There is one additional factor which is used in practice. Fossil fueled plants like those operation on oil can get paid to operate in backup mode. I know plants here in Sweden does this, and I suspect it is either tax funded directly or by the grid connection cost that get added on top of the metered cost.
This way a traditional fossil fueled power station get paid to maintain capacity regardless of current demand, and the response time is kept low in case of changing weather.
From the perspective of the government, they are simply paying for a reliable power grid. From the perspective of renewable energy plants, they can sell energy at a lower price than fossil fueled power plants with smaller investment. From the perspective of the fossil fueled power plant they get paid twice, once for being backup and then any power they then happen to sell when the price goes up because of the weather. From the perspective of capacity, both renewable and fossil fueled power plants tries to have capacity close to 100% of demand and thus get invested and built accordingly.
From my own perspective I am not sure this is the cleanest, most stable or cheapest way to run a power grid.
It sounds basically like paying someone to be "on call" in case you need them in a hurry. That does seem like more of a bandage over the existing system rather than an optimal design.
It is but there are not many alternatives. Government are investing into more power lines at the border in order to import energy from nearby countries fossil fueled energy plants. If we look at the region as a whole however, the fossil fueled energy capacity still need to match the whole grid and the owners of those plants will need to be paid.
Hydro power is a great alternative, but we are already at peak utilization. We actually need to tear down some in order to save red listed species and restore the environment for animals that need to have unobstructed rivers to reproduce. As the capacity has been increasing, hydro power has been mostly static in term of growth.
There is nuclear and the political situation of that. The government and the green party (who is part of the current government constellation) are promoting the "on call" as a favorable strategy over nuclear. Their main political argument is that everything is good as long we produce more green energy over the whole year than we consume coal energy during the winter. Historically the political right has been pro-fossil fuels, but given the current situation there has been some movement now where some parties is looking to move into opposition.
And last we got battery technology. So far the only installations that I know globally that operate by generating solar energy and putting them into battery is Tesla. I don't know how economical that system has been. There exist to my knowledge no wind park operating through Tesla batteries, and I do not know why that is.
This way a traditional fossil fueled power station get paid to maintain capacity regardless of current demand, and the response time is kept low in case of changing weather.
From the perspective of the government, they are simply paying for a reliable power grid. From the perspective of renewable energy plants, they can sell energy at a lower price than fossil fueled power plants with smaller investment. From the perspective of the fossil fueled power plant they get paid twice, once for being backup and then any power they then happen to sell when the price goes up because of the weather. From the perspective of capacity, both renewable and fossil fueled power plants tries to have capacity close to 100% of demand and thus get invested and built accordingly.
From my own perspective I am not sure this is the cleanest, most stable or cheapest way to run a power grid.