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
As I understand it, the reason for maintaining prices at levels required by gas generation is that at lower prices the private gas generators are not viable - so the owners won't keep them going to cover any gaps in renewable generation - so the problem is not regulation, but private for-profit ownership.
@GeofCox @ChrisMayLA6 I'm not doubting you, but how does that work?
In my mind, if a renewable source can't generate then they can't bid, and the price would be that of the gas generator. These prices, being sophisticated companies, would factor in any lean time when their equipment isn't being used.
So they might have something that costs such-and-such per kWh that is used such-and-such a proportion of the time (which may be very low), and overheads of such-and-such which must all be acocunted for in these few brief "gas summers", so charge this (large) amount for this (short) time, when there's no alternative.
They could presumably get funding from all these sophisticated financial instruments designed to "reduce risk" which we always hear about?
This would also incentivise them to reduce overhead costs as they get used less and less.
Is there some kind of friction to stop it working like that?
Emeritus Prof Christopher May
GeofCox
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