Everybody blames the war, but AFAIK UK imports 1% of its gas from Russia, and its electricity is generated locally, so why are prices increasing? I would expect grain and wheat to increase 500%, not power.
Just like oil. The US has cheap oil but it's a global market, so everyone pays the (more or less) the same price regardless of how close they are to the oil.
Because demand side has no upper price limit the whole market price can raise to very high.
Ofc, this ignores cases of own production, futures and so on.
It is very efficient at creating a transparent market and finding the "natural" market price. The same price that a free and transparent market would converge to.
The alternative are price caps. Which could be considered. But it's a choice between free and non-free markets.
Blaming merit-order is shooting the messenger.
That's wrong. The price is determined by demand and supply, which in turn is determined by what prices producers are willing to sell at and consumers are willing to buy at, plus other traders in the market.
Because that's how the auction works, but it's misleading, it's the cheapest supplier that can deliver the final GW hour required to satisfy the projected load. Other multiparty auctions with a volume requirement work the same way.
Saying that price is "determined by the most expensive producer" without further context is still wrong.
Is a 'completely free market' if not a spherical cow in a vacuum on a frictionless surface i.e. a purely theoretical concept that can never exist in real life?
Presumably a 'completely free market' allows cartells, bribes are not illegal, and there is no authority to throw me in jail if I lie about my product? So either it would collapse into a cesspool of fraud, or you have to introduce rules and then it's not free any more?
You're stating that without evidence, but the kind of auctions that the electricity market requires are similar to opening auctions for stocks. Would you claim they're very dysfunctional?
This is why we originally stopped mining coal - because Russian gas was so cheap at the time that it was a no-brainer.
What could possibly go wrong?
Europe is now at a critical point where choosing not to burn coal is going to have a high economic cost that many people are not going to be able or willing to pay.
If you think miners should not be fairly compensated for their work you're free to go work as one for one of those foreign producers that less "dysfunctional" and more "reliable"
Maybe we were also importing cheaper coal from elsewhere?
> The United Kingdom has the second-largest LNG regasification capacity in Europe (4.7 Bcf/d), and it can export up to 2.5 Bcf/d of natural gas to the European Union via the Interconnector pipeline into Belgium and the BBL pipeline into the Netherlands. Regasified LNG volumes in the United Kingdom averaged 2.9 Bcf/d from January through May 2022, and regasification facilities ran at a 63% utilization rate, up from 30% last year. Exports from the United Kingdom via interconnecting pipelines to the European Union have run at close to maximum rates since March 2022.
I would assume because of this.
Same thing for gas, uk is competing with their neighbors for a resource that just got a whole lot more scarce (locally), causing prices to rise
See https://doomberg.substack.com/p/have-fun-staying-cold
From last November
You still haven’t addressed WHY the fundamental price setting mechanism of nat gas would be any different from any other commodity.