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Slightly worrying

Following meetings with officials, renewable energy producers have agreed in principle to accept new long-term contracts at fixed prices well below current rates, according to the BBC.

Yes, but they’ll be well above where market prices are likely to be in the future. Won’t they – this is the simple shopper, government, after all…..

8 thoughts on “Slightly worrying”

  1. She said this would see the moratorium on fracking – in place since 2019 – scrapped with immediate effect, paving the way for developers to begin extraction in as little as six months in areas “where there is local support”.

    And where might that be?

  2. @ Can we talk crapago?

    What part of “this is the simple shopper, government, after all…..” didn’t you understand?

    On one side you have red blooded capitalists fighting tooth and nail to extract all the profit they can and on the other arts and PPE graduates who want to get things concluded ASAP so they can have a frappachino and avocado on toast.

    So, we (the taxpayer) will get shafted.

  3. Is knowledge the only real scarcity?

    What if govt ran a crowd-sourced green hedge fund where anyone could submit trades and vote on others? Could you the taxpayer then take an active role?

  4. The idea of changing the pricing mechanism for inframarginal producers (renewables + nuclear) and ultimately reshaping the entire electricity market has been floating around for some years. It was the main subject of the 2017 Cost of Energy Review by Prof Dieter Helm, which is well worth reading if you want to understand what the logic of the current system is (pricing is broadly set in a way that follows the marginal cost of the marginal producer, which these days is usually gas) and what some alternatives might be.

    Perversely the problem that was foreseen was energy becoming “too cheap to produce”. In the olden days, a brand new coal plant was more efficient than the old fleet. You ranked power stations in the “merit order” and ran as many as you needed to meet demand, selecting those who had the lowest marginal cost, and the price paid would be the marginal cost of the marginal plant – which would generally be an older one, but not so old that it was incredibly expensive to run and used only in emergencies. This meant that the newer and more efficient plants ran most of the time (sensibly), and since the price was set by the more expensive plants, this allowed the new plants to run profitably and pay off the cost of their construction. A system that was used not just in Britain but continental Europe too.

    With wind turbines and solar, the costs are in building the things and the marginal cost is essentially zero. For nuclear, marginal cost is also very low compared to burning gas or coal (or biomass). As renewables capacity continues to increase, we are going to have spells of favourable weather when the marginal producer is at zero or near-zero marginal cost, and under the current system that would set the price to near zero. If that happens too often, it becomes uneconomic to invest in building production capacity in the first place. For the next few years, we have more renewables capacity coming down the pipeline which accentuates this potential problem, and I think – regardless of government – we’re likely to keep heading in that direction. (Whether we should is another question, but it’s fair to say that building lots more gas or even coal plants isn’t exactly political flavour of the month.) For this reason, the wind and solar producers have long been content with the fact the market structure is going to need a big shake-up at some point. Even though they’re currently coining it in by getting paid a high price for the electricity they produce (set by the currently high marginal cost of burning gas) they all knew a change to the marginal cost pricing rule was inevitable.

  5. We’re being lied to about the renewables capacity coming:
    Take Hornsea 2, 165 turbines rated at 8MW. People are saying the capacity factor expected is over 42%, so it should generate just over 0.5GW over the long term.

    Two problems: first we’ve got 26GW of wind capacity already, multiplying by the quoted capacity factors, the average over the long term should already be around 9GW. Look at gridwatch charts and the average is about a 1/3 below that.
    Second, when the wind doesn’t blow at Hornsea 2, it doesn’t blow at Hornsea 1, or Hornsea 3, and it’s probably barely breezy 100km away.

  6. On the local attitude to fracking. Locals should get to vote on the matter and their votes should be recorded. Pros then get cheaper gas and antis pay through the nose and have their gas cut off if there is a shortage. Consequences are the thing that is required, why should all of us have to put up with the consequences of other people’s bad ideas?

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