Yeah, I'm not sure I understand your argument here. I work in the area. I can understand revenue uncertainty, but the solution is to sign a PPA. When Texas transitioned to a nodal market many existing generators got grandfathered into zonal pricing via free options, which is doable (e.g. any project built in the next 5 years will get this free option).
Give me an example of a "missing money" problem. I don't think these problems exist when you have capacity markets or ancillary service markets with enough incentives to exist (e.g. payments for standing offline, ready to turn on).
The big issue with UK power markets is that there is no incentive to build a huge power line down the country right now that delivers power from Scotland (where there are huge wind resources) to the rest of the country. Texas did this (very very successfully) with the CREZ.
The UK has many many competent engineers and making the energy grid more efficient is an attractive opportunity for many.
PPAs typically require the bank to be counterparty and that requires a forecast of the prices that will be received in the market over a lengthy period. The folks at Ofgem talked about how going nodal would be nice, but that they are worried about it being such a big project (these markets typically take 5-7 years to go from design to implementation in the US) that would take focus away from what is already mostly working for them. Overall, completely changing the market structure leads to uncertainty that investors don't like.
The grandfather point is a good one. Something could possibly be done there, but not sure of the complications.
The missing money problem is very much a real thing. You're right that capacity markets and other resource adequacy mechanisms create side payments to fix this, but not everyone has that. Texas infamously had an energy-only design that hasn't worked out so well and is why they have so many ongoing proposals like the PCM to address the reliability issues. It is also why fast start pricing has been pushed so hard by FERC. Even with the capacity markets, there are numerous issues such as the extremely high prices in PJM that is leading to numerous lawsuits and condemnation from their independent market monitor. The markets work well at reducing costs, but there are a lot of ongoing issues being addressed in numerous stakeholder groups and at FERC.
Sorry, I didn't mean to imply you hadn't, just offering a reason why I had a strong opinion.
Am I misunderstanding what you mean by counterparty? In the US, banks provide the tax equity and sometimes the project finance, but the PPA counterparty is a consumer, i.e. a utility or a large load (e.g. tech company data center). The forecast is necessary, but like I said, the uncertainty can be hedged.
Well, I'm talking about how linking a nodal market to a capacity or ancillary service market is necessary (i.e. purely nodal market without payments for reliability don't make sense). Texas's energy-only design would not have been saved from the 2021 disaster via a capacity market or a zonal price (gas availability dropped by 45%).
I think the PCM was always misguided and unnecessary (from just cursory understanding). I don't have time to respond to all the points about various capacity markets, but unfortunately a busy time of year, and will respond later.
No offense taken. I just wanted to make it clear I wasn't some rando who read an article or two on this.
I could have been more clear. There are many kinds of PPAs, but my understanding talking to the banks that do the financing is that they are an integral part of helping the developer get the steel in the ground. I agree there is almost always an off-taker that provides the fixed payment in exchange for the market payment. I agree the uncertainty can be hedged to a degree, but was just relaying what was said by the key folks representing the argument against nodal in parliament (think that's the right venue). The additional revenue uncertainty complicates things and slows things down.
I agree purely nodal markets don't make sense without some reliability mechanism, but that's not what many of the key academics were preaching/advocating not too long ago and why Texas did what it did. The Texas grid may have done better had they stuck to the older vertically integrated model which may have led to some older units staying around. It's hard to rewind in order to fully tell. I'd have to go pull a lot of figures to see if they retired coal that would have stuck around absent the markets. There surely wouldn't have been the bankruptcy fiascos from having $9000/MWh prices for a week, but that's another topic. I also think the courts are still looking into claims of market manipulation coming from the natural gas industry during Uri.
There is certainly a lot to talk about on PCM. Would love to chat later! Have a good holiday.
Give me an example of a "missing money" problem. I don't think these problems exist when you have capacity markets or ancillary service markets with enough incentives to exist (e.g. payments for standing offline, ready to turn on).
The big issue with UK power markets is that there is no incentive to build a huge power line down the country right now that delivers power from Scotland (where there are huge wind resources) to the rest of the country. Texas did this (very very successfully) with the CREZ.
The UK has many many competent engineers and making the energy grid more efficient is an attractive opportunity for many.