Can anyone tell me why the cost of renewable energy has gone up?

Tristan74

I do understand basic economics and that the cost of most sources of electricity has gone up due to an increase in the cost of raw materials i.e. oil and gas. But my energy is all from renewable sources, and hence uses no increasingly scarce raw materials so why I am also paying more?

I get my electricity from Octopus who make a good play of claiming to be ethical. While I understand the market value of electricity has increased should such a "worthy" company be charging market rate or cost rate plus a small profit?

Evan3020

So wouldn't everyone want to buy the cheaper renewable energy if that were the case? and then of course the renewable energy would rise in price because everyone wanted that.
Energy is energy and is sold into the market, that is why there is one price, the market price.

pochase

All companies claim to be green, but in reality there are only two that sell only renewable energy.

The second answer is because they can. If the cost for electricity produced by gas is high, why should the owners of wind farms / solar sell it cheaper than market value.

Evan3020

You can generate your own as i have since 2015.

Astria

All the energy a provider pumps into the grid may well be renewable, but it's likely insufficient for all their customers, so sometimes the energy you get might only be 20% renewable.

But you can make your own 100% renewable energy and not be connected to the grid at all if you want, then you won't have to pay a standing charge either.

Lastonestanding

pochase said:

All companies claim to be green, but in reality there are only two that sell only renewable energy.

The second answer is because they can. If the cost for electricity produced by gas is high, why should the owners of wind farms / solar sell it cheaper than market value.

My FIT for my solar panels at set at 5p kWh for 25 years, I believe I will be able to opt out of that contract when a can be guaranteed a better return.

[Deleted User]

Lastonestanding said:

pochase said:

All companies claim to be green, but in reality there are only two that sell only renewable energy.

The second answer is because they can. If the cost for electricity produced by gas is high, why should the owners of wind farms / solar sell it cheaper than market value.

My FIT for my solar panels at set at 5p kWh for 25 years, I believe I will be able to opt out of that contract when a can be guaranteed a better return.

I believe that you are talking about export payments not FIT. Both are subject to annual RPI increases. You can elect to forego the 50% export element payment in favour of SEG whilst retaining your FIT payments. SEG is paid on the ACTUAL amount of electricity exported not a deemed figure. 

At the moment, the highest paying SEG tariff is Octopus Agile Outgoing with 30 minute changing prices. To get SEG, you need a smart meter and you also need a MCS Certificate and DNO sign off on your installation. The supplier will apply to your DNO for an export MPAN for your smart meter.

Evan3020

I hope you are getting the rest of your FIT payments as you are on the 25 year deal you must have been an early adopter so getting maybe 50 - 60p a kwh?

prowla

Because it's a bit of a con...

doodling

Hi,

Tristan74 said:

I do understand basic economics and that the cost of most sources of electricity has gone up due to an increase in the cost of raw materials i.e. oil and gas. But my energy is all from renewable sources, and hence uses no increasingly scarce raw materials so why I am also paying more?

[...]

Your energy is not all from renewable sources, otherwise you wouldn't have been getting any the last few nights where there has been pretty much no wind.

Energy is sold at the market price and that market UK wide. Price can vary through the use of advance purchases but generally renewable energy companies sell at the prevailing price (which is set by the price of gas). You can't really buy wind energy in advance for delivery on a certain date because there is no guarantee that it will exist (and the penalties for non-delivery are severe).

The fundamental reason for high prices is scarcity (driven by high gas prices) - it doesn't matter what it costs to produce, it matters what someone is prepared to pay for it.

The 1960s solution to this problem was vertical integration - customers paid something vaguely related to the cost (albeit with questionable incentives to reduce that cost).

The 1980s solution was vertical separation which allegedly provided lots of funds for investment in energy extraction infrastructure as energy was sold at market rates but meant that all  sources of energy at a given time were paid the same, irrespective of the production cost.

Bear in mind that the renewable energy companies will be making a fortune (subject to the the "contract for difference" scheme in the case of wind energy which will give the government a cut) in the same way as the gas companies.

Chrysalis

As I understand its due to the open market, there is people trading energy like stocks and gold, the value of that energy doesnt change based on cost of production but purely based on demand for it.  So to get the energy price under control it really needs to be isolated from the open market, or the open market needs regulation.