Why is electricity rising as fast as gas

jimbo3172

I know the price of gas has risen sharply as a direct result of the war in Ukraine because European Countries are avoiding buying Russian gas which is putting the wholesale cost up globally. I don’t understand why electricity is rising so steeply. Over 40% of the UKs electricity is from renewable sources which is not impacted by global markets and imports make up less than 10%.

So why are the energy companies being allowed to raise the price as steeply as gas? 

If I was a conspiracy theorist I would be having a field day because if  I Google it, I can’t find anything, I just get reference to ‘energy’ prices.

Hoping someone can explain it to me in layman’s terms. 

macman

Because the current system allows generators to charge wholesale prices based on the marginal price of gas, rather than the actual price of generation, which is, as you say, currently much cheaper when renewables and nuclear capacity are taken into account.
There are moves to break this interconnection, both here and in the EU, but it's not in place yet, and is not likely to affect electricity pricing this winter.
Don't forget that considerable gas fired plant is still required to provide a large proportion of UK generation when wind and solar are producing negligible output-like on a still winter's evening.

[Deleted User]

This gets asked at least once a week - here are some of the threads that might help you understand.  It isn't a conspiracy.

https://forums.moneysavingexpert.com/discussion/6364901/gas-and-electric-price-link

https://forums.moneysavingexpert.com/discussion/6383358/decoupling-of-electricity-and-gas-prices

https://forums.moneysavingexpert.com/discussion/6338754/electricity-and-gas-prices

https://forums.moneysavingexpert.com/discussion/6332680/why-are-electricity-prices-linked-to-gas-prices

https://forums.moneysavingexpert.com/discussion/6388257/why-has-the-energy-price-guarantee-favoured-electricity-over-gas

matelodave

Increases in electricity generation from all renewable sources should push the share of renewables in the electricity generation mix to an all-time high of 30% in 2021. Combined with nuclear, low-carbon sources of generation well and truly exceed output from the world’s coal plants in 2021.

Dunno what it it's gonna be for 2022 but at this moment in time some 55.09% is being produced by gas and only 13.26% from wind, nuclear accounts for around 11% and the rest comes from other sources, although not a lot from solar at this time of night.

You may not understand that although the renewable source (wind, water or solar) might be free, the stuff that's required to harness it costs lots of money up front before you start to get your money back.

Low carbon and renewable doesn't actually mean cheaper until a long time in the future when you've paid for the infrastructure to produce it.

QrizB

Here is an article at The Conversation that explains it in more detail than I can:

https://theconversation.com/renewables-are-cheaper-than-ever-so-why-are-household-energy-bills-only-going-up-174795

skogar

Approximately 40% of UK electricity is generated from gas so the gas price will have some effect on the price of electricity. On pages 28 and 29 in this link there are some useful pie charts and graphs showing how electricity is generated and how this has changed with time.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1094025/UK_Energy_in_Brief_2022.pdf

Ectophile

Imagine you've just built a wind farm.  It cost a lot of money, and you had to borrow most of it.  You're now paying off that loan, and you're expecting to be paying it for years.

Then the price of gas shoots up, and gas-fired electricity goes up accordingly.

Suddenly everybody wants your wind-powered electricity, because the wind hasn't gone up in price.  Do you say to those people:-

• Yes, you can have our electricity, and it's really cheap, or
• Yes, you can have our electricity, and it will cost a penny a unit less than the gas-fired stuff.

The people who own the alternative sources of electricity aren't stupid.  They will charge as much as they can get away with.