[Epa095]

But with power the final product it's the same, the production method is different.

So it's more like this: I make a product for 5 and sell it for 6. My production facility is maxed, but there is still much demand. So I (or someone else) sets up another factory, making them for 8 and selling for 9 (there is demand enough). Now, will I keep selling at 6? No, my prices will also increase (to maximise my profit), and the final price will be where the demand curve crosses the supply curve.

I am wind, the new one is gass. We both make the same product, we sell at the same price, but I make a larger profit.

[triceratops]

Makes sense. But in a normally functioning market, production at 5 will rapidly ramp up to capture the excess profits to be made by selling at 8. Eventually this will drive everyone's prices to 6 and the ones stuck producing at 7 (natural gas) will be driven out of business.

According to this comment https://news.ycombinator.com/item?id=46982118 there's additional "treasury" (is that the tax authority in the UK?) weirdness that prevents renewables from capturing these profits.

[phil21]

> But in a normally functioning market, production at 5 will rapidly ramp up to capture the excess profits to be made by selling at 8.

Not if your production is effectively random. If your factory produces a product at $5 this week, but next week your production is halved for a few days, someone else needs to step into that market who doesn't have a factory which produces like yours. You don't have any warehouses, and your product is consumed immediately. If there is not enough product for the market at any given 1 minute window of time Really Bad(tm) things happen to society.

You can build all the $5 factories you want, but when they tap into the same source of unreliable inputs then it really doesn't matter there is massively more cheap production than needed when the timing is fortuitous.

Once someone figures out how to build a different type of factory (battery storage) to buffer your good days of output into a warehouse for that $5 or less cost, then those $6 factories will simply go away over time as they can never sell their output on the open market.

The problem fixes itself.

[PunchyHamster]

The problem is that this is the market that absolutely cannot tolerate lack of supply for even a second or else everything falls apart, and that the goods are instantly consumed on purchase. (minus whatever is bought by entities storing and reselling it I guess)

[tialaramex]

Treasury is the name for the government's economic ministry, ie the people who "have the money" (except that of course all modern governments run a huge debt) if you're American your equivalent department is also named Treasury.

The UK's tax authority is HMRC, His Majesty's Revenue & Customs.

It takes a lot of time to build electrical generators, so "rapidly" here means what... decades? Years at least. I think wind farms generally you need to do a bunch of paperwork and then if you get an OK (after the paperwork) maybe 3-5 years to build.

The weirdness you're talking about is the other side of the Contracts for Difference subsidising the off shore (and historically onshore too) wind farms. A CfD works like this: You auction off the right to build generation and in the auction people can bid down for the price they'll be paid for say, 10 years of their electricity, this is called the Strike Price. Whatever they sell their electricity for, they always get that strike price. When the sale price was lower, the government is giving you free money - that's why this is obviously a subsidy. But when the sale price was higher the government (effectively the treasury, though actually via a for-purpose government owned company) takes every penny above your strike price, too bad.

This subsidy is cheap for governments because it's about certainty, something they have and which private investors lack. The British government knows it will have tax revenue in 2036, but a private investor would want a fat premium to cover that.

Now, CfDs run out. If you have 10 years of CfD obviously the wind turbine you bought doesn't magically explode after exactly 10 years, maybe maintenance prices get out of hand or the main blades reach end of life in 20 years and so it doesn't last forever, but eventually there's an unsubsidised generator, the situation today though is that there's a lot of very new generation, and so most of it is subsidised.

Another issue is that it makes sense to build off-shore wind farms in particular on the Scottish coast, whereas it didn't make sense to build e.g. coal generation there, so the UK isn't set up to move a huge amount of power made in Scotland to the south where much of it is needed. This results in a situation where there's say 15GW of almost free electricity, but 5GW of it is the far side of a 2GW transit point, you can only have 12GW of that electricity, even though you made 15GW. Fixing this will take years and political will.

[ainch]

The Treasury is the finance ministry in charge of all public income and spending.

[Dylan16807]

You get simple supply and demand with uniform prices in commodity markets but I'm doubtful that's most markets in general.