Are we being conned with high energy charges

Redscope77

InvertedVee said:

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

So that's how it works but it hasn't convinced me the charging model is fair.  Given, on an annualised average basis, 40% of the energy feed into the grid is generated by Gas; 60% from other sources, the grid is over paying on 60% of the energy generated market.

The grid is able to calculate how much energy provided by source. So the grid already knows (per every 30mins) what proportion of energy is sourced from which generator.  It's not a big leap for the energy generators to state the cost price per kWh + margin.  

Am I missing something?

70sbudgie

I think the point you've missed might be that National Grid has the data, but they are a private company (and American?). For the government to have the sort of influence you are talking about, the TSO (Transmission System Operator) would have to be nationalised. I saw an article last spring (I think from the Guardian) that this was going to happen, but I have seen nothing since that corroborated this. So did / will the current Conservative government be known as the one that chose to nationalise (albeit only part of) the electricity network? 40 years after privatisation?

InvertedVee

Redscope77

As I wrote, it's not a system I like. Many of us would prefer something radically different and would use our votes in general elections to that effect if we could.

[Deleted User]

InvertedVee said:

Redscope77

As I wrote, it's not a system I like. Many of us would prefer something radically different and would use our votes in general elections to that effect if we could.

The review is ongoing:

’ Ofgem is undertaking an assessment of locational wholesale electricity market design options (“locational wholesale pricing assessment”). This aims to assess the potential benefits, costs and implementation requirements associated with moving to zonal or nodal wholesale electricity market design in GB. These market designs are used in numerous jurisdictions around the world but would represent a significant change for GB. 

The assessment aims to:  

• consider how these market designs could operate in GB;
• undertake economic modelling to identify the potential quantitative benefits associated with different wholesale market designs in scope;  
• assess likely implementation requirements and costs; and
• evaluate potential distributional impacts and potential mitigation measures. 

The work intends to support the UK Government’s Review of Electricity Market Arrangements (“REMA”) that is considering a wide range of options for updating GB electricity market arrangements to ensure that the UK’s commitment to a decarbonised and secure electricity system by 2035, at least possible cost to consumers, can be delivered. The UK Government’s first REMA consultation, published on 18 July 2022, highlighted the need for more accurate locational signals as a key cross-cutting issue for GB electricity market reform. More accurate price signals, including prices that vary by time of day and location, have the potential to significantly reduce costs for consumers by incentivising the right demand and supply responses in the right places, at the right time and making the best use of all available resources. ’ (source OfGem)

The Army has an expression for this type of work: they call it Situating the Appreciation. Essentially, a commander has already decided on a plan of action, and he/she uses a biased/slanted Appreciation to support his/her proposed plan. Expect to see time-of-use tariffs as an industry norm within the next 12 to 18 months.

MattMattMattUK

[Deleted User] said:
Expect to see time-of-use tariffs as an industry norm within the next 12 to 18 months.

I do hope we get them so that people who use the most at the most expensive times pay proportionatly for their usage. Full ToU tariffs and any who refuse smart meters charged permanently at the highest rate.

macman

Ironic that those who refuse smart meters on the grounds that they're a breach of privacy, a health risk, designed to spy on us and inflate our bills etc, tend to be the same ones who are convinced that the recent price increases are a conspiracy by the oil and gas and generating industries to impoverish us even more.
TOU tariffs are no more sinister than E7 was 50 years ago: an attempt to even out demand, but now with more sophisticated controls available.

dunstonh

macman said:

Ironic that those who refuse smart meters on the grounds that they're a breach of privacy, a health risk, designed to spy on us and inflate our bills etc, tend to be the same ones who are convinced that the recent price increases are a conspiracy by the oil and gas and generating industries to impoverish us even more.
TOU tariffs are no more sinister than E7 was 50 years ago: an attempt to even out demand, but now with more sophisticated controls available.

FYI, there is currently a thread in the pensions section of this site where a couple of people have opted out of their workplace pension because of concerns over privacy and that workplace pensions are a Tory conspiracy.

You just have to accept that you get some very strange people out there and you cannot educate them as they prefer to remain ignorant.    Ignorant also meaning ignore+rant

MouldyOldDough

MattMattMattUK said:

Dolor said:
Expect to see time-of-use tariffs as an industry norm within the next 12 to 18 months.

I do hope we get them so that people who use the most at the most expensive times pay proportionatly for their usage. Full ToU tariffs and any who refuse smart meters charged permanently at the highest rate.

Yes but the less well off /disabled and those less able to afford power are those who will not be working 9-5 and will require power at home during peak hours 
So I would say that social tarriffs being properly managed are more important 




 

MattMattMattUK

MouldyOldDough said:

MattMattMattUK said:

Dolor said:
Expect to see time-of-use tariffs as an industry norm within the next 12 to 18 months.

I do hope we get them so that people who use the most at the most expensive times pay proportionately for their usage. Full ToU tariffs and any who refuse smart meters charged permanently at the highest rate.

Yes but the less well off /disabled and those less able to afford power are those who will not be working 9-5 and will require power at home during peak hours 
So I would say that social tarriffs being properly managed are more important 

The two main peaks are 07:00-09:00 and 17:00-20:00, for many people those are avoidable or at least able to keep to a minimum. Daytime electricity is actually fairly cheap, it used to be part of the old E10 daytime windows, as well as Octopus's new Cosy tariff. Those who were not working 9-5 but different hours would probably avoid those peaks by default and for those at home then it should be easy enough to shift the majority of their usage outside of those two peaks. 

Social tariffs are an awful idea, they create a whole bunch of other issues. Benefits should be paid at the required level, especially for things like disabilities which come at additional cost. 

[Deleted User]

MouldyOldDough said:

MattMattMattUK said:

Dolor said:
Expect to see time-of-use tariffs as an industry norm within the next 12 to 18 months.

I do hope we get them so that people who use the most at the most expensive times pay proportionatly for their usage. Full ToU tariffs and any who refuse smart meters charged permanently at the highest rate.

Yes but the less well off /disabled and those less able to afford power are those who will not be working 9-5 and will require power at home during peak hours 
So I would say that social tarriffs being properly managed are more important 




 

No free lunch here: social tariffs will result in a cost that has to be borne by others either in the form of higher energy bills or higher taxes.

There is an article in today's DT which suggests the 54.2% of UK households now get back more from the State than they pay in taxes.