Renewables vs. Fossil

Let's start with the one fact that drives everything else: wind and solar have almost no marginal cost. Marginal cost is what it costs to produce one more unit of something — for a coal or gas plant that means buying and burning more fuel, but for a wind turbine or solar panel the fuel (wind, sunlight) is free. Once the hardware is built, the next megawatt-hour costs essentially nothing.

That single fact explains most of the disruption, so let's walk through the consequences.

How wholesale electricity gets priced
In most markets, generators are stacked from cheapest to most expensive, and the grid operator turns them on in that order until demand is met. The last (most expensive) plant needed to meet demand sets the price that everyone gets paid. This is called the merit order, and the cheap-to-expensive stack is the supply curve. Because renewables bid in at almost zero, they slot in at the very bottom of the stack and push the expensive fossil plants further up — or right off the end so they don't run at all. The result is that more renewables on the grid tends to pull the clearing price down. This is the so-called "merit-order effect."

Intermittency
Here is the catch. A coal or gas plant can run whenever you want it to; wind and solar only produce when the weather cooperates. The industry word for this is intermittency — output that comes and goes with the sun and wind rather than on demand. So you get hours where renewables flood the market and the price collapses (sometimes even going negative, meaning generators pay to keep producing because shutting a plant down and restarting it is more expensive than eating a small loss), and other hours where the wind drops and you suddenly need every fossil plant you can find. The price swings between those two states get sharper as the share of renewables grows.

What this does to fossil "baseload" plants
Baseload means a plant designed to run flat-out around the clock — typically large coal or nuclear stations that are cheapest when they never stop. Their whole economic model assumes a steady stream of operating hours. When renewables keep undercutting them on price for big chunks of the day, those plants run fewer hours, earn less, and the steady-baseload business case erodes. The plants that thrive instead are flexible ones — gas turbines and batteries that can switch on for the few expensive hours when renewables aren't delivering, and switch off the rest of the time.

A quick worked picture
Imagine a tiny grid that needs 100 MW. The supply stack is: 40 MW of wind at 0 dollars per MWh, 40 MW of gas at 50 dollars per MWh, 30 MW of coal at 70 dollars per MWh. On a windy hour, wind covers 40 MW and gas covers the remaining 60... but gas only has 40 MW, so coal supplies the last 20 MW and sets the price. The clearing price is \begin{equation} 70 \text{ per MWh} \end{equation} Now the wind picks up to 70 MW. Wind covers 70, gas covers the last 30, and coal never switches on. Now the most expensive running plant is gas, so the price drops to \begin{equation} 50 \text{ per MWh} \end{equation}

Sanity check
More wind, same demand, and the price fell from 70 to 50 dollars per MWh while the coal plant got zero operating hours. That is the merit-order effect and the baseload squeeze in one example — exactly what you see at grid scale.

So the headline is this: renewables flip electricity from a fuel-cost game into a fixed-cost game, dragging average prices down, making them swing harder hour to hour, and rewarding flexible plants over the old always-on baseload model.