hey Neil, thank you for your video. I have a remaining question, I do not entirely understand the difference between the capacity market and the electricity forward and futures market, could you help me out to understand it better? thank you in advance!
Hi, if you still have this question. Capacity market is a mechanism to prevenet fossil fuel power plants such as thermal plants to retire due to economic reason by collecting small amount of money from the market players (likely to be retailers) . Since we aim for zero carbon society, renewable energy prevails in the market ,which means those cheap resources with zero-marginal cost wins in the wholesale market and therefore econoimy for conventional power plants deteriorate and traditional plants cannot win the bid. Developers don't want to keep its operation, nor banks want to lend money for themm so they dessapear from the market. However, critial aspects that thermal power plants have and renewables do NOT have is "flexibility". Grid without thermal power plants is extremely unstable due to the lack of "flexibility". That's why capacity market functions to preserve fossil power plants (at least for a middle term) by guaranteeing them money in the three-four (depends on the country) years to come. This is kW value oriented. Forward/futures market is financial transactions to trade money between players, similar to stock or FX market, for a risk hedge when they procure kWh value. Totally different concept.
hey Neil, thank you for your video. I have a remaining question, I do not entirely understand the difference between the capacity market and the electricity forward and futures market, could you help me out to understand it better? thank you in advance!
Hi, if you still have this question. Capacity market is a mechanism to prevenet fossil fuel power plants such as thermal plants to retire due to economic reason by collecting small amount of money from the market players (likely to be retailers) . Since we aim for zero carbon society, renewable energy prevails in the market ,which means those cheap resources with zero-marginal cost wins in the wholesale market and therefore econoimy for conventional power plants deteriorate and traditional plants cannot win the bid. Developers don't want to keep its operation, nor banks want to lend money for themm so they dessapear from the market. However, critial aspects that thermal power plants have and renewables do NOT have is "flexibility". Grid without thermal power plants is extremely unstable due to the lack of "flexibility". That's why capacity market functions to preserve fossil power plants (at least for a middle term) by guaranteeing them money in the three-four (depends on the country) years to come. This is kW value oriented. Forward/futures market is financial transactions to trade money between players, similar to stock or FX market, for a risk hedge when they procure kWh value. Totally different concept.
@@RayMizuki thanks a lot mate!
Please how do I master GB forward power trading? what courses can i take to be grounded in this aspect?
can a person trade these contracts or is it all by the companies?