Michele Kearney's Nuclear Wire

Major Energy and Environmental News and Commentary affecting the Nuclear Industry.

Thursday, August 13, 2015

Matt Wald on the "auction."

Thank you all for your comments. 
The auction is done by computer, not by a guy with a hammer saying "going once, going twice." 
It runs through tomorrow and I think they'll announce the clearing price next week. The price is in the form of dollars per megawatt-day. With some of the more casual generators (the gas-fired plants that don't have firm gas transmission capacity booked with the pipeline companies) scared off, prices will be firmer than last year. Those companies could sign firm contracts with the gas transmission companies, or put in oil backup, but that would raise their costs, and probably raise the clearing price for megawatt-hours on the spot market, which is not a bad outcome for reactors.
Also scared off: the demand-side-management folks who aren't confident they can produce quite as much demand reduction as they've promised. 
I don't think the auction is "rigged," but it is something of a poker game. 
Income from capacity payments is usually a modest fraction of total income, but it starts to level the playing field, to pay more for the services nuclear is good at --- Delivering middle-priced electricity 24/7, as opposed to cheap electricity in the dead of night. It's not the production cost that's in play here, it's the size and dispatch-ability of the machine. 

Matthew L. Wald
202-997-5854
Skype: matthewwald

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