a price spike as a period in which the market price rises suddenly, markedly, unexpectedly, and temporarily.
They occur as a result of instability in the so-called feedback system that links demand, supply and price. They didn't exist in the past because the pricing mechanism defining consumer prices used a long term averaging process which in effect put a long time constant lag in the feedback loop, making it more stable. Now with the 'privatisation' of the entire electricity supply system in order to 'save costs to the many' (improve profitability for the few) the system no longer works as envisaged and you get huge price spikes whenever demand and supply equalise.
I agree with Bhanu that many participants in the market use complex algorithms based on derivatives and predictions to hedge their financial positions, but they are hedging them against the very instability that their dabbling in the market has created in the first place. I don't see any point in having a massively complex set of algorithms frantically competing with each other to 'make money' for their participants when all the system really requires is the delivery of power at a price the user can readily afford to pay. This complexity is driven by the ideology that the free market is axiomatically superior to any other mechanism in delivering goods - and it is, but this so-called superiority is more a measure of its ability to transfer wealth from the poor to the rich. (Where does all the money people pay for electricity in the deregulated market actually go?) Really, in 2017 we ought to be doing better than that.
Hello Prof Bhanu, please how can I get access to the Melbourne Energy Institute Report you talked about? Thank you. My email is [email protected].
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