[outop]

I disagree that this argument makes it less likely to have very low prices much of the time. I think it makes it more likely.

If peak to trough is a large gap, say 60% of peak, this tends to make it less likely that peak will be met by overproduction, since that would involve very large capital costs.

The picture you paint above would suggest a very small gap between peak and trough, say 2% of peak. This means that almost certainly there would be enough over capacity to more than meet peak demand. Therefore the total daily demand would be more than met by capacity, leading to some energy being thrown away. So at all times except the peak, the marginal cost would be zero.

You have given an accurate argument for why demand would be elastic at trough. But you haven't given any reason why overall demand would be very elastic.