Decoupling of electricity and gas prices

littleteapot

Is the market also being impacted by speculators? I.e. very wealthy individuals or institutions buying up huge amounts of future energy on the basis that they will be able to resell it later at a higher price? I know this happens with oil and many other commodities but haven't yet heard anyone mention it in the context of gas/electricity yet.

Section62

chris_n said:

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.

Why would anything other than gas be "inherently cheaper"?

Section62

jj_43 said:

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

So if we do that, UK consumers will be paying more on their bills to fund the additional generation capacity required for resilience, which is currently achieved in part by being linked to our neighbours.

Also, we are currently (and have been for much of at least the last week) sending about 3GW of electricity to France - about 9% of what is currently on the UK Grid.  If we cut outselves off from the international markets we would lose the opportunity for UK consumers to be subsidised by selling energy to other countries that need it.  And cutting ourselves off from the Republic of Ireland in particular may have 'political' consequences.

We are - whether you like it or not - part of the international energy markets.  Changing that won't necessarily lead to a better outcome.

The_Green_Hornet

Section62 said:

chris_n said:

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.

Why would anything other than gas be "inherently cheaper"?

Renewables?

This is something that EU are looking to do by creating two separate markets – one for electricity produced from expensive fossil fuels and the other for cheaper electricity from renewable sources.

QrizB

The_Green_Hornet said:

Section62 said:

chris_n said:

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.

Why would anything other than gas be "inherently cheaper"?

Renewables?

This is something that EU are looking to do by creating two separate markets – one for electricity produced from expensive fossil fuels and the other for cheaper electricity from renewable sources.

I think the point being made is that renewable energy isn't inherently cheaper than gas. For a long time it was more expensive.

It just so happens that, at current gas prices, many renewables *are* cheaper.

Section62

QrizB said:

I think the point being made is that renewable energy isn't inherently cheaper than gas. For a long time it was more expensive.

It just so happens that, at current gas prices, many renewables *are* cheaper.

Yes, it was whether everything except gas is "inherently" cheaper, or whether it is a case of "this week/month/year".

A plan based on gas being the most expensive form of energy is potentially as flawed as the ones which imagined that gas was always going to be cheap (and freely available from Russia).

doodling

Hi,

I have seen no evidence that renewable energy (as a whole) is cheaper than gas, even at current gas prices. 

At the moment (i.e. in the next hour or so) enewable energy is infinitely more expensive than gas - I can buy 1GW of additional gas generation right now at a price but I can't buy 1GW more renewable power.

Renewable only works because we have gas generation to pick up the slack when there isn't any renewable generation - I could make a good case that a fair chunk of the costs of gas generation are part of the costs of renewables and should be allocated as such.

Maybe when we've flooded Wales for pumped energy storage, or built hydrogen storage on a scale several orders of magnitude bigger than anyone has ever attempted before then we can lump the costs of those in with renewables and I'll agree that renewables are cheap, but my suspicion is that we'll all be saying how cheap nuclear power is by that point.

Renewable energy is great providing you don't care when it turns up and are happy to sit in the cold and dark until that time. Personally, I like to be able to have my heating on when I'm cold, rather than only when the wind is blowing.

[Deleted User]

Alok Sharma, the President of COP26, got much media coverage when he pressed the button recently to destroy one of our last remaining coal-fired power stations. This coming Winter, the Grid operator is paying for 2 coal-fired power stations to come back online/standby. Who pays for this Decision - we do?

Responding to a National Grid report on network balancing costs, Gillian Cooper, Head of Energy Policy of Citizens Advice, said:

“In the middle of a cost-of-living crisis, it’s totally unacceptable for energy generators to be making excess profits off people’s bills.

“This report outlines important measures that could help. But now words need to turn into action.

“Ofgem must close any loopholes allowing poor practice to take place. The regulator has to ensure generators are playing fair, so that families aren’t left to pick up yet another bill.”

Background

• Balancing costs are costs created when National Grid has to buy additional energy from generators. This might happen due to adverse weather conditions or if a power generator fails.

• Balancing costs are added to people’s bills via the price cap and higher wholesale energy prices

• Balancing costs have risen significantly over the last two years from £1.3bn in 2019-20 to £3.1bn in 2021-22

Section62

Dolor said:

Alok Sharma, the President of COP26, got much media coverage when he pressed the button recently to destroy one of our last remaining coal-fired power stations. This coming Winter, the Grid operator is paying for 2 coal-fired power stations to come back online/standby. Who pays for this Decision - we do?

Ferrybridge C?  If so, the "recently" was August 2021.

The power station finally ceased generation in 2016, at the time only having one (of four) 500MW generating units still in operation.

Units 1 and 2 closed down in March 2014 because they had never been fitted with FGD. A fire in 2014 affected Units 3 and 4, putting Unit 4's FGD system out of action and causing it to be finally shut down in early 2015.

That left only Unit 3 producing electricty (the 'one' out of four).  Apparently at a loss.

I wonder, if we were to look in the archives of what Citizen's Advice have said over the years, would we find evidence that they campaigned vigorously to keep coal as part of our electricity generation, and that measures such as FGD shouldn't be a requirement if it means closing down power stations which aren't yet life expired?

born_again

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.

You mean Billions 2+ & counting. Just for 1.6 million customers. 
Octopus wanted a £1 billion handout to take them on.

https://www.ft.com/content/cbe1c23e-e929-42ec-8f0d-58065802c53e

>> The cost to UK households of bailing out nationalised energy retailer Bulb is expected to soar to more than £4bn by the spring unless the government achieves a sale, saddling every home with an additional £150 or more on its bills next year. <<