Energy news in general

[Deleted User]

GingerTim said:

https://www.theguardian.com/business/2022/sep/01/energy-industry-backs-plan-to-save-businesses-and-homes-up-to-18bn-a-year

At the moment, the way electricity auctions are designed means the price of all electricity is closely pegged to the price of gas.

Under the proposals – first suggested by the UK Energy Research Centre – nuclear power stations and renewable electricity generators would be encouraged to sign up to a new type of contract. These contracts for difference (CfDs) would mean selling their electricity at a lower price, but one that was fixed and guaranteed over a number of years.

I think they were mentioning 10-15 year fixed contracts on Radio 4 this morning.

I remember the time when CfDs were massively controversial.  Hinkley Point C (the new nuclear station) signed a contract with a CfD strike price at under 9.5p per kWh and much of the media went ballistic because that was huge amounts of profit guaranteed by taxpayers to a private company who couldn't make the same amount on the open market.  Doesn't look like such a bad deal right now.

pochase

Happy to see that predictions are coming down even further.

michaels

[Deleted User] said:

GingerTim said:

https://www.theguardian.com/business/2022/sep/01/energy-industry-backs-plan-to-save-businesses-and-homes-up-to-18bn-a-year

At the moment, the way electricity auctions are designed means the price of all electricity is closely pegged to the price of gas.

Under the proposals – first suggested by the UK Energy Research Centre – nuclear power stations and renewable electricity generators would be encouraged to sign up to a new type of contract. These contracts for difference (CfDs) would mean selling their electricity at a lower price, but one that was fixed and guaranteed over a number of years.

I think they were mentioning 10-15 year fixed contracts on Radio 4 this morning.

I remember the time when CfDs were massively controversial.  Hinkley Point C (the new nuclear station) signed a contract with a CfD strike price at under 9.5p per kWh and much of the media went ballistic because that was huge amounts of profit guaranteed by taxpayers to a private company who couldn't make the same amount on the open market.  Doesn't look like such a bad deal right now.

I think you will find that is in 2012 pounds so you need to ad don inflation since then to compare with current prices.

Hover that is not to say that it turns out that CfD is a great pricing mechanism as it means that rather than us paying market price for the output we are protected  (at the cost of overpaying if the market price were to be lower than the CfD strike price.

Ironic that one part of the govt is insisting on fixed price (ire fully hedged) CfDs for power supply while another part has lost multiple billions by failing to hedge Bulb energy customers demand....

[A final little coda on CfD prices, the energy producers tend to have a time window of earliest and latest date they can start the CfD pricing.  Some wind farms are being completed before the end of their window and of course are opting to delay starting the CfD until the last possible moment as until they start it they can sell their output at the much higher market rate.  Not sure if they can opt out of the CfD altogether if they now decided it is better to operate without this floor/cap - as their cap is often sometimes as low as 5p per unit it is possible they could basically recoup their build costs very quickly at the current high prices and make more profit over the long term than they could ever make if on the CfD]

[Deleted User]

michaels said:

[Deleted User] said:

GingerTim said:

https://www.theguardian.com/business/2022/sep/01/energy-industry-backs-plan-to-save-businesses-and-homes-up-to-18bn-a-year

At the moment, the way electricity auctions are designed means the price of all electricity is closely pegged to the price of gas.

Under the proposals – first suggested by the UK Energy Research Centre – nuclear power stations and renewable electricity generators would be encouraged to sign up to a new type of contract. These contracts for difference (CfDs) would mean selling their electricity at a lower price, but one that was fixed and guaranteed over a number of years.

I think they were mentioning 10-15 year fixed contracts on Radio 4 this morning.

I remember the time when CfDs were massively controversial.  Hinkley Point C (the new nuclear station) signed a contract with a CfD strike price at under 9.5p per kWh and much of the media went ballistic because that was huge amounts of profit guaranteed by taxpayers to a private company who couldn't make the same amount on the open market.  Doesn't look like such a bad deal right now.

I think you will find that is in 2012 pounds so you need to ad don inflation since then to compare with current prices.

Hover that is not to say that it turns out that CfD is a great pricing mechanism as it means that rather than us paying market price for the output we are protected  (at the cost of overpaying if the market price were to be lower than the CfD strike price.

Ironic that one part of the govt is insisting on fixed price (ire fully hedged) CfDs for power supply while another part has lost multiple billions by failing to hedge Bulb energy customers demand....

[A final little coda on CfD prices, the energy producers tend to have a time window of earliest and latest date they can start the CfD pricing.  Some wind farms are being completed before the end of their window and of course are opting to delay starting the CfD until the last possible moment as until they start it they can sell their output at the much higher market rate.  Not sure if they can opt out of the CfD altogether if they now decided it is better to operate without this floor/cap - as their cap is often sometimes as low as 5p per unit it is possible they could basically recoup their build costs very quickly at the current high prices and make more profit over the long term than they could ever make if on the CfD]

Yeah, it was 2012 prices with some inflation linking, but also with a clause that reduced the price if a second nuclear station was built and whole load of other stuff.

Certainly not as simple as the press releases make/made it sound.

Grumpy_chap

GingerTim said:

https://www.theguardian.com/business/2022/sep/01/energy-industry-backs-plan-to-save-businesses-and-homes-up-to-18bn-a-year

At the moment, the way electricity auctions are designed means the price of all electricity is closely pegged to the price of gas.

Under the proposals – first suggested by the UK Energy Research Centre – nuclear power stations and renewable electricity generators would be encouraged to sign up to a new type of contract. These contracts for difference (CfDs) would mean selling their electricity at a lower price, but one that was fixed and guaranteed over a number of years.

I think they were mentioning offering to consumwrs 10-15 year fixed contracts on Radio 4 this morning.

[Deleted User] said:

I remember the time when CfDs were massively controversial.  Hinkley Point C (the new nuclear station) signed a contract with a CfD strike price at under 9.5p per kWh and much of the media went ballistic because that was huge amounts of profit guaranteed by taxpayers to a private company who couldn't make the same amount on the open market.  Doesn't look like such a bad deal right now.

Whatever happened to the promise we were given when we were children would be delivered by the time we grew up?
"Energy too cheap to meter?"

Mstty

Electricity prices to be detached from gas prices. Still exploring no promises.

BBC News - PM will explore energy market reform to cut bills

https://www.bbc.co.uk/news/science-environment-62832029

michaels

Mstty said:

Electricity prices to be detached from gas prices. Still exploring no promises.

BBC News - PM will explore energy market reform to cut bills

https://www.bbc.co.uk/news/science-environment-62832029

Nuclear and renewables contracted via CfDs are already at a fixed price and indeed this means that wind power is reducing prices already.  The oft quoted 'green levy' is actually a green discount plus an expensive 'social levy' which pays for the warm home discount etc.

Suppliers could have negotiated long term supply contracts with other generators but the existence of the cap prevented this as they were leaving themselves open to massive losses.

Interesting that the market never moved to long term consumer fixes, 36 months we the longest? but most went for 12 months.  I assume this reflected consumer demand, had their been people wanting to sign up for 5+ year fixes, presumably suppliers would have offered them.

QrizB

[Deleted User] said:

I remember the time when CfDs were massively controversial.  Hinkley Point C (the new nuclear station) signed a contract with a CfD strike price at under 9.5p per kWh and much of the media went ballistic

HPC's strike price was newswoerthy as it was 2-3x the price agreed by contemporary renewables projects, and could have been 30% lower (more like 6.5p) if the Gov't hadn't insisted on commercial financing rather than a gilts issue.

chris_n

Grumpy_chap said:

GingerTim said:

https://www.theguardian.com/business/2022/sep/01/energy-industry-backs-plan-to-save-businesses-and-homes-up-to-18bn-a-year

At the moment, the way electricity auctions are designed means the price of all electricity is closely pegged to the price of gas.

Under the proposals – first suggested by the UK Energy Research Centre – nuclear power stations and renewable electricity generators would be encouraged to sign up to a new type of contract. These contracts for difference (CfDs) would mean selling their electricity at a lower price, but one that was fixed and guaranteed over a number of years.

I think they were mentioning offering to consumwrs 10-15 year fixed contracts on Radio 4 this morning.

[Deleted User] said:

I remember the time when CfDs were massively controversial.  Hinkley Point C (the new nuclear station) signed a contract with a CfD strike price at under 9.5p per kWh and much of the media went ballistic because that was huge amounts of profit guaranteed by taxpayers to a private company who couldn't make the same amount on the open market.  Doesn't look like such a bad deal right now.

Whatever happened to the promise we were given when we were children would be delivered by the time we grew up?
"Energy too cheap to meter?"

Don't forget having more leisure time due to automation too.

chris_n

michaels said:

Mstty said:

Electricity prices to be detached from gas prices. Still exploring no promises.

BBC News - PM will explore energy market reform to cut bills

https://www.bbc.co.uk/news/science-environment-62832029

Nuclear and renewables contracted via CfDs are already at a fixed price and indeed this means that wind power is reducing prices already.  The oft quoted 'green levy' is actually a green discount plus an expensive 'social levy' which pays for the warm home discount etc.

Suppliers could have negotiated long term supply contracts with other generators but the existence of the cap prevented this as they were leaving themselves open to massive losses.

Interesting that the market never moved to long term consumer fixes, 36 months we the longest? but most went for 12 months.  I assume this reflected consumer demand, had their been people wanting to sign up for 5+ year fixes, presumably suppliers would have offered them.

Cfd's are not reducing prices already. The generators are being paid full market value for their energy, they then pay the difference between the 'strike' price and the market rate to the low carbon contracts company. See https://www.lowcarboncontracts.uk/news/announcement/reconciliations-how-does-money-move-through-the-cfd-scheme-resources-0 for an explanation.