Gas and Coal Economics, page-22

Let me add to your understanding of the market. WESM is a pool in which all generators are dispatched based on their marginal costs, other than must run plants like the Malampaya generators which have to be dispatched in line with their gas purchase obligations. Generators will bid their marginal fuel costs, so renewables will go first, coal next, and LNG and oil would follow. The marginal bid is the system marginal price for that time slice (1 hour or less, in pools like this - WESM I think wants to go to 15 minutes but may not be there yet). Such a market will not always deliver enough capacity, so regulators and DOE want distribution companies to have firm contracts with generators to make sure that new capacity is added. These are financial contracts and are settled bilaterally, so in that sense they are not contracts for differences though they have the same effect. WESM itself settles only imbalances and merchant (true spot) volumes - perhaps 5 to 10 % of total energy in the WESM.

These financial contracts have to be at price levels that would justify new investment and have to be bankable, that is, able to attract lenders. Provided that this capacity is procured competitively, the price will not reflect SMRC but rather LRAIC - the long run average incremental cost. LNG would be most competitive for mid-merit requirements of the utilities - think of portfolio theory, where the most efficient outcome for the distributors is to have an optimal collection of contracts for each component of their aggregated load. If as a generator you do not have a contract like this approved by ERC, you are likely to be mostly exposed to the WESM system marginal price which now makes LNG competitive only at peak times in the cool season, and into the mid cycle in the hot season. We know this 100% because of the FirstGen merchant plants amounting to 500 MW or so.

On Paris, you have it right I think. But just to add, it seems developed countries like Germany are coming out now and saying they too will miss the target they committed to in Paris. This seems to be annoying some of their citizens, and rightly so, but COP 21 commitments are voluntary and that should tell you a lot about how bankable they are.