Emeritus Prof Christopher MayDec 12

As Dale Vince (Ecotricity) points out, all that is required to reduce energy prices (specifically electricity) in the UK is to remove the requirement from the auction system that the price is dictated by the highest bid (nearly always that made by gas).

Breaking the link with gas prices (and allowing each energy source to be supplied at its actual bid price) would immediately reduce energy prices across the country.

Moreover the Govt. has the power to do this, they just don't!

#energy
h/t FT

Show threadRachel LawsonDec 12
@ChrisMayLA6 we currently need “spinning” generators, like gas and nuclear, to provide stability to the frequency of the grid. We don’t get that from solar etc atm. So, we have tonnage sure the gas generators stay in business.
There is already grid work taking place to enable solar etc to be able to provide this frequency stability. Once it is done, we won’t need the gas and we don’t need to support them any more.
Show threadMarjorieR
@rachel @ChrisMayLA6 at present we already pay gas, and previously coal, generators to be there to run idle, it's called the Capacity mechanism.
And if we followed Ecotricity's suggestion those generators would still get their bid price, just everyone would get their bid price, not what the gas generators, as the most expensive bidder gets.
In my view what each type of generator should get should be determined by their long term cost of supply, which surely is set through their Contract for Difference price, not the cost of the marginal supplier on the day.
Dec 12 at 7:50amWeb
Show threadRachel LawsonDec 12
@marjolica @ChrisMayLA6 and that’s exactly how the model will change. But only when the changes are made to the grid.
Show threadRoberto von ArchimboldiDec 12
@rachel @marjolica @ChrisMayLA6 this is a genuine question because I don't understand why we can't make the shift now. I happily accept that we currently need gas generators because of reasons to do with the grid even if they sit idle a lot of the time. That presumably increases the price of gas generation way above the price of gas itself. You have to cover your running costs for when the turbine is not spinning. But why then is my bid price not just elevated to effectively subsidise my running? Why does the grid now have to pay everyone that subsidy?
Show threadMarjorieRDec 12

@RobertoArchimboldi @rachel @ChrisMayLA6

Paying generators, such as gas fired, for the cost of just sitting there not generating is what the Governments Capacity Market is for.

I am of course assuming it works as originally designed (I worked in DECC when they devised this more than 10 years ago, before I retired but this was not my direct reponsibility).

"The Capacity Market ensures security of electricity supply by providing a payment for reliable sources of capacity. "

https://www.gov.uk/government/collections/electricity-market-reform-capacity-market

I doubt it there is any call at the moment to actually invest in new gas generation capacity, we just to keep the existing plants available so the price they get should then just largely reflect the cost to them of buying gas, and their conversion efficiency (about 60%). I would hope that we never need new gas plant - we should be looking at, and investing in, other non-fossil fueled means of filling in for intermittency.

Capacity Market

The Capacity Market ensures security of electricity supply by providing a payment for reliable sources of capacity.

GOV.UK
Show threadRoberto von ArchimboldiDec 12
@marjolica @rachel @ChrisMayLA6 so then I really don't understand why we can't adopt the ecotricity pricing scheme without upgrading the grid. Hopefully Rachel will explain
Show threadBruno NicolettiDec 12
@RobertoArchimboldi @marjolica @rachel @ChrisMayLA6 The poles and wires need upgrading as the places that generate wind power are in the north of the UK and most of the places that use that power are in the south. The current lines don’t have enough capacity to move the electricity at times of high generation or demand. There are other ways around that which doesn’t involve new wires, eg: regional pricing, which would encourage building energy intensive industries next to generation.
Show threadRoberto von ArchimboldiDec 12
@bjn @marjolica @rachel @ChrisMayLA6 that is helpful and explains why there is a need for gas powered turbines, even if they sit idle some of the time. I haven't been clear enough. My confusion is economic. Given that until upgrade there has to be gas, why do we have to pay every generator at the price of gas?
Show threadBruno NicolettiDec 12

@RobertoArchimboldi @marjolica @rachel @ChrisMayLA6 I covered that in a different post. It’s a market mechanism to encourage people to build cheaper generators than what the market is asking. In time this should have the cheaper generators displacing the more expensive generation. Unfortunately it can take quite a while for that to take effect and I don’t think it can work in bringing prices down with the generation mix we have and are likely to have for quite a while.

https://mstdn.social/@bjn/115706411657746232

Bruno Nicoletti (@[email protected])

@[email protected] @[email protected] @[email protected] @[email protected] In theory the electricity market mechanism we have could do that. If a wind turbine generates electricity at a cheaper cost than the market price, it should encourage investment in wind farms as they reap the difference in prices. One problem is that while gas is generating a single watt, the price the consumer pays doesn’t go down.

Mastodon 🐘
Show threadBashStKidDec 12

@marjolica @rachel @ChrisMayLA6 Even then, the CFD should be broken up into an early capex-payback phase and a longer, cheaper, opex-and-maintenance phase.

And more importantly, local consumers should be able to tap into locally produced renewables at a reduced price, especially within the current transmissibility choke points in the system.

Show threadThe Penguin of EvilDec 12
@marjolica @rachel @ChrisMayLA6 Not sure I understand how much of a difference this would make. Isn't the government already taking back the excess behind the scenes via the windfall taxes against renewables ? That would have to stop.
Show threadMarjorieRDec 12
@etchedpixels @rachel @ChrisMayLA6 to be honest I find the accounting for Contracts for Difference entirely confusing and similarly for windfall taxes on renewables.
My POV is that it would be better if the excess profits made because cheaper suppliers are paid the same price as gas weren't made in the first place and the monies instead of being diverted to the Treasury were reflected in a lower electricity price.
Back in the day, pre-Thatcher, we had a nationalised Central Electricity Generating Board (CEGB) (and National Grid) and the CEGB owned all the power stations and was only tasked with breaking even not making a profit. Power stations where then brought on line using a 'merit order', reflecting availability, fuel prices, efficiency and location.
Maybe it's time we renationalised?