Why gas sets the price of electricity, and why the economics behind it makes no sense https://www.taxresearch.org.uk/Blog/2026/03/17/why-gas-sets-the-price-of-electricity-and-why-the-economics-behind-it-makes-no-sense/

[richardjmurphy@mas.to]

Why gas sets the price of electricity, and why the economics behind it makes no sense https://www.taxresearch.org.uk/Blog/2026/03/17/why-gas-sets-the-price-of-electricity-and-why-the-economics-behind-it-makes-no-sense/

[christineburns@mastodon.green]

@RichardJMurphy There appears to be a mysterious force stopping Ed Milliband from altering this. Regional pricing would have been a step in the right direction, heavily favoured by energy retailers like Octopus, but it was not to be. Is it the Treasury? Is it fear that the fossil generation sector would hold the system to ransom (in which case the answer would be to nationalise them). In fact is it not obvious that it could be immediately solved by nationalising generation?

[bovaz@misskey.social]

@christineburns@mastodon.green @RichardJMurphy@mas.to the secret is that nationalizing generation and distribution would solve a lot of this, but "OMG Socialism" I guess.
In Italy a lot of that was nationalized, and got privatized over the last few decades, because of course markets are more efficient aren't they, especially when it's about managing basic infrastructures of modern society.

[christineburns@mastodon.green]

@bovaz @RichardJMurphy The UK is renationalising rail services as the franchises expire and, in Greater Manchester, the Mayor has taken bus and tram services back into public ownership and is integrating them with local rail. So, these things are possible with the political will.

[ingram@mastodon.social]

@RichardJMurphy Marginal pricing when table stakes are billions does break down. The UK approach has influenced spot market design in Australia and New Zealand too.

[bjn@mstdn.social]

@RichardJMurphy Quibble one in an other wise excellent article. I thought that money paid back by generators under CDFs didn’t go to the government but instead acted to lower prices, and vice versa when money was paid to top up a CFD, it raises prices. Regardless, the entire system needs redesigning.

[bjn@mstdn.social]

@RichardJMurphy Quibble 2. Marginal pricing encourages cheaper producers to build new generation as there is profit in undercutting the expensive price setters. However until the most expensive generation is squeezed out the only people who benefit are the generators not the customer. Which is taking _decades_ (“efficient” markets, Bah!). You somehow need to encourage capital to invest in new generation, so segmenting as you suggest or splitting the difference between bid and most expensive.