Yes, but here’s the thing: you don’t have a monopoly over your potato farming method. Lots of new farms are built, and the more that do, the more the average price of a potato drops. Your expected return starts to drop. Yours - and everyone else’s - profit margins get squeezed.
Investors begin to refuse to build new potato farms because a return on their investment gets worse whenever anyone decides to build a new farm.
But the people need potatoes and more potato farms! The government issues an incentive scheme to guarantee a minimum price for each potato sold. Potential farm owners bid against each other for the lowest price, but it means they can build a farm and expect to break even.
> Investors begin to refuse to build new potato farms because a return on their investment gets worse whenever anyone decides to build a new farm.
If they all refuse, then they're leaving money on the table. One investor could invest in 10% production only, and that would be very lucrative. It would be exactly my low cost to produce potato scenario.
In practice, they don't all refuse, or all invest. The market finds a balance. In time, producers switch to the new method, because anybody who doesn't leaves an opportunity for someone else to take their business and make more money.
This takes time, though. If we want things to go quicker, then we need to guarantee return on investment for longer, which is exactly what the government does by guaranteeing prices to renewable energy producers.
> This takes time, though. If we want things to go quicker, then we need to guarantee return on investment for longer, which is exactly what the government does by guaranteeing prices to renewable energy producers.
Yes exactly. The incentives to renewables producers exist to ensure accelerated growth. This may mean we are paying more for renewables in the short term (though no more than fossil fuels) but the investment should pay dividends in future.
Because if you have enough renewables and storage to eliminate gas from the mix you are no longer paying gas prices. The more often that happens, the cheaper your bills get.
A lot of wind power is generated in Scotland, for example. The power conduits that transmit power along the country can often not deliver all of that power to the South on a windy day. There is an excess of power in the north but the wind farms cannot deliver it, they are not paid to generate power so they switch their wind turbines off, even though there is wind available to capture.
This new test means that wind farms will not switch off in such conditions and electricity prices will be allowed to fall to zero, but only for those in the local area.
It’s not the same thing. Customers on some of Octopus’ tariffs get occasional zero or negative pricing to spur demand that can help balance the grid or reduce curtailment.
This trial is different. I think the real goal is to incentivise local communities to support the construction of wind farms. If you have a wind farm nearby, surplus generation is used to supply you with free power when otherwise the turbines would have been curtailed.
Curtailment is when an energy company has successfully bid on delivering electricity for the next block of time (an hour, for example) but it can’t provide that agreed amount of power because it would overload the grid. There are various reasons why that would happen: faults and unexpected lack of demand, for example. In that case the company is paid for the energy it was contracted to deliver, only for that period of time, even though it did not provide power.
It is wrong to say that overproducers HAVE to be paid. They don’t. They only have to be paid if there was an agreement to buy that power but for whatever reason the grid can’t take it. Normally if there is a generation surplus, the cheapest companies will win the bid to provide power and the others will simply not be paid.
They are incredibly communicative animals. Their problem seems to be that I am a very stupid creature that often does the wrong thing, like not feeding them every time they’re hungry, sitting at a desk instead of playing with them, carrying them out of the room when they were clearly trying to get on the kitchen counter, and so on.
Or, god forbid, stupid creature that I am, I buy _the wrong flavor food_. Then it's all "why are you trying to poison me, hooman? do you not love me anymore??"
Investors begin to refuse to build new potato farms because a return on their investment gets worse whenever anyone decides to build a new farm.
But the people need potatoes and more potato farms! The government issues an incentive scheme to guarantee a minimum price for each potato sold. Potential farm owners bid against each other for the lowest price, but it means they can build a farm and expect to break even.
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