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   #441  

DV52

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I think it's very sexy that I can buy a kWh of electricity for less than 20 cents. Why? If I connected a generator to a stationary bike, I would have to ride my heart out for at least four hours to generate that 1 kWh. So I'd be getting paid 5 cents per hour. Not a very attractive wage.
haha - not quite, but it's even worse!! I'm not sure if your 20 cents includes delivery (I assume that it does), but if I use the Texas long-term average price in the energy market, the wholesale cost to the retailer was about $38/MWhr, or 3.8 cents in your parlance. The retailer then re-packages the same electrons, adds network costs and a (rapacious) profit margin and charges end customers about 12 cents retail (see link in post#422).

So, if you want to compare apples with other apples, the true "value" (not "cost") of 1 kWhr is actually much lower because it needs to exclude the voracious retail profit



If I were to try to produce my own electricity using generator, the fuel cost alone would be much more than 20 cents per kWh, and that doesn't even consider the cost of the generator itself, which would have to be amortized over its expected life, and that likely isn't more than a few thousand hours, meaning it would have to be replaced at least once a year if it were run continuously. Mind you, I have a generator, but the economics mean it only makes sense to use it as a backup, if/when grid power fails.
If dispatched, the revenue that generators receive from the wholesale market is the common clearing price which is guaranteed to be at least their bid price - but it is often a price higher than their bid price.

Economic theory says that for auction clearing processes like those in the energy market - if they are competitive, generator bids will tend towards the short-run marginal cost of producing an additional 1 x MWhr of energy (so, the cost of fuel, labor, condenser water etc).

Of course, to survive generators must also be paid their long-run marginal costs (i.e cost of the equipment itself and a return on investment). This additional payment is meant to be provided via the difference between the generator bid price and the market price - on the many occasions when the generator's bid does not set the market price.

Hence, if the market is operating correctly and generators are competitive, they should be able to fully fund their investment and make a commercial return!

As to your analysis, of course the numbers don't stack-up. But neither do you have the economy of scale of a market generator that allows for the amortization of admitedly higher cost over the very large number of total MWhrs dispatched during the working-life of the asset!

And of course, let's not forget that you are buying fuel at retail costs. I thought that I had a good handle on natural gas prices before I joined the gas industry - but I was very, very wrong!! At least down here (and I expect also in your country)- contract prices for natural gas (which is what the generator pays) are nothing like the prices that are declared at the gas hubs.
 
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   #442  

PetrolDave

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fact is that electricity is relatively cheap
Here in the UK electricity cost around 3 times per kWh what gas does (GBP 0.12 per kWh vs. GBP0.04 per kWh) so the UK Government mandate that installation of new gas heating (furnaces) must stop and be replaced by electric alternatives is likely to lead to utility bills that massively increase and some folks simply won't be able to afford those bills.

The refit of either air source or ground source alternatives (which would reduce running costs) is for many not a viable alternative due to the large up front installations costs being far greater than any available grants.

Another impact of the 'Green agenda' which hasn't been thought through?
 
   #443  

Uwe

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For an electricity spot-market (like Texas) that has a winter peak and also has a high reliance on natural gas fired generation, the placement of gas in either markets must get mighty interesting!!
Yeah, especially when the compressor stations along the gas pipelines have had their natgas-fueled engines replaced with electric motors because they're more "green".

Now what happens when you lose the power line feeding a compressor station due to ice-storm damage? Oh, you needed full pressure in that line to make enough electricity to feed other compressor stations, to feed the other power plants... :facepalm:

-Uwe-
 
   #444  

Uwe

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I'm not sure if your 20 cents includes delivery (I assume that it does),
It does, and I'm using it as a conservative (on the high side) nation-wide average retail price.
As to your analysis, of course the numbers don't stack-up. But neither do you have the economy of scale of a market generator that allows for the amortization of admitedly higher cost over the very large number of total MWhrs dispatched during the working-life of the asset!
My analysis wasn't based on commercial generation, but on using my own generator(s) that I personally own. In other words, one like this that runs on gasoline:

9JyCNaM.jpg


Or even one like this that runs on LP gas:

xKizY1H.jpg


-Uwe-
 
   #445  

DV52

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My analysis wasn't based on commercial generation, but on using my own generator(s) that I personally own.

Uwe: yes, I had understood that you referring to your personal generator - my reference to a commercial generator was related to your lament that you couldn't understand how it was possible to deliver energy @ 20 cents/KWhr!!
I was trying to point-out the utter impossibility of the tiny Uwe Generator Company comparing it's costs to a commercial generator!!
 
   #446  

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Here in the UK electricity cost around 3 times per kWh what gas does (GBP 0.12 per kWh vs. GBP0.04 per kWh)
Dave: Sounds a tad high; my old rule-of-thumb was that the thermal efficiency of combined-cycle gas-fired generation is about 50% . But then your electricity price also includes higher priced plant and as I understand, the amount of gas-fired generation is dropping in UK in favor of renewables!! So, someone has to pay for the more expensive new plant!! :facepalm:
 
   #449  

Uwe

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my reference to a commercial generator was related to your lament that you couldn't understand how it was possible to deliver energy @ 20 cents/KWhr!!
Oh, no, I perfectly understand the economies of scale and wholesale fuel pricing, not to mention that some portion of commercial generating capacity has fuel costs somewhere between negligible (nuclear) and nil (hydro, solar, wind, etc). Thus I think it IS "sexy" to pay a utility bill at far lower cost per unit of energy than I could possibly produce it myself.

Of course such scaling (along with specialization of labor) are among the key things that make a modern economy with a high standard of living possible.

-Uwe-
 
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Jack@European_Parts

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I still like to be prepared and in meantime beat that meter into submission and do it legally!
 
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DV52

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I think it IS "sexy" to pay a utility bill at far lower cost per unit of energy than I could possibly produce it myself.

OK, then the figurative trip to your local utility office to pay your electricity bill must be accompanied by a beaming smile and the sense that the invoice amount is well worth the expenditure!! Down here it's very different; Aussies certainly value the effects of using electricity, but in general they view payment of our quarterly invoices as a grudge purchase!!

I hope that your philosophy is shared by your fellow countrymen- because it means that prices can rise considerably in America before folk start to complain. And it also means that electricity costs have to rise even higher before the elastic price is reached where consumption behavior is modified!!

Don

Of course such scaling (along with specialization of labor) are among the key things that make a modern economy with a high standard of living possible.

hmm....... a very profound observation (I hadn't considered the link between societal skill specialization and living standards) - very true!!
 
   #452  

Jack@European_Parts

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   #457  

Jack@European_Parts

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Scruffy the crack head approves!

 
   #458  

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   #459  

Jack@European_Parts

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   #460  

DV52

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Texas power industry problems go a lot deeper than just Griddy:

-Uwe-

Uwe/Jack: yep - energy market risk goes way beyond system security breaches. ERCOT seems to have a similar immunity as our market operator (AEMO). I recall during our market design the same question arose - it's really a matter of what costs market participants are willing to accept.

Fact is that in an energy market, the market operator is effectively a creature of market participants; it's simply a clearing house -so it doesn't create revenue (or profit) other than what it charges market participants for services (which is ultimately an agreed fee). Ostensibly, the financial role of the market operator (separate to grid-operations) is to run the clearing engine (so as to set spot-price) and then to manage the flow of monies from withdraw-ers to injectors.

Of course it's possible to design an energy market where the market operator can be sued, but this simply means that market participants must fund the consequential risk management costs for this extra-facility or they must (somehow) underwrite any market operator debt in a successful litigation.

Clearly, market participants in Texas have enjoyed the benefits of not funding this extra-liability since market start. It's seems that it's now time to accept the cost of this advantage!!

If the Texas Supreme Court removes ERCOT's immunity, it just means that market participant costs rise - which of course means that end user costs rise. Is this any better, or any more equitable? I'm not sure - it might be if these events become more prevalent! .

Don

PS: from my cursory reading, it seems that ERCOT has a financial security facility which is an underwriting mechanism which each participant (those that withdraw energy) provides based on the last market invoice. This security holding is a type of margin call facility that is topped-up whenever spot-prices rise - separate to the market invoice for energy withdrawn. The facility is meant to deal with participant force-majuere/chapter-7. So the impact of bankruptcy on market payments to generators is mitigated (at least in part) by this security mchanism.
 
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