Green, ethical, energy issues in the news

Martyn1981

Work has begun on the Eastern Green HVDC link. It will be 2GW with a 2029 target commission date.

Eastern Green Link 1 enters construction

Construction has started on a subsea electricity superhighway which will help expand the grid for the future.

Eastern Green Link 1, a joint venture between SP Energy Networks and National Grid Electricity Transmission, will transport green electricity for two million homes along over 190 km of predominantly undersea cable linking the south-east of Scotland with the north-east of England.

The £2.5bn project was given the green light by Ofgem last year and onshore works are now underway with offshore construction due to start in the summer. 

At the cable’s two landfall points, Torness, in East Lothian (Scotland), and Hawthorn Pit, in County Durham (England), two converter stations will be built to change the electricity from alternating to direct current – the most efficient way for it to travel long distances.

thevilla

https://www.bbc.co.uk/news/articles/cn93w44yv74o

Reform UK sets out plan to tax renewable energy

You couldn't make it up.  Make energy cheaper by taxing the cheapest.

zeupater

thevilla said:

https://www.bbc.co.uk/news/articles/cn93w44yv74o

Reform UK sets out plan to tax renewable energy

You couldn't make it up.  Make energy cheaper by taxing the cheapest.

Hi

... Eventually someone will recognise that the solution isn't anything to do with technology or sector ... it's simply the design & day-to-day operation of the UK's energy market which can be manipulated in order to set high prices for all involved .... to an extent where there's no difference in market cost (/price) between a unit of energy provided by the lowest & highest cost successful bids, whatever their technology & actual generation cost may be .... 

The current allocation system is designed to keep market prices high as all that successfully participated get paid the same ... the low cost bidders simply make a higher margin than the high cost bidders ... the logical solution would be to address the market pricing to reflect some form of average (as opposed to highest), however until that is finally realised, the introduction of proportional taxation on low cost generators offers practically no billing difference to the consumer whilst potentially relieving the overall personal tax burden ....

Okay, so those that understand CFD (Contract For Difference) prices relating to renewables .... well what's the difference between taxing the inflated margin and forwarding the proceeds to the Treasury and keeping the same money within the overall energy market within a huge CFD fund designed to subsidise the existence of other CFD generation technologies with a higher cost base ... for example, new nuclear will practically always receive CDF funding from the 'pot' based on their own contracted strike price ... that's how the market currently works ... and that's why it's specifically designed that way ... and until it's recognised that this is the case & someone acts as an agent for change there will be no cheaper energy simply because there's no incentive for the energy sector to volunteer for any form of change ... 

So is taxing the cheapest the most logical solution? ... certainly not, but it would certainly highlight how broken the current energy market is and how far market manipulation can be used to keep prices high, so why not warn the market makers what's happening, why it's happening and flush out those who complain the most .... 

HTH - Z     

michaels

Everything we buy, the price is set at the margin and it makes for efficient markets - set the price below marginal cost and there will be shortages.  Confiscate any producer surplus and you discourage investment in low cost production (that should eventually drive out the highest cost producers.  Not forgetting that we already tax not only profits but all money returns to shareholders as dividends.

Those who say end marginal cost pricing in the energy or any other markets should do a basic intro to economics course...

zeupater

michaels said:

Everything we buy, the price is set at the margin and it makes for efficient markets - set the price below marginal cost and there will be shortages.  Confiscate any producer surplus and you discourage investment in low cost production (that should eventually drive out the highest cost producers.  Not forgetting that we already tax not only profits but all money returns to shareholders as dividends.

Those who say end marginal cost pricing in the energy or any other markets should do a basic intro to economics course...

Hi

You're effectively describing a market based on competitive pricing .... if your product is of the same quality as that offered by others and you either are willing to trade at a lower margin in order to gain market share -or- have a manufacturing/supply cost advantage then it's possible to leverage economies of scale in a fair & transparent way (ie market capitalism) that's fine, even if the market sector requires some basic form of regulation ..... however, that's not the current form of the UK energy market.

In the current UK energy supply market there is effectively no real competition .... in effect a supplier can bid for supply well below cost (even at a massive loss) in the knowledge that the bid will almost guarantee supply inclusion in any particular time-slot, the price received will be set to be the same as the highest successful supply bid .... this is not marginal, it is not market capitalism, it is not regulated market capitalism, neither is it competitive - yes there are times that a high demand to supply imbalance temporarily forces market prices beyond the set 'norm', but does this really describe the reason for consumer prices being consistently high? - I'd argue no on that one as what we have is effectively regulated & managed price control over the market .... 

As an example, think about two generation technologies which should be competing for market share but are content to play the system ... as we're talking green, then let's keep it simple & choose nuclear vs wind and assume both are CFD priced based on awarded contracts of (say) 5p/unit for wind & 10p/unit nuclear .... now for a particular bidding time-slice it's winter, gas prices are high, it's quite windy and demand is high - nuclear doesn't follow demand too well so they bid supply at 1p to guarantee share, wind bids 5p on the basis that they will curtail a proportion of capacity, leaving the balance to gas to fill and they bid a daily marginal rate of 9p/unit .... so what really happened? .... well, nuclear knows that the CFD guaranteed 10p/unit and with the high bid being 9p they'll still receive 10p after the CFD pot makes up the 1p difference - wind bids the 5p as per their contract, however as they'll be paid 9p/unit their 4p surplus ends up in the CFD pot, some of which has just been diverted to nuclear .... so for this example wind gets the price it wants as per contract and effectively subsidies the much less competitive nuclear sector -and- for gas, well they've simply been allowed to control the pricing for that period .... this is exactly why UK energy pricing is inherently linked to oil/gas prices and not 'allowed' to operate in a competitive way, and that's by design --- as for the consumer, well they simply pay what they're told to pay whilst the private individuals & corporation that own the means of production are insulated against the normal marginal risks associated with operating in a 'normal' competitive market.    

HTH - Z

michaels

Will those with a CFD ever earn anything other than cfd price x output due to constraint payments?

So then I guess it is a question of whether non-cfd generators are numerous enough to form a competitive market or are few enough in number to effectively collude.

Exiled_Tyke

Interesting article on how PV can help poorer households but also very interesting (especially as the public are frequently gearing up to oppose large scale PV farms) a little section at the end reports that the RSPB are claiming they are good for bio-diversity and rare bird species.  
https://www.theguardian.com/environment/2025/feb/13/solar-panels-could-cut-energy-bills-by-quarter-fuel-poor-uk-families-study

Coastalwatch

Thanks ET, I didn't know about the RSPB study but found it here..

https://www.rspb.org.uk/whats-happening/news/solar-farms-managed-for-nature-boost-bird-numbers-and-biodiversity

Like you suggested it needs shouting literally from the rooftops. I wonder if other daily publications might give it an airing!

zeupater

michaels said:

Will those with a CFD ever earn anything other than cfd price x output due to constraint payments?

So then I guess it is a question of whether non-cfd generators are numerous enough to form a competitive market or are few enough in number to effectively collude.

Hi

Small 'non-CFD' technology generators are (/will be) allowed to exist by the CFD players because this is how the system is designed. It is the smaller players that effectively control pricing. Additionally, not all large(r) players are constrained by the CFD rules ... think about older wind & nuclear generation capacity operating outside the CFD system - they get to keep all proceeds whatever price they get as the marginal cost is effectively zero ... yes there's wear & tear related to operation (mainly a variable overhead component) but in terms of material, labour & fixed overheads there's practically no difference whether plant is generating or not, therefore bidding & receiving anything is better than receiving nothing at all ..... however ..... if there was to be market collusion then it's not limited to the small operators as it needs the larger generators to limit/curtail generation in order to allow high cost generators to make successful bids and therefore massively increase their own (non-CFD) margins ...            

Regarding constraint payments ... Logically this is totally questionable - if the generation (say wind) is constrained in any way by NESO (grid management) then that should really mean that as per contract curtailment T&Cs payment should be made, however there should also be no need for high cost technologies to even be allowed to bid and the wholesale energy price should be extremely low - in a well designed market the curtailment of generation by low cost suppliers should limit the time-slot pricing for all successful bidders to the lowest cost bid of a curtailed supplier as this would both cut wholesale costs & act to deter market collusion. As for generators choosing to exclude available marginal capacity from the bidding process, well that should logically, at a minimum, exclude that generator from curtailment payments as it's their own decision - at the other end of the scale, in not offering that marginal cost generation capacity should be open to question, possibly resulting in reduction/exclusion of the the effect of the highest successful bids for time-slot supply pricing ... of course, those found participating in such market collusion through withholding capacity shouldn't gain advantage and it would be incumbent on them to compensate the high bidders for their reduced payment .... keeping consumer prices down & operating within a transparrent (semi-)competitive marketplace - isn't that what everyone should expect??

HTH - Z    

70sbudgie

There are recent case studies for some of what @zeupater is describing. 

The Viking windfarm has been in the news about huge profits. That is an example of a large wind farm operating outside CfDs because it energised ~18 months early and before it's CfD starts. 

With the recent lack of wind and the tight margins, the some of the gas generators have demonstrated the market manipulation described. There is ~35GW of gas generating capacity and some gas generators, on seeing the day ahead pricing indicating tight margins, have pulled out of the market (reducing the already tight margin) to bid into the balancing mechanism, which then pays out a higher price because the margins just got tighter.

I do have a little sympathy for the gas generators (but don't get me wrong, I whole heartedly disagree with this practice of extreme commercial gain at the expense of everyone else) because the government has recently published their intent that by 2030, gas generation will only make up 5% of the GB generation. Imo, the challenge will be how to structure the market / pricing system so the gas generators earn a fair price for keeping their plants maintained, operational and available for perhaps an 1/8 of their current operation time. How do you keep them "on board" without allowing them to manipulate the market, because currently, when the wind doesn't blow, there isn't really anything else.