Decoupling of electricity and gas prices

jj_43

Section62 said:

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.

"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."

lol, repeat lol. It doesn't work like that at all.

Section62

jj_43 said:

Section62 said:

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.

"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."

lol, repeat lol. It doesn't work like that at all.

Feel free to explain...

[Deleted User]

jj_43 said:

Section62 said:

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.

"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."

lol, repeat lol. It doesn't work like that at all.

It could, if we have the excess generation that you suggest building.

QrizB

jj_43 said:

"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."

lol, repeat lol. It doesn't work like that at all.

I loom forward to your insightful analysis of how building enough generation capacity to achieve energy autarchy is somehow more affordasble if we don't sell the surplus.

I'm expecting to see it sometime after you post your cost-benefit analysis of retrofitting your current home to Passivhaus standards.

70sbudgie

There are currently three mechanisms for buying / selling electricity (that I am aware of), PPA (power purchase agreements) which are direct contracts between the generator and supplier (I understand that this is how Ecotricity operates), CfD (contracts for difference) which are government awarded price /MW for a set duration (do these include inflation?) and the open market. The latter is like a reverse auction where every generator receives the same price / MW which is based on the highest price generator electricity is purchased from. FF generators (like all other generators) have a variety of operating costs, so when renewable generators are not producing much, more electricity needs to be bought from more expensive FF generators.

Options for decoupling FF from electricity? Include building more non FF generators, so (expensive) FF is "pushed" out of the market. More PPA agreements (will require a lot more non FF generators). Open market mechanism changed so that non FF generators don't get paid FF prices. 

Completely decoupling will be complicated as there will be many CfD contracts for FF generators that still have years (decades?) to run. Do they include inflation clauses? (I think, but am not sure, that more of the historical CfD contracts went to FF generators than cleaner generators). 

Anyway, this is why it is all being reviewed. I would like to think that review will happen relatively quickly given the current energy crisis, but it is a UK government review, so who knows?

jj_43

Section62 said:

jj_43 said:

Section62 said:

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.

"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."

lol, repeat lol. It doesn't work like that at all.

Feel free to explain...

ok

the industry model is each energy company has downstream, midstream, upstream p&l.
downstream is the energy retailer to the customer. midstream is the trading unit for the downstream p&l, upstream has all the assets (generation, gas, oil). Each p&l feeds into group, they have strategies, targets, kpi to meet.

downstream will forecast demand, and do hedging. They ask midstream to sell/purchase, who transact at the market price quoted on screen. 

downstream will price and create tariffs for the customer. They add up all the costs, including latest commodity costs to form the price and tariff is created.

In these activities there is no decision or conversation such as "upstream are making 8 times more on gas this year" so we have £100m to give to downstream, or lets buy LNG from the US and ship it over to UK and use this cheap gas to provide a cheap tariff to customers that advantage is for the upstream or midstream p&l.

as others put it, why would I sell something to you for a £1, when i can sell it for £2?

doodling

Hi,

jj_43 said:

Section62 said:

jj_43 said:

Section62 said:

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.

"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."

lol, repeat lol. It doesn't work like that at all.

Feel free to explain...

ok

the industry model is each energy company has downstream, midstream, upstream p&l.
downstream is the energy retailer to the customer. midstream is the trading unit for the downstream p&l, upstream has all the assets (generation, gas, oil). Each p&l feeds into group, they have strategies, targets, kpi to meet.

downstream will forecast demand, and do hedging. They ask midstream to sell/purchase, who transact at the market price quoted on screen. 

downstream will price and create tariffs for the customer. They add up all the costs, including latest commodity costs to form the price and tariff is created.

In these activities there is no decision or conversation such as "upstream are making 8 times more on gas this year" so we have £100m to give to downstream, or lets buy LNG from the US and ship it over to UK and use this cheap gas to provide a cheap tariff to customers that advantage is for the upstream or midstream p&l.

as others put it, why would I sell something to you for a £1, when i can sell it for £2?

(Referring to the bit I have bolded) - why would anyone do that when they could sell it on the open market for a higher price?  To be blunt, the UK market price for gas reflects the fact that you could buy LNG from the US and ship it to the UK - if that was easy then the UK and US prices would track each other with the only differential being shipping costs.

Not to mention that buying LNG is not a simple process at the moment - you risk being outbid right up until the moment that the ship is actually unloading the stuff - if the LNG seller gets a better offer they will turn that ship around.

MattMattMattUK

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.

Not millions, billions. The last estimate was £2.8 billion by the end of September this year, £4.6-6.4 billion if they have not disposed of Bulb by March next year. None of the other suppliers are willing to take Bulb on because they know it would mean losing billions and at the moment that cost is being funded from general taxation, but there is still the possibility that it will be put onto energy bills at some point in the future. 

MattMattMattUK

wrf12345 said:

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. 

The UK does not produce any gas, private companies do, private companies to whom the government sold the gas to decades ago. I guess if the government wanted to completely destroy the economy and any form of inward investment then they could seize private property, but it would be idiotic on a colossal scale. This idea you have of a "normal profit", when energy companies were losing billions in 2020, were you prepared to bail them out? The average profit over the last five years in the energy sector is around 3.5%, that is quite low overall, over the period from 2020-2025 that might be expected to rise to 5% at a maximum, which is still a fairly low rate of return.

wrf12345 said:

Much higher electric and gas prices will wreck the economy both from a manufacturing and consumer point of view.

The problem is there is that there it has to be paid for somehow, every action has consequences and that is why no country has found an easy solution yet. 

wrf12345 said:

If the govn prints yet more money it will just ruin the currency which will make energy and everything else more expensive.

Printing money would be further inflationary so a very bad option, especially at the scale required for "free energy", borrowing would be very bad because we already have the highest debt as a percentage of GDP for seventy years, the cost of government borrowing is increasing and the UK has been living beyond it's means since 1999. Increased taxes would be bad, but probably the least worst option, combined with a level of subsidy on energy, but still having higher prices to encourage a reduction in usage. With a medium and long term view of huge investment in government owned generation capacity to make sure the UK has a secure energy supply. There will be a recession, there will be a drop in living standards, people are going to have to deal with that, it is a cycle, it happens.

pochase

jj_43 said:

Section62 said:

jj_43 said:

Section62 said:

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.

"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."

lol, repeat lol. It doesn't work like that at all.

Feel free to explain...

ok

the industry model is each energy company has downstream, midstream, upstream p&l.
downstream is the energy retailer to the customer. midstream is the trading unit for the downstream p&l, upstream has all the assets (generation, gas, oil). Each p&l feeds into group, they have strategies, targets, kpi to meet.

downstream will forecast demand, and do hedging. They ask midstream to sell/purchase, who transact at the market price quoted on screen. 

downstream will price and create tariffs for the customer. They add up all the costs, including latest commodity costs to form the price and tariff is created.

In these activities there is no decision or conversation such as "upstream are making 8 times more on gas this year" so we have £100m to give to downstream, or lets buy LNG from the US and ship it over to UK and use this cheap gas to provide a cheap tariff to customers that advantage is for the upstream or midstream p&l.

as others put it, why would I sell something to you for a £1, when i can sell it for £2?

If each supplier had/has an upstream that makes billions why did 30 suppliers go bust last year? Did the upstream just feel no longer like having a supply division? Can you just give us a list who the upstream companies were?

Just out of interest who are the upstream companies for example for Octopus, Ecotricity or Green Energy UK.