The electricity price is set by the most expensive marginal cost.
This made sense when renewables were more expensive on average than fossil fuels (which we want to discourage) but the rules probably need rewritten now that renewables are cheaper and continuing to get cheaper and fossils relegated to peaked roles.
At the moment it just means that renewable providers are getting a lot of extra cash for not doing anything different and then on occasions when we go 100% renewable the price will crash suddenly to near zero.
Dispatch based on marginal cost makes sense, as that ensures that the lowest marginal cost generators will be used to provide the demand.
But yes, increasing penetration of variable renewable energy like wind and solar will mean that the price will vary wildly. That means that players in the market will need to be hedged to insure them against too high/low prices.
Also it wouldn't surprise me if various capacity market type mechanisms were to become more popular and constitute a bigger share of the money flows in the electricity market as a whole.
This made sense when renewables were more expensive on average than fossil fuels (which we want to discourage) but the rules probably need rewritten now that renewables are cheaper and continuing to get cheaper and fossils relegated to peaked roles.
At the moment it just means that renewable providers are getting a lot of extra cash for not doing anything different and then on occasions when we go 100% renewable the price will crash suddenly to near zero.