Comment on Energy bills to tick lower this winter but will remain high
bernieecclestoned@sh.itjust.works 1 year agoAh, yes. But we can’t actually ignore capex, because most of the fossil fuel infrastructure is sunk cost.
Renewables are net new capex, which needs a return. The reduction in cost of renewables is the best thing. A barrel of oil isn’t going to get any cheaper to pump out but wind and solar will. The war is already won, we just haven’t seen the benefits yet.
I think green hydrogen would help smooth the peaks of renewables but it’s not very efficient, probably a better use is making ammonium nitrate for fertiliser or as a replacement for heavy oil for shipping
hellothere@sh.itjust.works 1 year ago
Context of the situation is important. You can’t use them interchangeably.
Capex does not matter when we are talking about choosing to generate using existing infrastructure, because capex amortisation is the same regardless of whether you’re generating or not. Choosing whether to generate at 1am on a random Tuesday has nothing to do with your previous capex, but everything to do with your next unit cost. If price is higher than cost, you’ll generate, it not you (probably) won’t.
Capex payback is important when businesses are evaluating building new generation. The spot price at 1am on a random Tuesday has nothing to do with whether you’re choosing to build new infrastructure. What does matter is average unit prices, over time, not one data point.
bernieecclestoned@sh.itjust.works 1 year ago
But you said you wanted more renewables… That’s capex.
hellothere@sh.itjust.works 1 year ago
I’m not the person you originally replied to when you falsely claimed that renewables are only economically viable because of last generator pricing.
I have explained why that isn’t the case, how both generation and new capacity decisions are made, the different aspects those decisions consider, and how because their next unit cost is lower due to generation input being free they are able to operate profitability at lower spot prices than are achievable for fossil fuels.
One last time - capex payback is a consideration when building new capacity, yes, but that is based on average prices over decades. It is not a consideration when choosing whether to power up or down on at a specific time on a specific day.
Attempting to simplify this to just capex is wrong.
bernieecclestoned@sh.itjust.works 1 year ago
Economically viable means you can raise the capital to build it…higher returns attract more capital
Spain has cut the last generator link so now renewables are not charged at the gas rate.
Let’s see how it works out. It’s already helped reduce inflation there.