Decoupling of electricity and gas prices

Fairzo

Questions for the clever people out there - there has been mention in the past of removing the link between gas and electricity prices, which is (I believe) keeping the latter higher than it needs to be as the price of renewable sources is not taken into account. There's mention of the EU looking at this imminently.

In UK terms how could this decoupling be achieved (legislation?), how long could it take and what would be the potential effect on electricity prices relative to what we're facing now?

macman

The problem is that we are still producing about 45% from gas fired plant. 

Fairzo

macman said:

The problem is that we are still producing about 45% from gas fired plant. 

But 55% which isn't, so there's a profiteering on renewables which could instead lower electricity unit rates?

[Deleted User]

How can you "decouple" the price of electricity from the price of its fuel?

So unless you're talking about putting a fixed profit margin on generation and force different companies to sell the same thing for different prices - which is what we did for Hinckley C (the new nuclear station) and everyone had massive complaints about it - nothing will change until we no longer rely on gas for nearly 50% of our electricity supply.

chris_n

macman said:

The problem is that we are still producing about 45% from gas fired plant. 

Which at current prices means 55% is not produced from gas and is therefore inherently cheaper but currently being paid the same. Offshore wind is something in the region of £100 MWh on average, gas is currently 5 times higher.

[Deleted User]

Fairzo said:

macman said:

The problem is that we are still producing about 45% from gas fired plant. 

But 55% which isn't, so there's a profiteering on renewables which could instead lower electricity unit rates?

I have a thing.  You want to buy this thing for £1.  Someone else wants to buy this thing for £2.  Selling it to them instead of you is not "profiteering".

DeeQS

The renewables decoupling is (as you might expect) also complex.
I understand the govt are going to offer wind farms a fixed rate on a long term contract if they agree. Something to persuade them to forfeit the short term high prices in favour of long term stability.

Fairzo

[Deleted User] said:

How can you "decouple" the price of electricity from the price of its fuel?

So unless you're talking about putting a fixed profit margin on generation and force different companies to sell the same thing for different prices - which is what we did for Hinckley C (the new nuclear station) and everyone had massive complaints about it - nothing will change until we no longer rely on gas for nearly 50% of our electricity supply.

Austria, amongst others, must think it's possible.

[Deleted User]

As I said - it is, using CfDs like Hinkley, but that was apparently unacceptable to most of the public.

Fairzo

[Deleted User] said:

Fairzo said:

macman said:

The problem is that we are still producing about 45% from gas fired plant. 

But 55% which isn't, so there's a profiteering on renewables which could instead lower electricity unit rates?

I have a thing.  You want to buy this thing for £1.  Someone else wants to buy this thing for £2.  Selling it to them instead of you is not "profiteering".

The global energy prices appear to be divorced from this notion of market forces though.

chris_n

Fairzo said:

macman said:

The problem is that we are still producing about 45% from gas fired plant. 

But 55% which isn't, so there's a profiteering on renewables which could instead lower electricity unit rates?

There is no profiteering, the government get the difference. The government hold Cfd auctions and renewables are built knowing they are getting a fixed price for the energy. When the market price is below the 'strike' price the government pay the difference,  when the market price is higher the extra money goes back to the government.