It is often difficult to assess the fundamental reasons as to why markets move. Some argue that the daily price movement is as a result of traders reacting to each new piece of fundamental data. Others suggest that players have to re-adjust positions because of risk limits. The likely answer is that most traders like lemmings feel that they have to trade to justify being in the position they are in, and so holding a position for a long period of time is bad trading (when in reality it is not, it is what Warren Buffet does and other strategic traders).

The economics of markets have fascinated many but it is fair to say that in reality markets reach low points when producers stop making profits and so turn down and supply is short lived, and so prices start moving up. When markets reach high points consumers start to look for alternative cheaper markets the cost of goods rises and demand looks to scale back and prices start to fall. This is basic economics, but many players forget that for long-term fundamentals there is another curve (the technology curve, and the new build curve). At a certain price it becomes more economic to build new production facilities (or consumption reducing facilities), there is also a new point at which players will look to invest in the new R&D and try new technology.

In power new technology is renewables and fuel cells, if these work in scale then they will become the new build curve. Power prices have been so high that we would expect many players to have invested in looking at new build and new technologies. However, there is a lot of evidence to suggest that these new high prices were used to extend the life of existing plant to 2015 when the lPCD kicks in a makes these pieces of kit surplus to requirement.

In short the technology curve has not been reached and the evidence is that the market will have to rise to accommodate this at some point before 2015.