An “energy-only” model keeps wholesale prices low during fair weather. Low prices encourage customers to add devices and equipment. On a larger, longer term scale, it encourages businesses and even residents to migrate to take advantage of having low cost electricity available.

But it doesn’t provide sufficient predictable revenue to encourage investment in durable generating sources or long term, guaranteed delivery fuel supply contracts. //

If challenged about the value of continued strong support and mandates for increasing wind and solar penetration, one of their arguments is that using the wind and the sun to supply energy when it is available allows fossil fuel generating sources to burn less fuel. //

That would be a reasonable response if the only competitor to wind and solar was fossil fuel. It’s even a reasonable response in systems where large hydroelectric dams are part of the generating mix because it allows the water to remain behind the dam, ready to be used when wind and solar generation falls off.

But opportunistically displacing other sources of power can lead to unproductive consequences like eliminating enough revenue from nuclear plants to make them struggle financially. Right now, there are firm plans in place to close five operating nuclear plants in the US during 2021.

Though some industry leaders have vociferously denied that wind and solar power can be blamed for those closure decisions, the financial evidence is clear. Low grid prices and grid congestion fees in regions where there is abundant wind or solar power available create a “missing money” situation that stresses large steady-running generators that serve base load very well. //

The “energy-only” market structure has helped gas to push most coal and lignite off of the Texas grid, producing significant air pollution reduction and a reduction in greenhouse gas emissions. Using more natural gas in power production has been beneficial to the Texas economy as well, since most of the gas burned in the state is extracted in the state. //

Without any source of revenues for power generations other than selling electricity, there are no reasons why any generator would spend money to store fuel on site to use in the rare case where there are interruptions in the fuel supply. //

If society determines that it is unacceptable to have a power grid that cuts off customers for many hours at a time during a period when being without power can be deadly, it must accept the fact that markets cannot be the decision makers.

Cheapness on a short duration scale – like 5-minute settlement markets – cannot be the sole criteria for selecting power sources.