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Electricity prices - what next?

AJJewsbury

Electricity prices look to be soaring. Seemingly the tariff I'm on isn't one of those covered by the government's price cap and it looks like the price per kWh for this coming year will be over 80% higher than a year ago. Presumably everyone else will see similar increases soon - when the price cap is next revised in April if not before - or even higher increases as the delay means their suppliers are even more out of pocket. Presumably gas prices will increase by even larger proportions.

It seems the recent inflation is primarily down to demand exceeding supply in the international wholesale gas market causing the price to rocket.

Because of the way the UK wholesale electricity market is organised, if I've understood it correctly, the most expensive generator needed at any point in time effectively sets the price for the entire market. One interesting consequence of this seems to be that those renewable/nuclear generators who have agreed a fixed 'strike price' with the convernment (which for recent wind was lower than the typical price for gas generated electricity) have to charge their customers the full market price, but can only keep the 'strike price' and have to return the remainder to the government/regulator. Effectively renewable customers are in a way subsidising fossil fuelled generation, rather than the other way around - which presumably wasn't the intention.

Hopefully things will stabilise a bit as winter passes - but what's the long term outlook?

"Reforms" to the wholesale electricity market to better protect the whole from changes in price of just one fuel?

An acceleration in the move from using imported fossil fuels for generation to more locally sourced energy (mostly renewables)?

A greater emphasis on demand reduction (more efficient appliances/lighting, significantly better insulation for buildings)?

More "time shifting" of demand - to times of day were there's non-gas generating capacity available?

Another look at minimising distribution "losses" - look again at BS 7671 appendix 17 perhaps?

   - Andy.

Parents

  • Storage is also very very expensive, say £300 per kWh from Tesla

    Presumably that's the capital costs - if the equipment survived for say 3000 cycles (I think Tesla's warranty is for 10 years unlimited cycles) then the additional cost would be around 10p/kWh - if electricity ends up at 40p or 50p per kWh peak and but perhaps 30% or more cheaper off-peak (or lower cost from on-site generation) it might start to look financially attractive.

       - Andy.

Reply

  • Storage is also very very expensive, say £300 per kWh from Tesla

    Presumably that's the capital costs - if the equipment survived for say 3000 cycles (I think Tesla's warranty is for 10 years unlimited cycles) then the additional cost would be around 10p/kWh - if electricity ends up at 40p or 50p per kWh peak and but perhaps 30% or more cheaper off-peak (or lower cost from on-site generation) it might start to look financially attractive.

       - Andy.

Children
  • in reply to AJJewsbury

    I do not see why everyone seems to think that more expensive electricity is OK, I certainly don't. Unless energy prices are similar in all countries (they are not now) there is severe economic damage to be had for those that are more expensive. We already see this in the UK, and for countries that do not have a free market (China) there is a massive trading advantage in manufactured goods. They have lower costs all around from much less regulation, H&S, working hours directive, low imports of food, and virtually everything else. Our power is already quite expensive compared to other countries, even the US where "green" California is about 30% cheaper although being loaded with renewables subsidies. Many other states are considerably cheaper.

    Because storage has to be paid for "up front" Andy, your calculation is rubbish, you need to use a reasonable financing model as well, and borrowing money in trillions of pounds is pretty much impossible by private industry (the Electricity Grid). I suggest a real cost of storage is 30p per unit, making stored power completely uncompetitive at 50p to the consumer. At this price, most industry is completely uncompetitive, a total disaster. You need to consider the inflationary effects of this electricity too, wages would increase by  some% to pay for it, and more to pay for more expensive food and goods. Serious inflation is always bad and hits to poorest most.

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