Why is electricity so expensive?

[Harry WilkesParticipant @harrywilkes58467]

without been political we are ripped off by energy providers whilst I'm not a supporter of public ownership I have for a long time energy providers should taken into public ownership at least that way we would not have to pay shareholders !

H

[MacolmParticipant @macolm]

The quietly hidden trigger for the current energy price escalation was forcing coal, nuclear and oil out of electricity generation in Europe. This would have been fine if there was a competent plan to ensure that feasible replacements were available promptly. The coming crisis was clear enough to see when large price spikes in wholesale electricity prices started happening in 2019 in the UK and many other counties. There was simply too little spare capacity.

Covid restrictions reduced demand and the problem seemed to disappear, but with the start of economic recovery last year it re-emerged, and now more serious due to further loss of dispatchable capacity in the interim. What had started in the electricity sector quickly affected the whole gas market. No doubt suppliers took their chance for a fast buck, but where do we go from here?

[not done it yetParticipant @notdoneityet]

No doubt suppliers took their chance for a fast buck, but where do we go from here?

Not entirely true.

Margins on everything in stock has been cut back for umpteen years. ‘Just-in-time’ delivery has seen stocking levels reduced across all of manufacturing. Gas availability, from storage, has been allowed to reduce to a too-low level so any shortfall affects the price of electrickery and heating costs – across manufacturing and domestic usage.

Re-organising, so that the country is self-sufficient for energy might be good, but is not possible. Oil and gas field extraction equipments are not owned by the State.

More insulation, to reduce the commodity volumes for housing (and other buildings), is required. Some nuclear power is required (unfortunately) for base load and far more renewables, along with copious energy storage, is an urgent necessity.

There is little one can do, in the short term, when some despot, like ‘pukin’, decides to tempt WWIII! Everyone either gives in to the despicable acts of recent weeks (even years) and eventually have pukin knocking on our door (just like he has invaded Ukraine) or take a stand.

It is most certainly a time to reduce reliance on fossil fuels – and not to suck up to pukin – so we are left with a very large energy-cost adjustment. Pukin turning off the gas supply to Europe has been on the cards for some years, I would suggest. It is a problem to be solved at governmental level, but everyone can do a little towards reducing the pain.

It is most certainly a time to reduce reliance on fossil fuels – and not to suck up to pukin – so we are left with a very large energy-cost adjustment. Pukin turning off the gas supply to Europe has been on the cards for some years, I would suggest. It is a problem to be solved at governmental level, but everyone can do a little towards reducing the pain.

Edited By not done it yet on 05/04/2022 18:10:19

[duncan webster 1Participant @duncanwebster1]

Don't get me wrong, I'm in favour of renewables, but we need to keep hold of reality. There have been periods recently where wind has produced <5% of our electricity for at least 5 consecutive days, simply due to low windspeed across the country. Doubling the installed capacity would only increase this to 10%, and of course solar doesn't work at night, and night lasts for more than 12 hours in winter, at least where I live. Pumped storage isn't going to provide enough to keep us going for a week.

[MacolmParticipant @macolm]

The difficulty with storage to make good the variability of renewables is the vast amount necessary. Currently on average, the UK uses 30GW daily, which equates to about 700GWh of energy (0.7TWh). If heating and vehicles are to be powered solely by electricity, this will increase to perhaps 2TWh. For comparison, current pumped storage capacity is about 5GWh.

There can be many weeks with overall average wind power of less than 10% of capacity, and midwinter solar output is a few percent of capacity. So at least 20 days of storage would likely be required, say 40TWh. Large grid connected batteries of circa 1GWh are currently being deployed to stabilise the grid against wind power fluctuations, but 4,000 would be needed. Sounds OK? Well, it would be one a day installed for the next 11 years. The story using hydrogen is similar, many millions of 700 bar cylinders, cryogenic storage of about the same capacity as the UK current tank farm inventory, or chemical storage yet to be developed at scale.

A further thought. Crossrail will have taken 14 years (including detail planning) if completed in 2022. When it kicked off, the technologies were all available and mature, the task was fully defined, and the funding was understood. And this electrical transformation will be completed in just 13 years? Is there really a feasible plan?

[SamsarandaParticipant @samsaranda]

Malcom paints a very gloomy but realistic picture of where we are and where we need to be. Dave W

[Tony Pratt 1Participant @tonypratt1]

We are in deep shxx thanks to our glorious leaders over the last 20 odd years.

Tony

[Pete.Participant @pete-2]

Population of London 1995 6.8 million, population of London 2022 9.5 million, has supply been keeping up with demand?

I have to admit, energy supply isn't something I study in great detail, the most basic of economics supply and demand seems to boggle so many minds, I'm just speechless when people in London complain about rent costs, but can't figure out why they are so high, I actively avoid the place if possible, last time I went 5 months ago there were food delivery scooters weaving in and out of the traffic, it reminded me of being in Bangkok, OK for a short period of time but geez, could never live in such chaos.

[pgk pgkParticipant @pgkpgk17461]

London's population has been variable historically. Around 9 Million during the war and when I was at Uni in the late 60's it was 8 Million. Indeed it dropped to it’s lowest for a long time in the 80's
Traffic chaos is a function of most capital cities going back to ancient Rome with fringe parking plans, one-way streets and pedestrianized streets.
And large capital projects have always been an opportunity for opportunists to line their pockets and long been sold to the public at estimated costs and delivery times well below realism.

pgk

[MacolmParticipant @macolm]

As soon as I switched off the computer last night, I realised I got my arithmetic wrong. One mega battery a day only equates with 2 days storage, it needs 10 a day. After 11 years, bingo, 20 days storage, and we can then continue installing them at the same rate in perpetuity to replace those at the end of life.

[pgk pgkParticipant @pgkpgk17461]

In which case you need a different technological solution. Sadly Fusion will be 30 years away and always will be but there are guys working on ideas such as this one:
https://www.popularmechanics.com/science/a33573417/carbon-dioxide-ethanol-catalyst/

pgk

[Martin KyteParticipant @martinkyte99762]

Posted by Pete. on 06/04/2022 01:55:14:

Population of London 1995 6.8 million, population of London 2022 9.5 million, has supply been keeping up with demand?

That assumes that enegy consumed per person remains constant and that all persons equally use the same amount of energy.

There has been a drive for energy efficiency at least for the last 20 years so a new device today uses less power than the same device 20 years ago. Most things have gone in this direction.

The demographic mix alters the calculation too. Add a baby to a household and there will not be much in the way for change in demand. Maybe a few extra lights on for night feeds.

A better measure would be the number of households as generally speaking this would equate to a set of household devices (Fridge, freezer washing machine etc)

On a gross scale I would suggest that supply is keeping up with demand as there have been no power outages.

regards Martin

[Clive SteerParticipant @clivesteer55943]

If there is a large price difference, per kWh, between gas and electricity maybe one should install a gas fuelled ICE generator. To further improve cost efficiency the waste heat from the ICE can be fed directly to the central heating system and/or to the air source heat pump. If one has solar panels and a battery all the better to reduce gas usage on sunny days and cover periods of high demand. If one can be self sufficient in electricity then the standing charge may only have to be paid for the supply of gas making further savings.

Although the Utilities sell the advantages of centralised resource and distribution the come a time when the cost model isn't the best. First rule of business. When you are the only supplier of a commodity in demand you can charge what you like.

Clive S

[RobinParticipant @robin]

If we can free up a few new gas fields, while the Germans buy all the gas that nice Mr Putin is prepared to sell them, then we could end up with a gas glut and those wonderful comparison sites could get us back to normal PDQ. Capitalism is the key, buy your petrol where ever it is a penny cheaper and the price will fall, panic buy and it will rise. Lots of lovely new gas discoveries in English territorial waters but why go offshore when you can frac?

[Alan JacksonParticipant @alanjackson47790]

I think the elephant in the room in this discuussion is tidal power. We live in a country surrounded by sea and high tides, which rise and fall twice a day 24/7. Why do we ignore this?

Alan

[SillyOldDufferModerator @sillyoldduffer]

Posted by Macolm on 05/04/2022 21:41:11:

The difficulty with storage to make good the variability of renewables is the vast amount necessary. …

Many posts assume the future has to replicate whatever we do today. Not so. History shows people have talways had to adapt to their circumstances. Boomers often have unrealistic expectations. Having spent a lifetime enjoying the fruits of literally dirt cheap fossil fuel energy, we can't comprehend that the party is coming to an end. The future is going to be different.

The good news is that renewable electricity is cheap, the bad news is it's not available on demand. Most likely the cost will vary hour by hour so people will develop ways of not using power when it's expensive.

In future I expect the overall cost of energy to rise and there's nothing like high prices to alter behaviour. At the moment a chap with a good pension can afford to set his central-heating to 'lava', maybe in future we will all be wearing more jumpers and heating fewer rooms. This is already changing, low-income folk first, more later. In future, consumption of electricity might be considerably lower than it is now.

Turning the question round is instructive: Why is electricity so cheap? When that's answered, the dependency on fossil fuels becomes apparent. Unfortunately, supplies are starting to run low and when it's gone it's gone. Supply can't satisfy demand at the moment, and the situation is gradually getting worse. In 20 years time oil and gas will be cost enough to change how they are used on a large scale.

Worth remembering that before WW2 many UK homes didn't have electricity and it was often only used for lighting. They managed.

Rising domestic bills aren't the main problem. In future the mix of High and Low cost energy will change how the economy as a whole works. There will multiple repercussions, all change. Our grandchildren will live in interesting times.

The need to grip the problem is now urgent. 20 years isn't long when it comes to major infrastructure change…

Dave

[Tony Pratt 1Participant @tonypratt1]

Posted by SillyOldDuffer on 06/04/2022 10:54:16:

Posted by Macolm on 05/04/2022 21:41:11:

The need to grip the problem is now urgent. 20 years isn't long when it comes to major infrastructure change…

Dave

Thats the understatement of the year! Fortunately we have a good captain & crew at the helm.

Tony

[MacolmParticipant @macolm]

The magical thinking is that something new and different will prove better than an existing technology that has had the sharp edges knocked off over many years. Take wind generation, which is perceived as new and shiny. When was the first wind farm of recognisably modern machines? The answer is about 1978! Thus the technology is more than 40 years old, and it can be argued has just about reached its full potential.

 

A rule of thumb that fits the energy sector quite well starts with a successful demonstrator. Unless this leads to a satisfactory first of series within 10 years, the concept will not succeed. Try this to evaluate your favourite notion. Then remember that full infrastructure takes decades to put in place.

 

The world population has tripled over my lifetime, in no small part enabled by low cost energy to provide a myriad of essentials to our wellbeing. Such things as refrigeration and distribution systems, and pharmaceuticals and chemicals including fertilisers to name but two sectors. These things are the real baseload of the energy system, and it is unclear how any existing renewables can adequately support our lifestyle. On the other hand, reversion to an agrarian economy may not turn out to be popular!

Edited By Macolm on 06/04/2022 12:01:33

Edited By Macolm on 06/04/2022 12:02:16

[Robin GrahamParticipant @robingraham42208]

Thanks for replies. I'm not surprised that that the title of the thread has invited wide-ranging discussion, which is welcome. We humans are indeed in a bit of a pickle. I liked SoD's inversion of the question – why is electricity so cheap? I am a 'baby boomer' on a final salary index linked pension myself and can see that nice as that might be for me, it's a sort of fluke. Not sustainable for future generations I fear.

MichaelG – that Pathe news clip took me back a bit! But doesn't answer my my question about the relative prices of electricity and gas which I don't think anyone else has addressed either.

To put it another way.

Wholesale forward gas and electricity prices in GB (prices in GB pence per kWh, ratios electric/gas, source Ofgem)

March 2021 – Electricity 5.0 , gas 1.7 – ratio 2.9

Dec 2021 – Electricity 24, gas 9.0 – ratio 2.7

Jan 2022 – Electricity 20, gas 7 – ratio 2.9

So it's a pretty consistent – per Joule, electrons at the plug are getting on for three times as pricey as gas molecules at the nozzle. OK, derate that as electricity is 100% efficient for heating, gas maybe 70-80% . But still a big difference.Why would that be?

In my case, the ratio from my supplier ( elec 32p, gas 7p) is more like 4.6. But I'm with Green Energy so I get special electrons of course – I had a close-up look at the blighters through my welding helmet tonight and they did indeed have a greenish tint. You have to pay for that!

 

Robin

Edited By Robin Graham on 07/04/2022 00:19:57

Edited By Robin Graham on 07/04/2022 00:20:34

Edited By Robin Graham on 07/04/2022 00:23:28

[Michael GilliganParticipant @michaelgilligan61133]

Posted by Robin Graham on 07/04/2022 00:17:04:

[…]

MichaelG – that Pathe news clip took me back a bit! But doesn't answer my my question about the relative prices of electricity and gas which I don't think anyone else has addressed either.

[…]

.

Agreed, Robin : The clip itself doesn’t answer your question … But my observations do.

The dangled carrot of “too cheap to meter” encouraged the public to like the prospect of Atomic Power

Decades later, the prospect of selling their Solar Electricity back into the grid, at a very generous FIT, encouraged householders to decorate the roof.

These are just two examples of ‘manipulation’

MichaelG.

.

Edit: __ and as Electricity prices continue to rise … people will ‘learn’ the required behaviour.

Edited By Michael Gilligan on 07/04/2022 00:48:17

[Pete.Participant @pete-2]

Posted by Martin Kyte on 06/04/2022 10:09:30:

Posted by Pete. on 06/04/2022 01:55:14:

Population of London 1995 6.8 million, population of London 2022 9.5 million, has supply been keeping up with demand?

That assumes that enegy consumed per person remains constant and that all persons equally use the same amount of energy.

There has been a drive for energy efficiency at least for the last 20 years so a new device today uses less power than the same device 20 years ago. Most things have gone in this direction.

The demographic mix alters the calculation too. Add a baby to a household and there will not be much in the way for change in demand. Maybe a few extra lights on for night feeds.

A better measure would be the number of households as generally speaking this would equate to a set of household devices (Fridge, freezer washing machine etc)

On a gross scale I would suggest that supply is keeping up with demand as there have been no power outages.

regards Martin

In your opinion, what is the reason for the electricity cost rise? Should we nationalise essential utilities like water and electricity?

[AdrianRParticipant @adrianr18614]

I was looking through the OFGEM graphs and there is a graph giving a breakdown of how the cap is calculated. https://www.ofgem.gov.uk/energy-data-and-research/data-portal/all-available-charts

What surprised me is that this year there was a 38% rise in Network costs, £268 to £371. Network costs are the allowance for the distribution, but why after being stable for years did it need to rise so much this year?

The cap rose by £730 but the Network Costs rose by £103, so 14% of the rise has nothing to do with wholesale costs!

[HowiParticipant @howi]

Posted by Pete. on 07/04/2022 01:01:48:

Posted by Martin Kyte on 06/04/2022 10:09:30:

Posted by Pete. on 06/04/2022 01:55:14:

The demographic mix alters the calculation too. Add a baby to a household and there will not be much in the way for change in demand. Maybe a few extra lights on for night feed..

regards Martin

What alternative reality world do you live in?

[SillyOldDufferModerator @sillyoldduffer]

Posted by AdrianR on 07/04/2022 08:39:46:

… What surprised me is that this year there was a 38% rise in Network costs, £268 to £371. Network costs are the allowance for the distribution, but why after being stable for years did it need to rise so much this year?

The cap rose by £730 but the Network Costs rose by £103, so 14% of the rise has nothing to do with wholesale costs!

Don't know for sure, but 'stretching the assets' is a common problem with infrastructure management.

Infrastructure projects start well by installing shiny new gear, which stays reliable and low maintenance for a good many years. The initial cost is sky high, so the money almost always borrowed. Thereafter installation, maintenance and interest costs are repaid by the customer over many years. But the whole thing degrades slowly and eventually has to be replaced.

Infrastructure has a Best-Before rather than a Use-by Date. As it ages, maintenance costs rise as failed elements have to be replaced or patched up. Like owning an old car, fixing wear and tear eventually costs more than buying a new one. Many other advantages to buying a new car – lower emissions, better mileage, increased comfort and a DAB radio. Same with modern infrastructure rather than older. Unfortunately, buying new requires the owner to find a large sum of money in one lump, which is harder than making many small payments over time.

Deciding what to do about an unreliable car when you can't afford to replace it is bad enough. The finances of major infrastructure projects are more complicated because the idea either has to be justified to investors or to politicians. The latter like to stay popular by cutting public spending even if that means big trouble later (by which time they will have moved on.) Many other factors come into play, and they all tend to delay action on major spending until it's unavoidable.

I think this has happened here. An ageing gas infrastructure has stretched to the limit and it's no longer possible to avoid replacing large lumps of it. Bad luck on government and consumers that an infrastructure crisis coincides with record breaking rises in the cost of wholesale gas! Or is it?

Voters, of course, have to decide how much of a government's 'bad-luck' is self-inflicted. In another example, you might expect Western democracies to have long since recognised the threat posed by Mr Putin and had a well-prepared plan of action ready to go. Mr Putin should have been whacked with a full set of severe sanctions five minutes after his troops crossed the border. Instead of financial shock-and-awe linked directly to his actions, he's being given plenty of time to manage a slow trickle of bad news. He'll be able to shift blame for economic ill-effects on Russians from himself to the West. This is negligence – politicians choosing not to have a plan, in hope Mr Putin would behave better in future. Despite the evidence…

Dave

[SamsarandaParticipant @samsaranda]

Dave,

, I think the need for major maintenance of the gas distribution infrastructure has been with us for many years and has been tackled for quite a few years now, it must have been about five years ago that all the gas mains in our local area were sleeved because the cast iron pipes had deteriorated badly. So it would appear that there has been ongoing replacement of “large lumps of the gas infrastructure “. Dave W

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