Introduction to Electricity Markets

Michelle Horsfield

25 years: Sustainable Finance

In this video, Michelle explores the intricacies of power markets and their sustainability implications in the context of global energy transitions. She delves into topics such as carbon intensity, life cycle assessment, and wider sustainability impacts, the video offers viewers a comprehensive understanding of the complex dynamics shaping the future of electricity markets.

Energy

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Introduction to Electricity Markets

15 mins 51 secs

Key learning objectives:

Understand some of the basic and fundamental concepts of power markets
Outline the sustainability implications of major electricity generation types
Understand the significance of carbon intensity and wider sustainability aspects in assessing energy mix options
Explore the potential drivers of change in electricity markets

Overview:

Beyond the comfort electricity brings lies a scary reality - its generation from fossil fuels contributes significantly to global warming. As we explore power market concepts and the pros and cons of different electricity generation types, we uncover the complexities of achieving a sustainable energy mix. Sustainability considerations, including carbon intensity, life cycle impacts, and broader environmental and social concerns, are integral to shaping the future energy mix alongside regulatory, technological, and commercial factors. Adaptability and a nuanced understanding of these dynamics are essential for navigating the evolving landscape of sustainable power markets.

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Summary

What is the primary environmental concern associated with electricity generation from fossil fuels?

Fossil fuel-based electricity generation contributes significantly to global warming, accounting for about a third of the planet's total emissions. Rather than advocating for total avoidance of electricity use, we need to understand and minimise the impact of various generation options while balancing supply and demand in power markets.

What are some fundamental concepts within power markets relevant to sustainability considerations?

Concepts such as demand-supply matching, merit order, and levelized cost of electricity (LCOE) are crucial in understanding the dynamics of power markets and their implications for sustainability. The intermittency of renewable sources like wind and solar presents challenges in maintaining supply-demand balance, necessitating the use of peaking plants and strategic utilisation of renewable energy when available.

How do different electricity generation types compare in terms of their carbon intensity?

Carbon intensity, measured in grams of CO2 equivalent per kilowatt-hour, varies among different generation types, with renewables like wind and hydro exhibiting significantly lower carbon intensity compared to fossil fuels. Carbon intensity provides insights into the environmental impact of electricity generation but may overlook the broader life cycle impacts of different fuels, necessitating a comprehensive life cycle assessment (LCA) approach.

What broader sustainability aspects should be considered in evaluating energy mix options?

Beyond carbon intensity, considerations such as land use, habitat fragmentation, waste generation, and social and economic impacts play crucial roles in assessing the overall sustainability of electricity generation options.

What factors may drive changes in electricity markets?

Rising carbon emissions costs, regulatory interventions such as emissions trading schemes, and technological advancements in storage and renewable energy are key drivers shaping future electricity markets and energy transitions.

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Michelle Horsfield

Michelle Horsfield, an environmental scientist with a climate change specialisation, transitioned into the financial sector four years ago to apply her knowledge to the largest reallocation of capital in history, as the economy moves towards a lower carbon future.

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