much to do with this.