Are we being conned with high energy charges

MouldyOldDough

See https://www.energydashboard.co.uk/live for live current energy use and sources in UK

It clearly shows that gas is currently only a small (11% amount) Wind is 50% of electricity generation

So why is it so expensive and getting even more ?

Apodemus

The snapshot figures at 2pm on a relatively windy day (in the North Sea), don't necessarily reflect the position at the peak daily demand or when the wind is not blowing so well for the renewables sector. 

pochase

If you want to pay always the current price you should go for a Octopus Tracker or Agile.

Just be aware that the latest cap was 100p, so you might end up pay three times the SVT cost.

Astria

If you want to buy electric/gas at a specific point in time then yes you can get some pretty decent prices. For example, last night/this morning when the winds were strong you could get free electric from Octopus as it was price was 0p (and in some cases a negative amount)

If you want a guaranteed rate regardless of time of day, then the price will be significantly higher.

InvertedVee

MouldyOldDough said:

See https://www.energydashboard.co.uk/live for live current energy use and sources in UK

It clearly shows that gas is currently only a small (11% amount) Wind is 50% of electricity generation

So why is it so expensive and getting even more ?

The wholesale price of electricity isn't made up of a basket of differently-priced contributions from gas, wind, nuclear etc. The price is market-driven by an auction for every 30-minute slot in the day. Each supplier offers electricity at a rate into the (unregulated) market. It's a 'pay as you clear' model, so the final price paid by purchasers for all electricity in the 30-minute slot is set by the highest price electricity that had to be bought.

In other words, the marginal cost of the last generating unit used to meet demand sets the price that the energy suppliers pay.

Although other forms of generation have lower marginal cost than gas and although they usually produce the majority of UK electricity, the price that is paid for them is set much higher than the cost of supply. It's set at the marginal cost of generating electricity with gas.

Here's a graph illustrating it. Price on the y-axis, demand on the x-axis. At very low demand, the price falls significantly. It can even go negative if generators need to off-load their electricity. As demand rises, other forms of supply come on stream, at higher prices. 

You might ask, isn't this unfair? Why can't the buyers simply shop around and buy their basket of electricity at different rates from different generators? The difficulty is that in a single market for electricity, the lower-cost generators would then simply set a price that they thought the market would stand, in effect not much less than the gas price. (Prices in unregulated markets for other goods, whether potatoes or iPhones, are set by what the suppliers think the market will stand, rather than on costs of supply). If generators thought that a market wasn't worthwhile because it couldn't give a sufficiently high price, they'd leave the market and we'd run out of power.

I'm not saying that I like the system. But this is how it works.

One way out of this problem would be to create different markets for different sources of generation. Perhaps we'll see something like this emerging as a proposal later this year.

Lots more detail on this here: https://www.instituteforgovernment.org.uk/explainers/electricity-market

Scot_39

MouldyOldDough said:

See https://www.energydashboard.co.uk/live for live current energy use and sources in UK

It clearly shows that gas is currently only a small (11% amount) Wind is 50% of electricity generation

So why is it so expensive and getting even more ?

Because that is not the standard typical mix - and nor does it reflect the advanced purchasing of much of the gas / electricity we use.  2 weeks ago during the cold snap - wind was less than 10% of mix - outputting c3GW vs todays 18GW.

And that pushed the daily ave wholesale prices to c670 (it was c£200 at lunchtime today), but a more telling c£2500 at 6pm - whcih is why national grid / energy firms have been paying people not to cook etc at that time.

See Ofgem price cap page for their assumed costing periods - basically last 3-6 months for current cap.

If used the grid's own page - look at the longer term figures and mixes.

And the biggest problem - is until Cons introduced CfD for nuclear (for Hinkley C in 2012 deal - c10p at 2012 indexing now Sizewell going ahead - but not expected online to 2026/7) and in 2015 renawables auctions - the price was uncapped - so basically market rate - even if bears no relationship to cost to produce.

Hence even Cons are now imposing windfall taxes on old wind contracts (assuming the threatened court case doesn't stop them).  Edit 5/1/93 - And that after months trying to get suppliers to accept offer new deals, replacing uncapped with capped prices along lines of modern CfD (contract for Difference) basis - which they rejected.

So far only sub 2GW from the 2015 auction (c12p/kWh) and maybe a bit from later is online - less than 5% of total demand if cold.

The next major 2019 auction (5.8GW @ strike price ?) with target online dates 2023-2025 and over 10GW Wind / Solar in July 2022 - sold at roughly 4.35p/kWh wholesale (at 2022 indexing when July market ave 45p) - target dates 2025-2027 - will build on that in coming years - so the caps will become increasingly significant - unless gas prices drop away.

But it is already making a small difference to our bills - only c1% - the Oct/Q4 2022 Ofgem cap had -£23 CfD rebate in total - the Jan/Q1 2023 had -£40 rebate in total.

consequences

MouldyOldDough said:

So why is it so expensive and getting even more ?

Because it's a quasi-monopoly and they can get away with it.

Miser1964

I read the spot price for electricity went negative in Finland a few days back. In winter! Of course in rip-off Britain/Treasure Island we continue to be bled white; largely due to the failures of Ofgem whose staff are 100% sympathetic to the producers. 

Astria

Miser1964 said:

I read the spot price for electricity went negative in Finland a few days back. In winter! Of course in rip-off Britain/Treasure Island we continue to be bled white; largely due to the failures of Ofgem whose staff are 100% sympathetic to the producers. 

Some providers in the UK (eg. Octopus) also had the electricity at negatives prices, it's not uncommon if you are on the right tariff and have a smart meter installed and setup for 30 minute monitoring.

Spoonie_Turtle

Miser1964 said:

I read the spot price for electricity went negative in Finland a few days back. In winter! Of course in rip-off Britain/Treasure Island we continue to be bled white; largely due to the failures of Ofgem whose staff are 100% sympathetic to the producers. 

Octopus Agile has had negative pricing reasonably often in the last week or so, also in winter.  Last Thursday, ¼ of the day was negative, dropping as low as -8.4p/kWh https://agileprices.co.uk/?region=E&fromdate=20221231

chris1973

I was talking to a relative over Xmas who lives in Jersey, they pay 17p per KWH for both Business and Domestic Electricity on a single rate, although they also have various E7 and 'Heat' style tariffs as Electric Heating is still the main form of heating for a lot of Islanders. My relative is on an E7 tariff which I think is 19p peak rate and 9.5p off peak. I guess it helps that they buy their Electricity from France.