What is the Merit Order Effect?

What is the merit-order effect, and how could renewables decrease your bills?

Timeline:
00:00 Intro
01:38 Why fossil fuels makes price higher
01:52 More renewables?
02:57 Gas effect on prices
03:44 Conclusion

Main Sources:
1) IRENA 2022: POTENTIAL LIMITATIONS OF MARGINAL PRICING FOR A POWER SYSTEM BASED ON RENEWABLES

1.5) Zakeri & Staffell (2022): The Role of Natural Gas in Electricity
Prices in Europe

2) Haltunenn et al. 2022: Global Assessment of the Merit-Order Effect and Revenue Cannibalisation for Variable Renewable Energy

3) Nissen 2023: Economics/technology - Video 10: Power Markets in Europe

4) Prol et al. 2020: The cannibalization effect of wind and solar in the California wholesale electricity market

5) UCL 2022: Electricity prices dictated by gas producers who provide less than half of UK electricity

6) Antweiler & Muesgens 2021: On the long-term merit order effect of renewable energies

7) Renewable Energy Integration in Electricity Markets Challenges and Opportunities Webinar (2024)

8) Figueiredo & Da Silva (2019): The “Merit-order effect” of wind and solar power: Volatility and determinants

9) Stewart 2023: Why is cheap renewable electricity so expensive on the wholesale market?

10) Simon Evans (Carbon Brief): Analysis: Why UK energy bills are soaring to record highs – and how to cut them

11) Bartrum 2022: Electricity market

12) Trebbien et al. 2023: Understanding electricity prices beyond the merit order principle using explainable AI

13) Hupez 2022: Enabling Mutualization and Prosumer Empowerment for Collective-Centric Optimization: Towards Responsible Energy Communities

14) Enerace 2024: Merit Order - why do electricity prices go up and down?

15) Palusinki (2024): Merit Order - Why Do Electricity Prices Go Up and Down?

16) Hirth (2022): The Merit Order Model and Marginal
Pricing in Electricity Markets

17) Bowden (2023): Understanding power markets: Merit order and marginal pricing

18) Hannah Ritchie (2023): If the UK has lots of renewables, why do electricity prices follow gas prices?

#renewableenergy #climatechange #energy #storage #electricity #market #fossilfuel #economy

[theclimateClub]

💡Thoughts on the merit-order effect?
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[sebstott]

Superb channel. Clear and to the point.

[nathangamble]

The problem with this is that if electricity becomes much cheaper, it no longer becomes worth the capital investment cost of building more renewable power plants. The market will naturally readjust to a point where non-renewable power sources become significant again, as people reduce the rate at which they build new renewable power plants.

[grekiki]

Wouldn't buying less from nuclear and gas power plants increase their price when you do buy from them though?

[johnjakson]

Just a load of utter bollux, lets just have a law that any energy provider must appear to be able to generate on demand within a black box without CO2 emmissions.
if the bulk of the energy is coming from solar or wind, the black box must include its own load balancing system with all costs and profits going to that black box.
Normally nuclear does not follow the grid, it has the privilige of being baseload, but to some extent as in France it can load follow, and Molten Salt Reactors can easily load follow.
For solar or wind to load follow would mean impossible amounts of battery storage as well as peaker plants hidden within the system.
When intermittent systems have to cover the full cost of making themselves look fully dispatchable, their true costs will be revealed esp if any use of carbon emissions is included.
Nuclear is the only way forward with out playing stupid games esp when you have to generate all energy as carbon free at something like 5TWe for the whole world for all energy use.