There is a race to get wind farms built, held up by a lack of new big jack up cranes for the new generation (pun alert) of bigger turbines. Dogger Bank foundations are now going in but the turbines will have to wait. The waters around Europe are being filled with new turbines; the wider the spread the better for everyone! There is a wueue for the tools.
Electricity Prices: Where to now?
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except the ones on CFD. Where does that money go?
Anyone modelled what bills would look like if we didn't have this 'everyone pays the same as the highest spot price' nonsense?
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If you look past the death and destruction, the war in Ukraine pretty much meets your request to pay twice as much for renewable electricity. At the very least it's giving the law makers a prod in the right direction.
It goes to the Low Carbon Contracts Company; and ultimately back into the govt. coffers I guess. They have a budget to dispense money to the generators who need support but clearly at the moment all are making a contribution back to the LCCC as their strike price is exceeded.
Ofgem and BEIS are troubled by the present market arrangements and are looking at splitting the FF generation away from the renewable. And whilst they are at it the nuclear, Hinckley C too?
I assume some is reserved in case prices fall below the cfd guarantee and the LCC needs to pay the generators? But right now seems unlikely. Would seem to be a bucket the government could fairly easily dip into if needed?
Govt. accounting is a strange beast. Parliament agrees the funding and 'Votes' for it and that money then has to be spent... if it is returned as being underspent or as in this case because of unexpected receipts it gets lost in general income and is not there for disposal. I.e. Parliament did not Vote to have an income and therefore could not agree or Vote for its use. There are all sorts of technical rules about govt. finance. For example any money allocated for capital expenditure cannot be used to cover an overspend on running costs but an underspend on running coasts can contribute to capital expenditure... in that way you can sometimes save money for future years by buying a bit of kit to save manpower.
There is no shortage of gas, or fossil fuel cartels, in Australia
Sudden price falls in gas and electricity markets have caught out Australia’s fossil fuel cartels – like a trillion dollar toddler – with their hands in the cookie jar.reneweconomy.com.au
In the UK, the government and the regulator are sick of it, and are now seeking to design new markets that will ensure that the low price of wind, solar and storage is not polluted by the cartel-like practices of the fossil fuel industry.
I was trolling through the LCCC reports and dashboards. They expect around £1billion in net receipts from the CfDs over the next 6months. Some will go into reserves. However, they are expecting net receipts for the foreseeable, though from abut 12mo out the downside goes back to payments. If it is the government that directly sees these receipts that is a 'crap' deal as the payments are guaranteed by rate payers. That is they get added to electric bills, and not general revenue. In reality if we expect that the marginal MWh is going to be quite expensive for a while, there should be no shortage of commercial schemes to provide that – the problem is we don't actually have an efficient market on that end, too many barriers to entry.
As for government accounting, it really is a misnomer to call it 'money'. In reality agencies have chits to spend on certain things that are nominally with £X amount. Unfortunately, because they are chits and not really money we will always get less than the monetary value of those chits.
agree. The whole thing seems a mess since renewables and other generators started to become bigger suppliers. Seems like the mechanisms just aren't set up for the flexibility needed.
Ideally I would think we'd want wholesale prices to be pitched by vendors, and sold at those prices - not everyone moving to the highest price. I know this is being looked at but its a surprise its like this already. Make people pay more for the few MWh you need for gas only, and you'll encourage energy saving to avoid that usage, investment in renewables at lower strike prices etc.
Additionally any CfD should be put into a flexible pool - used to fund when wholesale price is low to meet the guaranteed minimums for those contracts, and excess used to keep bills low when prices are high.
obviously government makes things complicated but you'd have thought this past year would have focused the minds a bit more. Feels like billions on the table you could save from being passed on to consumers by reforming how energy is sold
Ideally I would think we'd want wholesale prices to be pitched by vendors, and sold at those prices - not everyone moving to the highest price. I know this is being looked at but its a surprise its like this already. Make people pay more for the few MWh you need for gas only, and you'll encourage energy saving to avoid that usage, investment in renewables at lower strike prices etc.
Additionally any CfD should be put into a flexible pool - used to fund when wholesale price is low to meet the guaranteed minimums for those contracts, and excess used to keep bills low when prices are high.
obviously government makes things complicated but you'd have thought this past year would have focused the minds a bit more. Feels like billions on the table you could save from being passed on to consumers by reforming how energy is sold
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I believe one of the factors that dictate a nuclear reactors life is the graphite core which slowly degrades and cracks having been bombarded with neutrons for all of it's life. It can't be replaced as it's in the highly radioactive part of the reactor. The operators don't want to be in the position where the control rods can't be inserted to stop the reaction due to bits of broken graphite core obstructing them so once the deterioration gets to a certain point the reactor must be shut down for good. Video inspection showed that they could extend the life for a few years but it can't go in indefinitely.
As @Brian G pointed out there is a lot of the market which is not on 'open markets'. Lots of long-term contracts are done privately, and we really don't know where the surpluses are ending up. However, the day-ahead and spot markets are single closing price markets, vs individual bid-offer strike pricing. These are slightly less liquid and may or may not have a significant effect on the final prices that are paid. Given that £45MWh CfDs look to be 'in the money' for LCCC I am surprised that we are not seeing more commercial development deals. However, this is likely due to the near impossible nature of actually developing these deals in the UK. Offshore is all crown, so no 'in' there, and onshore is regulated out of existence in England.
Right now we are likely paying fairly far above the marginal generation cost, as the actual marginal generator isn't going to 'turn-on' given that the export links are maxed. In some cases people are buying overseas for more than the local price and then selling it on to France, mainly because they have purchased the interconnection capacity.
While the markets are never going to be efficient enough, in real life, to allow it, you can't be surprised if anyone with a guaranteed price (from a future or long-term deal) to sell it onwards if the spot market price is higher than their value. This is why those on Octopus Go, etc cannot access the Agile export tariff, it would be a massive transfer of value from Octopus to the customer.
Although the article says the government are sick of it, I’m not actually sure they are. Maybe some in the civil service are but considering how hard it was to lobby for a windfall tax, which now seems even more justified in light of BP’s and Shells profits, as well as the resistance to energy efficiency measures, green funding initiatives etc and the fact the EU were more than happy to have their economies reliant on a dictators gas as well as consider it ‘green’. Need I go on?
The govt doesn’t want to get involived in insulating homes because it would be very messy. Firstly it would be hugely disruptive to the economy, where does the manpower come from? Second, simple measures that are diy projects can help a lot, loft insulation for example. Cavity insulation was being supported years ago and if homes don’t have it now why? Social housing has had its own route to supported improvements, You are left with private landlords who have been dragging their feet, they should not need support, and the hard to do houses, like the 1930s houses in their 100,000s without cavities and with suspended floors. There will be old Victorian teraced houses too. The issue there is that the work is very disruptive and best done when the house is empty. Would buyers and sellers tolerate the requirement to do the work during the sales process? That is in a period without occupation, rip up the ground floor to insulate it and deal with the wall insulation. There would be a reality check that a lot of those houses are overpriced! Presumably at some point requiring homes to have a heat loss spec as is to be required for rental properties is the answer.
The gov is already imposing EPC rating standards on rented property and industrial property. Just need "domestic properties need to reach EPC C before they can be sold".
In this days EPC C is not a difficult standard to reach requiring DG,loft,wall and maybe a A2A HP or PV. All flats would almost immediatly comply because they have only one outside wall. The real problem is with those that own a pile of bricks but then their asset value has gone up way above any modernisation costs which they have been putting off for yrs.
In this days EPC C is not a difficult standard to reach requiring DG,loft,wall and maybe a A2A HP or PV. All flats would almost immediatly comply because they have only one outside wall. The real problem is with those that own a pile of bricks but then their asset value has gone up way above any modernisation costs which they have been putting off for yrs.
Can be done. In the 80s (maybe late 70s) we were living in a terraced house with no internal bathroom - outside loo and sink in the living room. Council and/or government put us up in temporary housing while they knocked down the outhouse and replaced with a bathroom. We had to go through the kitchen to get to it, but it was fabulous. Whole area was getting done.
I suspect it’s a short term view thing. With your scenario, it visibly improved peoples lives and there was a lot of support to bring old terraces up to standard or knock them down. Insulation isn’t one that will have the same visual impact, not to mention added value to the home with a bathroom and therefore stamp duty increases. I think the change to EVs is another overlooked example. Just think of the local air quality improvements alone and the impact on the local health trusts. Sure, they still produce particulates but no way near as much as ICE and I wonder what impact that will have on the £30 billion hole lost in fuel duty would be. I suspect it could be much more than that and likely cancel that out in savings elsewhere.
Coincidently my dad worked as an insulation installer in the late 70s early 80s and said it was one of the best paid jobs he ever had. I suspect the oil embargo and energy crisis then, just like now, focused peoples minds on where their money for heat etc was going.
Coincidently my dad worked as an insulation installer in the late 70s early 80s and said it was one of the best paid jobs he ever had. I suspect the oil embargo and energy crisis then, just like now, focused peoples minds on where their money for heat etc was going.
I don’t believe the present govt has the intent to spend the money on something which is, in the view of the right wingers, inessential. The lack of bathrooms and toilets was big news in the 1950s and 60s reported on the radio that x million homes were without them every year and consequently along with improvements in health care there was stomach for spending that money. People generally didn’t have spare money back then either. That isn’t the case now and this government isn’t going to spend money. Many people have the money to get the work done these days but cheap gas has been a huge disincentive and they would rather spend the money on holidays!
The only way is up…. Not good news..
theenergyst.com
“Devastating” Cornwall view: Price cap “to stay above £3,000 until at least 2024” | theenergyst.com Price cap, Cornwall, Insight, devastating, above £3,000, until theenergyst.com 2024
Two continuing years of unprecedented consumer misery from fuel bills are predicted in latest research from analysts Cornwall Insight. The respected energy economists this morning release research indicating a typical household dual fuel bill will remain above £3,000 until well into 2024. By...
theenergyst.com
Interesting, as the price of gas futures is distinctly lower for deliveries from Q3 2023 than right now. There is a lot more uncertainty in what will happen over those time frames, so the price is much more likely to shift. However, the risk premium will also be larger, so we would expect those futures to be further away from the risk neutral expectation. Of course, I don't think the price caps over the next few sessions will fully account for the increase in base supply costs, so I would expect a delay on the back end. Add to that we pay nominal prices, so with inflation what is £3,000 today won't be worth £3k in 2024.The only way is up…. Not good news..
“Devastating” Cornwall view: Price cap “to stay above £3,000 until at least 2024” | theenergyst.com Price cap, Cornwall, Insight, devastating, above £3,000, until theenergyst.com 2024
Two continuing years of unprecedented consumer misery from fuel bills are predicted in latest research from analysts Cornwall Insight. The respected energy economists this morning release research indicating a typical household dual fuel bill will remain above £3,000 until well into 2024. By...
So what is the market thinking? By next summer gas storage for winter 2023/4 will be better prepared, Germany will have its FLNG terminals in place, USA will be exporting to full capacity, China will be getting gas via the Russian pipeline despite its limited capacity Australia will have had its floating export terminal going flat out for 12/15 months after the fire?
The European gas storage situation gets better by the day for the coming winter, if Germany keeps its nuclear plants running that in itself will contribute 4 GW towards their electricity needs or 6%. The 3 plants closed last year are still viable and could add another 4 GW, it seems that they would be foot shooting not to bring them back into use, 8 GW of nuclear equals 12 GW of gas!
Meanwhile we are receiving LNG into Haverfordwest every couple of days, and looking at marine traffic, there are plenty of LNG tankers swanning around going to For Orders! But then it is summer time and storage is getting full.
The European gas storage situation gets better by the day for the coming winter, if Germany keeps its nuclear plants running that in itself will contribute 4 GW towards their electricity needs or 6%. The 3 plants closed last year are still viable and could add another 4 GW, it seems that they would be foot shooting not to bring them back into use, 8 GW of nuclear equals 12 GW of gas!
Meanwhile we are receiving LNG into Haverfordwest every couple of days, and looking at marine traffic, there are plenty of LNG tankers swanning around going to For Orders! But then it is summer time and storage is getting full.
I really don't know. I think right now everyone is holding their breath over this winter. By December we will have a much better view of where things are headed, one of the reasons why futures for Dec delivery have the highest price. As long as the temps remain more moderate between now and October there shouldn't be any huge issues in filling European storage; however, there is a decent risk we will run out of storage before demand substantially matches supply. In which case we are leaving LNG on the table due to choked systems.
The seasonal premium is much lower for next year right now, about 5-10% comparing Dec to Sep in 2023 and 2024 as compared to the 33%+ for 2022. Next summer looks to be similar in price to this summer, but expectations from Winter 2023/24 onwards are improving a lot.
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