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

tacpot12

There does seem to be a problem with energy pricing. The costs of producing nuclear biomass, power, wind, and solar power haven't changed, only the cost of gas has changed. The wholesale cost of gas has increased by 400%, but gas only makes up about 40% of our electricity supply, so why has the wholesale cost of per kwh increased five fold since 2021? It doesn't make sense. I think OFGEM needs to look into the energy company's pricing models as a matter of urgency. 

razord

tacpot12 said:

There does seem to be a problem with energy pricing. The costs of producing nuclear biomass, power, wind, and solar power haven't changed, only the cost of gas has changed. The wholesale cost of gas has increased by 400%, but gas only makes up about 40% of our electricity supply, so why has the wholesale cost of per kwh increased five fold since 2021? It doesn't make sense. I think OFGEM needs to look into the energy company's pricing models as a matter of urgency. 

Nothing OFGEM can do here. They already set the amounts that energy companies can charge you for energy, and how much networks can charge for delivering that energy.

Government would need to go further here, which they kinda have with the windfall tax on the generator profits.

[Deleted User]

tacpot12 said:

There does seem to be a problem with energy pricing. The costs of producing nuclear biomass, power, wind, and solar power haven't changed, only the cost of gas has changed. The wholesale cost of gas has increased by 400%, but gas only makes up about 40% of our electricity supply, so why has the wholesale cost of per kwh increased five fold since 2021? It doesn't make sense. I think OFGEM needs to look into the energy company's pricing models as a matter of urgency. 

Never wanting to miss an opportunity, BEIS launched a consultation last month. The expectation is that some changes will be implemented from next summer onwards:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1091526/review-electricity-market-arrangements.pdf

This paragraph sets out one of the problems:

Wholesale market prices are broadly set by the most expensive plant:

The wholesale market is based on marginal pricing,25 which means the cost of the most expensive generation asset sets the price for the entire market. The marginal price model had been adopted by the majority of liberalised electricity markets. As the market price reflects the value of an additional unit of electricity at all times, this model provides efficiency, transparency, and incentives to keep costs down. However, as gas and carbon-emitting technologies (amongst others) frequently set the wholesale price under current arrangements, the low cost of renewables is not being fully passed on to consumers, leading to excess profits for some generators. This is partially addressed through the CfD, which requires generators to pay back if prices are high but remains an issue for non-CfD plants. This issue will reduce over time as gas generation generates less frequently but will remain to some extent as power CCUS, hydrogen and potentially some unabated gas, is needed to maintain security of supply.

Nifty_Purse

tacpot12 said:

There does seem to be a problem with energy pricing. The costs of producing nuclear biomass, power, wind, and solar power haven't changed, only the cost of gas has changed. The wholesale cost of gas has increased by 400%, but gas only makes up about 40% of our electricity supply, so why has the wholesale cost of per kwh increased five fold since 2021? It doesn't make sense. I think OFGEM needs to look into the energy company's pricing models as a matter of urgency. 

There are supply issues too.

Less electricity from France:
"September's fire had helped send UK wholesale power prices surging, adding to pressures that had already been pushing them sharply higher including the spike in the wholesale gas market."
https://news.sky.com/story/fire-damaged-power-link-will-not-be-fully-restored-for-two-years-says-national-grid-12434131

Hinkley Point B reactor has been turned off so less nuclear production:
https://www.bbc.co.uk/news/uk-england-somerset-62339183