Wind Becomes Britain's Largest Electricity Source
reports.electricinsights.co.uk
reports.electricinsights.co.uk
Perhaps the blame is because the previous Tory government banned onshore wind, the cheapest form of wind energy, a ban only lifted recently under Starmer? I don't know the reason, but it deserves a more serious analysis.
https://commonslibrary.parliament.uk/why-is-cheap-renewable-...
As to whether the cause is Tory ban of onshore wind- I'm skeptical. I don't think wind is any cheaper than gas once you include the necessary energy storage capacity- especially when there is huge amounts of gas sitting under the north sea which the new Labour government is planning to ban pumping: https://www.forbes.com/sites/gauravsharma/2024/07/12/sudden-...
Also, they're banning looking for new gas, the cost of which is 91% subsidised.
> The new 80% Investment Allowance will mean businesses will overall get a 91p tax saving for every £1 they invest – providing them with an additional, immediate incentive to invest. This nearly doubles the tax relief available and means the more investment a firm makes, the less tax they will pay.
https://www.gov.uk/government/publications/cost-of-living-su...
https://www.youtube.com/watch?v=NicE0-N9ux0
TLDR version - https://www.youtube.com/watch?v=R3bo-s_OY4Q
This is why. Prices are set by what electricity retailers think the "market will bear". Unlike suppliers bidding in which the lowest price wins, our electricity prices are set by the highest bidders.
It al
If the number of suppliers needed happens to be ten, then the ten lowest bidders prevail, and the highest bidders lose out. The ten lowest bidders all get the rate offered by the tenth lowest bidder, ie. if a supplier bids at its own cost, it'll likely make a profit (or not get a contract at all).
They just charge for the most expensive generation method for all electric usage on the grid from what I can tell, regardless of source.
Not sure if this is a "UK problem" in terms of regulations or legacy infrastructure, or if there is some more general economic-theory behind it.
You're free to make your own electricity grid
There are some issues, like for some reason the UK national grid doesn't pay different amounts for different locations, even though our grid capacity is too low to transport all the electricity we need from Scotland to England. They could fix that if they wanted.
You might say it's not an "open market", in that it has to be tightly controlled by the grid operators to ensure that it doesn't dephase. But it's still a free market. If you build a power station and undercut everyone else they will have to lower their prices, just like every other market.
It does not work like that. You're paid the price the most expensive power station running is setting. And as the most expensive power stations earn via the capacity market, what you do is keep your old gas/coal power station spot price set really high, and you'll profit anyway.
Also, electricity 'price' set for wind and solar are 0, good luck getting lower.
In the short term, when a geopolitical rival is invading your neighbours and using its control of certain resources to destabilise your own country, the windfall profits should be seized and returned to the people.
This happened somewhat slowly and piecemeal in europe because big energy companies had too much sway over the political process.
> or if there is some more general economic-theory behind it.
It’s economics 101: supply and demand. If electricity from renewable sources wouldn’t get more expensive, demand for it would soar. Since supply can only follow slowly (it takes time to build wind farms/install solar panels), demand would outstrip supply, so prices go up.
However, we're now beyond that point so it seems to me that the pricing model should change. With the planned growth rate of new wind (and solar) by 2030 for the UK I assume it's going to happen one way or another.
As you probably noticed, although you have a "100% renewable energy" tariff, the company who sold you this tariff did not lay new cables to your home to supply this energy. Indeed, they don't lay any cables, anywhere, they're just a paper company, they have an office maybe, a call centre, maybe a few web servers in the cloud. Clearly they do not make "100% renewable energy" and they couldn't deliver it to you if they did.
Instead your home is hooked up to exactly the same electricity as everybody else in your area, by a specialist supplier who deliver electricity to everybody (well, all ordinary residential customers and most small businesses, the situation for an industrial Aluminium Smelter or whatever isn't the same) but don't have you (or any of your neighbours) as direct customers. This is good news - when it's dead calm and dark, but freezing cold, your electricity still works because it's the same electricity as your neighbours.
So what were you buying for one penny per kWh extra? In the UK when a wind farm makes electricity they get an imaginary coupon for the fact that this is "green" renewable energy called a Renewable Energy Guarantee of Origin or REGO, they can snip this coupon off the electricity and sell these two things separately. The electricity is valuable (in another response elsewhere I might cover why it might be more valuable for them but it's irrelevant to you) and so obviously they should sell that for the prevailing market price or better if they can. But the REGO eh, not so much. But they can sell it, even if for not very much, and so they do.
You are paying one penny per kWh for a promise that your supplier will buy enough REGOs to add up to the amount of electricity you used. That probably cost them much less than a tenth of a penny per kWh. So, really you just gave them free money.
In theory if most electricity users in the UK cared, and bought these "100% renewable" tariffs, the REGOs could go up in value and you'd make a real difference and it would all be worthwhile. In reality very few UK consumers even bother to pick a cheaper electricity tariff, let alone seeking a "renewable" tariff. So, next time your tariff renewal comes up, ignore whether it's "renewable" that's not better or worse, just focus on price. Wanting to do good is an excellent motive, but this is the wrong place to attempt that.
Please post sources.
This report - https://commonslibrary.parliament.uk/research-briefings/cbp-... - from a few days ago says "the average price of electricity 23.4 p/kWh", which is €0.28/kWh.
France is generally cheaper, but I can tell you I pay more than €0.20/kWh and probably closer to €0.25 if I actually check my bills...
If the UK Grid needs 1001 MWs for a day and can source 1000 MWs at £0.05/Kwh from wind and 1MW at £0.50/Kwh from gas, then it pays £0.50/Kwh for both. This gives larger profits to cheaper sources of electricity, therefore hoping that it will accelerate the growth. Whether this works or not is up for debate.
TLDR: We pay the most expensive price for all electricity regardless of its cost.
Easy explainer: https://www.sustainabilitybynumbers.com/p/electricity-pricin...
The retail electricity prices are linked to the wholesale gas cost. So consumers pay the same unit rate for electricity regardless of source/time of day etc. (simplification). Average 23p / kWh or so.
However, the producers of the electricity get paid the grid spot price. Plus any source-specific government-agreed subsidies (for nuclear, or the strike price for wind auctions).
So the typical/average UK grid electricity spot price is around £70 per MWh or 7p per kWh, so while retail is 23p / kWh a solar producer doesn't get paid 23p.
What you will also find is that the spot price, while it varies a lot, tends to be higher in the UK late afternoon / early evening, and higher in the winter than the summer, both of which are normally times when solar output is lower.
https://en.wikipedia.org/wiki/Electricity_market#Bid-based,_...
Octopus isn't allowed to pass on the full burden (e.g. if the spot price soars to £5000 per MWh, which is crazy, Octopus has to eat that and charge their customers £1 per kWh as promised. even though that's much less than £5000 per MWh) and of course they want a profit (say spot price is £150 per MWh, Octopus charges 18p per kWh, they kept a few pence for operating costs and profit) but if you are able to react nimbly then this allows you to get a significantly better deal than if you're paying a fixed rate.
This is possible because of Smart Meters. The meter sends your usage, not once a month, or even once a day, but every half hour, so they can bill you 2p per kWh at 3am but 35p per kWh at 5pm reflecting the very different energy profiles and production.
From historical data, Octopus would also pass on a negative spot price to customers on that tariff so consumers could sometimes get paid to use electricity.
As you say I'd imagine that certain customers with high flexibility, maybe/particularly those with some battery storage (or an EV to charge), could make huge savings.
I don't know what sort of margin Octopus apply on that tariff, I expect it's a bit higher than the 3 p / kWh you suggest (when normal tariffs would average something like 15 p / kWh difference between average wholesale and retail).
For a huge fraction (maybe 95% for all I know) of UK retail consumers they're still with their legacy incumbent supplier, even though those deals are usually more expensive and the service is no better, "privatization" was largely a waste of everybody's time and money. But at least in principle they could all choose Octopus.
Not really and this is currenctly causing a big problem. France stopped building new reactors after 2002. They only built 1 new generation EPR, which was very late and 6x the cost. Many of the reactors are very old and need to be replaced, but it's difficult to do because of the bad experiences of Flamanville's reactor.
If new projects get ordered I'm quite confident costs will move closer to the actual bill of materials, per unit.
We have the most expensive electricity, and its either going to require complete replacement of gas produced electric or replacement of all contracts. I think I can have a good guess as to what is most likely to happen first.
Maybe it's easier to see why this is how it works with physical goods in a model rather than fungible electricity and numbers that make no human sense.
We want to buy 100 oranges.
Alice has 40 oranges, and she's willing to part with them for 60p each
Bob has 18 oranges, he wants 56p
Carol has 36 oranges, wants 70p each (!)
Dave has 60 oranges for only 49p
If we insist on having Alice's Oranges and Dave's Oranges but only paying 49p each for them, obviously Alice is going to be very angry about that, we're stealing her oranges, she didn't agree to be paid this little. Also Bob would likely be somewhat angry, he thought we'd buy his cheaper oranges, and instead we just stole Alice's !
So, what we actually do is we take all Dave's oranges, all Bob's oranges, and twenty two of Alice's oranges, and we pay Alice's price for all 100 of them.
Now, Dave has a lot of power here, because we need 100 oranges which the other orange suppliers couldn't cover without him, he could set his price as high as he likes. So it's important under a system like this to ensure you have lots of suppliers so that nobody gets as much power as Dave has.
Unlike our model orange market, the wholesale electricity market is thirty minutes at a time. So 48 prices per day. So if the wind picks up for a few hours at night, for those hours most likely the clearing price will be set by wind prices, the gas generators stay online (typically better to lose a few quid per MWh to idle at low power than eat the restart cost on those generators although you might want to schedule any maintenance for predicted high wind periods) but the prices are set by wind.
In spring that happens fairly often, might even happen for several days in a row. Mid-winter, not so much.
What are you talking about. If I walk into shop A and buy an orange for 10p, then walk into shop B and buy an orange for 15p, I didn't steal 5p from shop A.
"Alice has 40 oranges, and she's willing to part with them for 60p each"
See? Sixty pence.
"If we insist on having Alice's Oranges and Dave's Oranges but only paying 49p each for them"
We're only paying forty-nine pence for Alice's Oranges.
But Alice's price was eleven pence more - we are stealing from Alice
We're trying to determine a single clearing price, the oranges are just an analogy to make it easier to see why we can't choose the lowest price.
Your "well actually" was argumentative and added nothing.
The solution is to either remove the expensive sources or change how we do the purchasing. Nothing you said changed that.
What is paid is the clearing rate and I explained why. Fantasies about "changing how we do the purchasing" won't change the facts either.
There are no subsidies in Ontario, Canada, and nuclear is the second cheapest (CA$ 0.101/kHw) after hydro-electric (6.2¢/kWh); see Table 2:
* https://www.oeb.ca/sites/default/files/rpp-price-report-2023...
So looking at insurance, it's impossible to fully insure a nuclear power station, and so the state effectively insures it.
With long term storage of waste, the material has to be securely stored for about 10,000 years. As far as I know, only Finland is doing this so far.
With decommissioning, it always costs more than is set aside, and so the taxpayer gets left to pick up the pieces eventually.
With your example of Ontario I don't know how these costs I've outlined will be handled, but if it's anything like the UK the costs will be pushed onto the taxpayer.
It has to be stored for 6-10 years for cooling after it is taken out of the reactor. Then after 200-300 years the only way it is dangerous is if you (a) eat it, or (b) grind it up and snort it like cocaine.
The '10,000 year stuff' is not very 'hot' and any radiation given off can be blocked by aluminium foil. The dangers over thousands of years is overblown:
* https://www.youtube.com/watch?v=z2t2tYQsK94
> With your example of Ontario I don't know how these costs I've outlined will be handled, but if it's anything like the UK the costs will be pushed onto the taxpayer.
The generation companies will be handling nuclear waste in Canada:
> The Act required Canadian electricity generating companies which produce used nuclear fuel to establish a waste management organization to provide recommendations to the Government of Canada on the long-term management of used nuclear fuel. The legislation also required the waste owners to establish segregated trust funds to finance the long-term management of the used fuel.
* https://en.wikipedia.org/wiki/Nuclear_Waste_Management_Organ...
It still may be an acceptable price, externalizing certain known or unknown costs to the state, but when it comes down to it, no source really does this well. That being hard to price is a good reason.
This is way off. It's actually capped at €0.29/kWh at the moment. If you're talking about wholesale prices it's even more way off, and basically the same as France.
https://www.ofgem.gov.uk/energy-price-cap
https://tradingeconomics.com/united-kingdom/electricity-pric...
When she privatised electricity they split it into like a dozen different markets (supply, transport, retail, metering, billing, etc.) and coordinating all of those companies is insanely complicated and expensive.
Notably, the previous Conservative government managed to effectively ban onshore wind power in England, but not in Scotland.
I do have an EV and try to charge it at the lowest possible rate (including an occasional negative rate when it's very windy), which brings the average down.
I do not know if that is a large issue in the context of Britain, considering the 5.6 GW of hydro storage capacity it has.
The unit police issues you a warning! Storage is measured in watt-hours (or Joules), so 5.6 GWh in this case?
So, many people would be able to postpone charging their cars. Steep variable pricing easily would make them do that.
The Nordpool price today in the region where I live is 0.80 NOK/kWh, that's 0.074 GBP/kWh or 0.056 USD/kWh.
Here in the Netherlands there are also contracts like that, but people that are interested in them tend to put a lot of time and effort in then tracking those prices. I don't see regular consumers as a whole ever being interested in that. For now, the benefits are also small, and I happily pay a few percent extra (net) to not have to bother.
I also feel like it's not a good direction to move it: consumer energy markets are actually quite predictable so taking out long term contracts should stay the norm (consumer contracts and supplier contracts). Using car batteries as storage for solar can be addressed better by making it more attractive to charge at work, where I assume most park their EVs in the day, but right now pay full price despite providing a place to store surplus.
Meanwhile the EV fleet has risen to 3.5% of the total car fleet.
To thoroughly abuse statistics, theres an inverse correlation between EV ownership and electricity use.
https://publikasjoner.nve.no/rapport/2023/rapport2023_35.pdf
My Tesla S 70D could supply my house for at least 24 hours if it had V2G.
Of course, if the previous government hadn't effectively banned onshore wind in England, the cheapest source of energy available, you'd be able to deliver that energy for a quarter of the cost.
And, for extra added irony, this is an occasion that the classic "the wind doesn't always blow" line backfires, as either a) if it's windy in Scotland then it will be windy in England avoiding the gas cost or, b) the wind across that distance is decorrelated and you can displace even more expensive gas from the grid.