What would happen if…?

Have already posted a few articles today, but will leave you with a question that one of our readers asked me earlier today…

It’s quite a topical question:

1)   with the Cumulative Price Threshold reached in the Victorian DWGM

2)  and with the span of volatility seen in electricity prices in recent weeks threatening to have one or more regions hitting the Cumulative Price Threshold in the electricity market (at which point dispatch prices in the region would be capped at $300/MWh for a period of time).

Our reader asked me…

‘When we hit administered price cap levels, the market trades at $300 by design.

However, this APC levels obviously does not envisage a world when $300 doesn’t begin to cover the SRMC of coal / gas.

THEREFORE, what happens if we hit APC?!?

(a)  Gens bid at VoLL because you can’t withhold capacity;

(b)  but then you clear at $300, which is in certain instances not economical…

Any thoughts?!?’

I don’t know the answer to this question – but thought I would throw it open to the WattClarity Readership Brains Trust, as it certainly sounds like something we should be thinking about!

Over to you, valued readers …


PS on 31st May

Readers here might like to follow the comments that are collecting under this same discussion over here on LinkedIn.

About the Author

Paul McArdle
One of three founders of Global-Roam back in 2000, Paul has been CEO of the company since that time. As an author on WattClarity, Paul's focus has been to help make the electricity market more understandable.

3 Comments on "What would happen if…?"

  1. As an ex coal fired power engineer, I could always justify turning off the unit to fix something. There was always a reason to turn a unit off. So I would pull out my risk assessment, and say that the risk of keeping the unit online was unacceptable, and that repairs are to commence once the unit has cooled sufficiently (48-72 hours), and that owing to concerns about the complexity of the repair, it will be done on day shift only. I could conceivably keep a unit offline for a week or more in that scenario.

    That only buys you enough time to get past the immediate challenge, but to get short run marginal costs that high, you’d have to be exposed directly to very high fuel prices (and presumably water prices for water cooled units). Which in the current environment I would see as gas only.

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