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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

  • Interesting Lazard report on the Levelized Cost of Energy (LCOE) here: https://www.lazard.com/media/451905/lazards-levelized-cost-of-energy-version-150-vf.pdf

    For lowest unsubsidized cost per megawatt hour, the cheapest options seem to be large scale solar farms or on-shore wind.  We're not building many on-shore wind farms at the moment because Conservative Party supporters are often NIMBYs, so we have to have the more expensive off-shore instead.

    I suspect their prices for gas-fired are a bit optimistic in Europe at the moment.

    The LCOE includes the cost of building and maintenance, cost of financing, and cost of fuel.  It also includes down-time when not generating.  For renewables, that would be the average actual generation, not the peak.

Reply

  • Interesting Lazard report on the Levelized Cost of Energy (LCOE) here: https://www.lazard.com/media/451905/lazards-levelized-cost-of-energy-version-150-vf.pdf

    For lowest unsubsidized cost per megawatt hour, the cheapest options seem to be large scale solar farms or on-shore wind.  We're not building many on-shore wind farms at the moment because Conservative Party supporters are often NIMBYs, so we have to have the more expensive off-shore instead.

    I suspect their prices for gas-fired are a bit optimistic in Europe at the moment.

    The LCOE includes the cost of building and maintenance, cost of financing, and cost of fuel.  It also includes down-time when not generating.  For renewables, that would be the average actual generation, not the peak.

Children
  • in reply to Simon Barker

    You need to be careful, the costs here (and outputs too) are deceptive. The solar looks very good but is based on desert conditions in southern USA, it would be wildly less good here and land costs are much higher, and there is no charge for lost agricultural production, which here is high. Clearly fossil fueled power production is much the cheapest, so why would anyone in their right mind stop it? Whilst Nuclear is expensive in capital cost, it is very much a 24/7 supply, and lasts a long time (in Britain 50-60 years). All the renewable sources are biased by the capacity factor in the comparison, add the cost of storage (full output for a week minimum, probably more including recharge time) and wind and solar look pretty bad. If storage is not available the cost of the backup supply also needs to be added, including its construction cost, and again they are bad. The economics simply do not add up. Suggesting that scrap car batteries could be used for backup is delusional, as the only reason to scrap a battery is that it has failed!

  • in reply to David Stone

    Time to dust off the drilling rigs and get them operating in the North Sea. Same with coal mines - we're sitting on tons of the stuff beneath our feet.

    And also, look genuinely at fracking options.

    Enough of this green nonsense. If they really want to go green, then how about stopping the water utilities from dumping raw sewage into our watercourses.

    QUOTE:

    Homeowners are being charged thousands of pounds to upgrade their electricity supplies so that they have enough power to charge an electric car and run a heat pump.

    People trying to switch to greener forms of heating already face costs to install alternatives and improve the insulation of their homes.

    Gas boilers and petrol cars are set to be phased out under the Government's net zero plans.

    But environmentally conscious householders are being penalised with eye-watering bills to upgrade their power supply amid concerns about the network's ability to cope with a growing reliance on electricity, The Telegraph can reveal.

    Many older homes in the UK have an electrical service of 60 or 80 amps, but 100 amps is standard for newbuilds and is usually seen as a requirement for anyone who wants to install a car charger. For homes that need even more power, three-phase supplies can be installed.

    ‘Hang on a minute, my home can’t deal with this’

    Gino Pooley, 59, a retired engineer from mid-Wales, enquired about improving his electricity supply to three-phase to enable him to install chargers for his family's two vehicles and a heat pump.

    He was sent a letter from his distribution network operator, SP Power Networks, stating that the work would cost £14,678 and has abandoned plans to install a heat pump.  

    He said: "Having your first charger, with a gas boiler, it won't affect you. But it will start affecting people nearer the time when they are going to be really pushed to go electric and [get] heat pumps. Then they are going to start realising – hang on a minute, my home can't deal with this."

    Laurent Schmitt, the chief executive of smart home startup dcbel, who previously worked on electricity grids in Europe, said most UK households could not handle the electricity demand of car charging and heat-pump heating at the same time.

    "If you have your normal electricity appliances, plus an electrical car charging at a decent speed – the standard is around seven kilowatt – plus a heat pump, then you would already exceed this 100 amps," he said.

    Faster car chargers that provide 11kw charging can be installed in 100-amp homes, but there is a risk of putting too much demand on the system if other electrical appliances are used at the same time, leading to blown fuses and blackouts, experts said. Extra chargers add to this risk.  

    Electric car drivers have also been quoted hundreds of pounds to upgrade their power systems from 60 or 80 amps to 100.

    Ben Nelmes, the head of policy at NewAutomotive, a transport research organisation, said: "Some of them will charge an absolute fortune – or worse they'll refuse to do it.

    "People will sign a lease on an electric car, they'll call up their electricity supplier and say: 'I want to have an electric car, I want home charging, I need to upgrade my fuse box.'

    "The electricity supplier will then ring up the distribution network operator, and the distribution network operators sometimes say no. And that causes chaos for people, which is really bad – they're trying to do the right thing and switch to an electric car."

    National upgrade to improve substations and cables

    A spokesman for SP Power Networks said it was planning to invest in mass upgrades and did not charge for upgrades to a 100 amp supply.

    "A typical electric vehicle can double household consumption, and heat pumps can have a similar or even greater impact," he said.

    "In the majority of cases, these low carbon technologies can be safely accommodated by the cables and assets we use to provide the customer with their electricity supply.

    "Connection requests involving both upgrading a domestic supply from a single supply to three-phase and requiring expensive network reinforcement are rare.

    "The current cost of this upgrade can vary significantly, depending on the work required, and is in line with the charging methodology used by all GB distribution network operators."

    A national upgrade programme, slated to begin in 2023, is expected to improve substations and cables to allow them to cope with the demands of thousands of domestic heat pumps and car chargers, which the existing grid was not designed to handle.

    A spokesman for the Department for Business, Energy and Industrial Strategy said: "The vast majority of domestic consumers will not need to pay for an upgraded connection to accommodate a heat pump and electric vehicle charger.

    "Where costs are chargeable, these are regulated by Ofgem to ensure they are calculated appropriately."

    The department added that an Ofgem review into the cost of new connections, which could see charges drop, is ongoing.

  • in reply to whjohnson

    That £15k for a 3-phase supply seems a bit steep, but it depends upon where you live. Mine cost about £1k.

    Daughter is having some building work done at the moment. The ABC cable seems to be 3-phase to the last pole. I feel sure that re-routing it to the new building wouldn't cost much. She might even get a rebate for the scrap copper.

    It may seem selfish, but I say get it while you can.

  • in reply to Chris Pearson

    On the topic of reliance upon a supply from interconnecters from the continent - we can forget that.

    Right now, the French and Germans are fighting over what can and what cannot be classified under the eu definition of 'Green sustainable' generation under Brussels edicts, with one side wanting nuclear to be included in the mix.

    Like ourselves in the UK, the eu has a shortage of energy generation capacity, the remainder of which will be vigorously fought over between eu states. Give it another couple of years and bad winters and they'll be fighting like cats in a sack over the last kilowatt.

    There'll be nothing left on the plate for us unless sense begins to be seen and fossil fuels once again come to the fore.

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