Decoupling of electricity and gas prices

[Deleted User]

Fairzo said:

[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.

Global energy prices appear to be following market forces pretty well, based on supply vs demand, transport and storage capability, and forward sentiment.

doodling

Hi,

Fairzo said:

[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.

Not at all - they are exactly following it, as you would expect in a liquid market with a scarce commodity.

The only thing distorting the markets at the moment is geography.  If, for example, I built a 50GW undersea cable between the US and the UK then I could make a fortune but would pull UK and US energy prices closer together in the process.  Of course, the lead time for doing that is such that this particular crisis would be long past by the time it was functional.

sevenhills

Fairzo said:

[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.

The market forces are global, most prices are global. 

QrizB

chris_n 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?

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. 

It's not the government, it's the energy supply companies and so (indirectly) us account holders who pay any extra or receive any refunds.

See:

https://www.lowcarboncontracts.uk/show-me-the-money

ariarnia

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".

yes it is (or can be). profiteering means taking advantage of a situation (like a shortage) to make an unreasonable amount of profit (vs a 'reasonable profit' with some kind of link to risk or production costs). (https://dictionary.cambridge.org/dictionary/english/profiteering and https://dictionary.tn/what-is-the-difference-between-profit-and-profiteering/) 

a pharmacy company taking advantage of being the only people who can make a life saving drug for pennies and charging so much that only a few (the richest) who need it can afford it would be profiteering.

charging £30 for a £1 bottle of hand sanitiser at the start of a pandemic would be profiteering.  

an energy producer taking advantage of the shortage and demand for gas (or creating the shortage by producing or suppling less to the market) to increase the price to 'what the market can bear' and doing that until a significant portion of customers are in fuel poverty would be the same thing. 

not saying that's what's happened and there aren't more complex reasons for the price increases but there is a difference between profit and profiteering and charging what the market will bear when people are scared and desperate is one of the differences. 

chris_n

QrizB said:

chris_n 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?

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. 

It's not the government, it's the energy supply companies and so (indirectly) us account holders who pay any extra or receive any refunds.

See:

https://www.lowcarboncontracts.uk/show-me-the-money

Thanks for the link, I did think it was through the customers (is this part of the green levy?) but couldn't remember where I had seen it when asked elsewhere. 

jj_43

it can be achieved by decoupling our energy from the international markets which will be the solution needed.

decoupling all the linkages between gas and electricity markets, requiring that contracts between the two energy markets are not price index, not convinced gas/electricity linkages are the problem. 

sevenhills

ariarnia said:

yes it is (or can be). profiteering means taking advantage of a situation (like a shortage) to make an unreasonable amount of profit (vs a 'reasonable profit' with some kind of link to risk or production costs).

Bulb energy went bust and were rescued by the government. That bailout is said to be costing the taxpayer millions.
If excess profits are being made, they will be making money for the government.

ariarnia

sevenhills said:

ariarnia said:

yes it is (or can be). profiteering means taking advantage of a situation (like a shortage) to make an unreasonable amount of profit (vs a 'reasonable profit' with some kind of link to risk or production costs).

Bulb energy went bust and were rescued by the government. That bailout is said to be costing the taxpayer millions.
If excess profits are being made, they will be making money for the government.

theres a difference between energy suppliers and energy producers. you might want to google the Maadi Pact or OPEC

wrf12345

Also the ruination of Sterling by the BOE printing yet more money to cover govn handouts will not help (unless all the major countries do the same).
"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".
In an emergency situation - a national state of emergency - it is conceivable that the govn could ring-fence the fifty percent of gas that the UK produces and demand that it is sold at cost plus a normal profit and then apply a two tier pricing system to reflect the cost of the "cheap" energy and expensive energy, be it gas or electric. Much higher electric and gas prices will wreck the economy both from a manufacturing and consumer point of view. If the govn prints yet more money it will just ruin the currency which will make energy and everything else more expensive.