Posted By: djhOTOH I do believe energy prices need to increase significantly, and while this isn't the way I would have chosen to test it, perhaps there is some benefit to be gained. I don't know; what do you think?

Unfortunately I don't think there is anything to be gained by the hikes in prices, not for the majority population at least and certainly not for the environment. While I do agree that we've seen falsely cheap energy prices, particularly because they don't cover exernality costs, non-financial and policitical social or environmental impacts, I don't believe this increase in prices does anything to address this.

All that these prices increases do is to fuel an unbelievable wave of value extraction that will cause significant harm. It'll be even worse if/when governments step in to cover the energy costs as this will represent another form of wealth grab from public to private sector rentiers who add virtually no value. It makes me very angry because the profits are so extraordinary and represent a form of extreme greed. I don't see any of these profits being re-invested into RE or anything more sustainable.

At least in the last couple of days there has been some open discussion about how broken the energy market is and the EU announced that it is going to look at changing the EU energy market. There's also been some talk about decoupling gas prices from electricity prices because only now does it seems it's been recognised how dysfunctional this is.

I was listening to the radio last night where finally someone in the UK mentioned this problem with the market and how it is market mechanisms causing the problems we're facing and therefore these need to be addressed.

Many of the proposals being put forth, including by the green party are impractical at least because they are unworkable in the real world. We don't have the necessary resources to implement a nationwide insulation drive, conversion to alternative heating systems, solar installation or anything else...

But fundamentally, what is most dissappointing for me is that the entire political class (I can't bring myself to call any of them leaders as they don't seem capable of anything but reaction to forces they don't seem to even fully understand) seem incapable of realising that getting together and working collaboratively across the world to address the problem would be the best approach to take. At present everyone is scrambling to self-protectionism which will only make things worse and for longer - like trying to outbid each other for LNG tanker shipments to get them diverted mid sail. It's increadible...

My comment was to the group in general and Mike in particular, wasn't intended for DJH.

I see from Energy Insights that UK is still importing small amounts of electricity from France.

Posted By: WillInAberdeenI see from Energy Insights that UK is still importing small amounts of electricity from France.

Which energy insights?

I see from the spreadsheet attached to https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/articles/trendsinukimportsandexportsoffuels/2022-06-29 that our exports to the EU exceeded our imports from the EU as recently as this April, but I can't find anything more recent or anything specifically about France. I've no idea where the data supporting whatever it was I read came from I'm afraid (mea culpa) but here's something saying the same thing:

https://www.energylivenews.com/2022/07/15/britain-exported-electricity-for-first-time-since-2017-in-second-quarter/

And https://www.theguardian.com/business/nils-pratley-on-finance/2022/aug/30/wanted-a-new-energy-contract-for-renewables-and-nuclear-projects

"... report suggests that energy firms ... should be enticed to switch from ‘renewables obligation certificates’ (ROCs) to contracts-for-difference (CfD) arrangements"

Posted By: fostertom"The commission’s president, Ursula von der Leyen, said on Monday that Brussels was preparing an intervention to separate power prices from the soaring cost of gas, in an effort to ensure electricity prices reflected cheaper renewable energy."

I just do not see how they do that when Gas is a global commodity that gets sold to the highest bidder.

"What EU, you'll only pay me 10% less than I can get elsewhere; I'll go elsewhere with my gas".

Posted By: Mike1Both of these are correct. Fossil fuels typically only supply around 7% to 8% of electricity generation in France (it's still >40% in the UK), but half of all plants have been offline or at reduced output, either due to river water being too warm for cooling (perhaps improving now the heatwave is lessening), or because reactors are off-line for maintenance, including 12 suffering corrosion. And the new Flamanville reactor - the prototype for Hinkley Point C - is over a decade late (& 4 x over budget) and still not operational.

Yep - SMRs are the way forward.

Posted By: Mike1So yes, EDF is currently importing over interconnectors from neighbouring countries and making a loss (€5.3 billion in the first half of this year). It's normally Europe’s biggest net exporter, so that reversal is also pushing up prices elsewhere. EDF is now suing the French Government for the difference between the market price and their enforced sale price.

The Tax Payer will pay eventually (it is also distorting their inflation figure).

Posted By: borpinI just do not see how they do that when Gas is a global commodity that gets sold to the highest bidder.

I suspect the thing is that at the moment there is a free market for electricity so the marginal price for gas drives the price for all electricity. If they regulate the market and prices so there can be different prices for different sources of electricity then there could be a different pricing mechanism, such as cost plus, applied to every source.

Posted By: borpin

Posted By: fostertom"The commission’s president, Ursula von der Leyen, said on Monday that Brussels was preparing an intervention to separate power prices from the soaring cost of gas, in an effort to ensure electricity prices reflected cheaper renewable energy."

I just do not see how they do that when Gas is a global commodity that gets sold to the highest bidder.

Because although gas is generally* traded internationally on a free market, the electricity generating market isn't. It is a market, but it's a long way from a free market. It's highly structured and regulated to meet Government (or EU, in this case) objectives - energy security, encouraging investment in renewables, etc. - for a market dominated by fossil fuels.

*And, for domestically produced gas, it need not be a free market. The UK Government could also regulate the price and control the export of domestically produced gas, rather than taxing 'excess profits' via a windfall tax.

You'll have seen there are other sections in the document responding to "The unprecedented rise in wholesale energy prices over the last year" and "ambitious targets to reduce reliance on
expensive gas imports" following "Russia's invasion of Ukraine". All those energy companies were going bust last year, before the invasion.

But they are lengths to point out that this reform would be needed irrespective of Ukraine, because the emerging energy mix will be cheap intermittent renewables with a backup of more expensive firm power (nuclear, gas-CCS, blue hydrogen, storage).

If the current market continues, then the wind generators would have to be paid the same marginal prices as the CCS or blue hydrogen or nuclear. That would be way more expensive than necessary, and vulnerable to price volatility in the costs of those new technologies.

So the reform is to decouple electricity prices from _any_ dispatchable sources, not just from gas.

If a renewable can offer a firm, dispatchable service (biomass, hydro, green hydrogen?) there's no reason stated why it shouldn't participate in the higher-marginal-price market for reliable power. I don't see anywhere they "pick on" renewables, rather they "pick on" intermittent sources.



Storage of any kind is less "renewable" than the marginal electricity source that was used to charge it. If Dinorwig or Cruachan are filled using (at the margin) gas or coal power, of which they return 70% and waste 30%, they're really not renewable yet. That will change once gas and coal drop off the grid.

Posted By: WillInAberdeenwhether we want renewable power to be more expensive than gas in the long term; and what price would induce nuclear stations to sign up when they only have a short remaining lifetime. Hope we don't rush into this and regret it later.

My fear is that from a political perspective there is a high risk of knee jerk short-termist reaction to make it look like something is being done only to backload the energy cost - or even worse, try to hide the long term impact.

There are plenty of sensible people in the space suggesting the market revision is not a short-term immediate fix and will take time to implement so maybe there is some hope.

I think it's a sensible step but with the market as it is currently, it's a bad time to negotiate. I think some arm twisting and strong stick may be needed to ensure value, especially when transferring to CfDs rather than obligations.

However, I think this only goes a short way to resolving the market problem. It's very clear from the recent 20% drop in prices merely due to a threat by the EU to intervene in the market mechanisms that a very significant part of the market is driven by pure speculation and rentierism - if any more evidence was already needed. This is fundamental part of the market that needs to be modified in some way.

But also, the market is very messy. You've got the drive toward financialisation starting mainly in the 1980s due to the belief that long-term contracts were monopolistic, yet due to the very nature of the commodity, a large percentage of the market stills functions outside the financialised portion where gas is sourced through bipartite agreement. On the one hand financialisation has lead to a greater number of short-term contracts and speculation which has probably increased volatility. But on the other hand there are continued monopolies and rents.

I can only come to the conclusion that there needs to be a fundamental review of our energy economic model towards something that better supports the relevant transition, and not only to address the current crisis. If, like I suspect, governments are going to throw money at the immediate problem and tinker with some market adjustments, we're going to end up in a similar situation to the economic crash of 2008 where very large sticking plasters were used to hold together a debt ridden and dysfunctional financial system without flushing out all the bad debt and structural problems, problems that still haunt us today and I suspect threatening to make things worse as the economic situation unravels.

Well I have decided to opt out of this scam. Have been heating independent for years using biomass so going totally off grid is not a big issue using solar and hydro.

Tricky bit would be to work out what level N should be.

Is N sufficient to electrically heat a house and charge a car?
If it is, N is quite high and most people will only ever pay low rate - so suppliers can't give much discount.
If it's not, it's an incentive to stay with gas/oil heating/cooking and petrol cars, otherwise your biggest uses of electricity would push you onto the higher rate band.

Should N be per person, or per adult, or per household? A five person household will need more electricity than a single person, but not 5x more.

Should people stuck with renting poorly insulated flats with panel heaters, get the same N as wealthy people living in newbuild low energy homes with heatpumps? Should older people get more N to keep warmer?

Personally I would like to see a range of tariffs available to choose, some with/without standing charges, some with stepped prices for >N units, some fixed/variable, some Time of Use, some only renewables, and energy companies forced to steer people to the most appropriate for them. We used to have a market like that, but since most of the suppliers went bust, we lost a lot of innovation and choice.

Posted By: ArtiglioThe idea of getting ridmof the standing charge and then having “n” units at low rate followed by higher rate for further consumption , surely won’t work. The standing charge is being used to compensate companies for the costs they alledgedly incur taking on customers from failed suppliers, how would you transfer this cost to the unit price?

The suppliers have fixed costs that need to be paid and those fixed costs need to be shared somehow among their customers. But it's just as possible for the costs to be shared among the units of electricity, since they know pretty well what the costs are and how many units of electricity they will supply, just as they know how many customers they have.

This discussion was overtaken by national news, but perhaps is back into focus.

What I heard so far is:
Gas and electricity prices to be capped at 10.3p/kWh and 34p/kWh respectively (IE no choice to pay higher rate in exchange for lower standing charge)

Fairly derisory £400 flat rebate per property, plus £100 for off-gas-grid (IE uncapped) properties, plus extra for lower incomes

Something vaguely similar for business supplies

"Green charges" (for historic FITs etc) to come from taxation rather than from electricity bills (good I think)

All to be funded by government borrowing (because tax revenues are declining and QE-money-printing has stopped)

The avoided energy price rises will avoid inflation rising further. But that extra borrowing has caused the £ to lose value, making our imports more expensive, including of energy. UK Government bonds have lost a lot of their value, is bad for pensions.

Anyone heard anything else?

Posted By: fostertomMMT

advocates that money supply should be regulated to control inflation, so at the moment (inflation >10%), MMT says that the government should be increasing taxes, reducing public spending, and certainly not splashing around £bns to subsidise continued fossil fuel consumption!

The Bank of England has been quietly winding down its money-printing programme (QE) and since the summer is now effectively reversing it, to control inflation.

The problem with "owing nothing to anybody" is that UK, including UK government, is a net importer of energy (and most other things) so printing £ doesn't help - energy is mostly sold in $ (oil, LNG).

As can be seen from the market carnage today, if UK government spends huge amounts of £ which it doesn't have reserves of, the value of the £ goes quickly down, so all government purchases become more expensive if they derive from imported energy or materials or food. As do yours and mine.

So the government have discovered the Magic Money Tree, but not at a time when MMT would advise them to shake it!

Posted By: WillInAberdeenso at the moment (inflation >10%), MMT says that the government should be increasing taxes, reducing public spending, and certainly not splashing around £bns to subsidise continued fossil fuel consumption!

Agreed, on what MMT says.

But the major part of that present inflation is due to under-supply of energy, and a major part of absent countervailing taxation is the refusal to windfall-tax energy cos (some of whom have been publicly welcoming it). Conventional wisdom says 'printing money' creates inflation by over-demand, but the point is, inflation is more often, in de-industrialising countries like UK, created by under-supply e.g. when imports are interrupted. So if well-targeted 'printing money' results in fairly rapid increased supply, it can be deflationary.

Under-supply of energy is unprecedentedy quickly ameliorable, in lucky windy UK, over 2yr timescale, via massive MMT-investment in wind power (UK-sited production factories as well as purchase subsidy if necessary).

Instead of borrowing to subsidise imported fuels esp gas (creating over-demand), protect consumers by protectionist measures to segregate cheap-to-produce UK electricity from energy world-market pricing, which is pure windfall to the energy cos, some of whom are actually embarrassed about it.

Actually, there's no suggestion that energy companies are spending their windfall, certainly not in any way that contributes to over-demand, so windfall-taxing would have no deflationary effect.