The electricity sector is still set on high fixed costs?
Not always. The distinction to be made depends on demand. If it is temporary and very important structure to high marginal cost but low fixed cost (relatively speaking) will be preferred. In contrast to fluctuating demand fixed costs will be higher while the lower marginal costs. The costs depend on matching supply to demand. In addition to the price of electricity depends not over the offer and that the technological structure of its own demand.
A second important factor and the impact on the environment. Legal constraints (norms but above all pollution permits) submit new constraints on technology choice, such as taxation on greenhouse gas emissions.
These two indicators should define an optimal nuclear power, that is the most effective structure if not the most efficient manner possible. It will therefore be held against the internal and external demand and capacity for interconnection with other countries. Generally the structure of French nuclear parks are equipped with high fixed costs which makes this competitive sector of the economy. Report on electricity prices of the General Mining and Finance Inspection (2004) shows that as the duration of capacity utilization production remains above 57% the average cost of generating facilities makes better French nuclear technology as less expensive than its alternatives for semi-base or spikes (coal-fired, combined cycle gas turbines, gas combustion, Burning fuel oil).
But then what price fixed, and especially should we fix it? Not necessarily. A first observation is that electricity from nuclear power is a first appeal with the technologies of semi-basic, that is to say that if demand exceeds supply from nuclear methods so we use technology semi -base. If this latter possibility can not meet demand data so we use advanced technology but the price is much higher than before. We therefore concluded that the competitive market price may be established so that it equals the marginal cost. If the price is below marginal cost, so there is no incentive to offer. If the price is above marginal cost supply would soon exceed demand, so a price close to marginal cost is the most profitable for each party. So everything depends on the substitution of one technology to another. Fixed costs Important nuclear should allow lower marginal costs and hence prices less elastic to changes in demand. In contrast, advanced technologies are equipped with very high marginal costs so excessive that a shortage in supply will lead inexorably to a sharp increase in price (from about 7 to 30 euros per megawatt hour). The level of supply will inevitably depend on the number of competitors due to the longevity of the period of marginalization of nuclear market in particular. One major obstacle remains the risk associated with private investment in production structure as nuclear. Many incentive mechanisms should be established for a market closer to the best of a situation of perfect competition. In our analysis we excluded the barriers to entry, but they can not depend on a competitor's more advanced than his own potential competitors but depend on the sum to invest to establish a production system adequate. The establishment of a consortium of such contracts or long-termist to disperse and reduce the risk is solutions. Finland has been used in recent years. To conclude, a marginal cost pricing is efficient in allocating resources and whether a market close to a situation of CPC is possible to run it requires public regulation incentive temporary nature.
Our discussion focused on the establishment of a more competitive market and meet fluctuating demand. We only considered the need to set a price at marginal cost as fixed costs are often high, no longer pose a barrier to free entry into the electricity market. Yet the reality is once again much more complex because of the scarcity rents and monopoly co-exist, what will be discussed in our third and final ticket.
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