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Seb Kennedy's picture
Founding Editor, Energy Flux newsletter

I am professional energy journalist, writer and editor who has been chronicling the renewables and fossil fuel energy sectors since 2008.  I am passionate about the energy transition, so much so...

  • Member since 2020
  • 103 items added with 54,442 views
  • Jun 28, 2022

Not all energy is made equal. As a general rule, the more obstacles that lie between a unit of energy and its end-user, the less value it has. A molecule of gas is often a liability at the wellhead, but commands an eye-watering premium once in a pipeline network in Europe or Asia. Location is hard-wired into gas markets. Price differentials signal a need to send volumes from producing regions to demand centres and, if necessary, build infrastructure to facilitate the trade.

That’s not often the case in electricity. Wholesale prices in many liberalised power markets do not fully reflect inherent value. Due to the ephemeral nature of electricity, value is tied not only to the electron’s physical whereabouts within a power grid, but also to its time of generation and the predictability of that timing.

Wind and solar — clean power sources with zero marginal costs and variable output profiles that must be produced in specific resource-rich locations — have a very different value proposition to conventional generation. For this reason, countries that are decarbonising their power grids are finding their legacy systems of price discovery are no longer fit for purpose.


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