Speaking of economic principals... from prominent energy economist Dieter Helm, Why are electricity prices so politically toxic?
That leaves gas. If coal is ruled out and the capacity margin gets tight, the wholesale price should rise to the energy price of new gas. But it is unlikely to do so any time soon. The reasons are several, but one counts strongly. Outside the market, through ROCs and FiTs, the government is encouraging onshore and offshore wind, and solar. These technologies have high fixed costs and almost zero marginal costs. When the wind blows and the sun shines, as the Germans have discovered, renewables could eventually cover total demand for periods of the day. The result is a zero or even negative wholesale price. A new gas station is now at the mercy of the wind and the sun and hence it cannot be assured that it will run base-load. Intermittent renewables render everything else intermittent too. This wreaks havoc with new gas investments.
What is emerging on the generation side is something which has a number of similarities to the CEGB [Central Electricity Generating Board] model and in particular a fully-fledged central buyer. The government already determines the investment in almost everything except gas and it will soon determine gas too. There is not much left of the market. If it is going to be a central buyer, it should at least try to do the job properly. Once intervention starts it tends to have its own momentum. Each intervention begets another, and as the complexity piles up so do the unintended consequences and the costs. There is now a clear choice – back to the CEGB or back to a competitive model.