High prices cure high prices. This doesn't seem to yet be working for British electricity. Government contracts reduce the cost of capital, but they also insure against volatility. The cost of this insurance policy may be going up.
the governments new angle pre ME crisis was new build renewables are cheaper than new build gas plants so it doesnt matter that the prices have gone up.
Thanks - yes a little risky publishing this 2 days in advance of the first releases instead of afterwards. Regardless how they shake out, I think it's worth calling out the different functions of contracting and it won't always lead to lower costs. As you say - a counterparty will pay more when there's pressure and all the bidders know it. So many good examples of this - another I studied at grad school was paying for political risk insurance to cover your bases in extreme asset appropriation events, even if statistically you would be better off exposing yourself to that risk based on how often those political events actually happen.
the governments new angle pre ME crisis was new build renewables are cheaper than new build gas plants so it doesnt matter that the prices have gone up.
Thanks - yes a little risky publishing this 2 days in advance of the first releases instead of afterwards. Regardless how they shake out, I think it's worth calling out the different functions of contracting and it won't always lead to lower costs. As you say - a counterparty will pay more when there's pressure and all the bidders know it. So many good examples of this - another I studied at grad school was paying for political risk insurance to cover your bases in extreme asset appropriation events, even if statistically you would be better off exposing yourself to that risk based on how often those political events actually happen.