Green Electricity

[scotia]

There are some major electricity suppliers who claimed that they are green energy suppliers. Since there have been no substantial changes to the costs of generating renewable (green) electricity, does this mean that their customers will not be affected by price increases? If not, why not? The nice little renewable green electrons are still being generated by wind, solar and nuclear. None of which use gas or oil.

[mc2fool]

If only. Basically the price of electricity is driven by the marginal cost, i.e. the cost of producing the "last" bit, and that's by gas.

See explanation at: https://www.goodenergy.co.uk/why-does-t ... enewables/

[Mike4]

If only. Basically the price of electricity is driven by the marginal cost, i.e. the cost of producing the "last" bit, and that's by gas.

See explanation at: https://www.goodenergy.co.uk/why-does-t ... enewables/

I don't buy any of that. Just because renewable energy generators can charge world prices for their leccy, this does not mean they have to.

By the same argument gas prices in the USA haven't tripled or so I understand, because they mine their own and therefore don't need to charge themselves world prices for their own gas. I dunno about USA leccy prices but i bet they have not sky-rocketed either.

Given the UK still mines 50% of its own gas, I don't accept there is any credible reason to raise the price to domestic consumers or industry of the proportion of the gas we use from our own North Sea wells at least.

With 50% North Sea gas used for leccy generation plus a hefty contribution from our 'renewable' generation, only that small proportion of leccy generated with imported gas should be getting more expensive, and by extension leccy prices should not be rising as fast as they are, IMO.

[Dod101]

If only. Basically the price of electricity is driven by the marginal cost, i.e. the cost of producing the "last" bit, and that's by gas.

See explanation at: https://www.goodenergy.co.uk/why-does-t ... enewables/

I don't buy any of that. Just because renewable energy generators can charge world prices for their leccy, this does not mean they have to.

By the same argument gas prices in the USA haven't tripled or so I understand, because they mine their own and therefore don't need to charge themselves world prices for their own gas. I dunno about USA leccy prices but i bet they have not sky-rocketed either.

Given the UK still mines 50% of its own gas, I don't accept there is any credible reason to raise the price to domestic consumers or industry of the proportion of the gas we use from our own North Sea wells at least.

With 50% North Sea gas used for leccy generation plus a hefty contribution from our 'renewable' generation, only that small proportion of leccy generated with imported gas should be getting more expensive, and by extension leccy prices should not be rising as fast as they are, IMO.

But Europe in general is one big gas and electricity market where both flow freely everywhere. Nowhere as far as I know is there a source of gas which is exclusively from our bit of the North Sea nor electricity purely from our windfarms. So not surprisingly the cost to consumers is the general market price and if one supplier happens to be fortunate enough to be able to supply it a lot more cheaply than another, how very fortunate for them.

Dod

[Mike4]

I don't buy any of that. Just because renewable energy generators can charge world prices for their leccy, this does not mean they have to.

By the same argument gas prices in the USA haven't tripled or so I understand, because they mine their own and therefore don't need to charge themselves world prices for their own gas. I dunno about USA leccy prices but i bet they have not sky-rocketed either.

Given the UK still mines 50% of its own gas, I don't accept there is any credible reason to raise the price to domestic consumers or industry of the proportion of the gas we use from our own North Sea wells at least.

With 50% North Sea gas used for leccy generation plus a hefty contribution from our 'renewable' generation, only that small proportion of leccy generated with imported gas should be getting more expensive, and by extension leccy prices should not be rising as fast as they are, IMO.

But Europe in general is one big gas and electricity market where both flow freely everywhere. Nowhere as far as I know is there a source of gas which is exclusively from our bit of the North Sea nor electricity purely from our windfarms. So not surprisingly the cost to consumers is the general market price and if one supplier happens to be fortunate enough to be able to supply it a lot more cheaply than another, how very fortunate for them.

Dod

Surely the whole reason for the fuel price crisis is gas and electricity NOT flowing freely everywhere in Europe.

Or are Russian consumers also suffering a tripling of gas and leccy prices?

I can see this turning into an early general election. Calls for nationalisation of energy supplies to decouple our own resources from European market gyrations, if what you say is correct. Ms Truss is idealogically incapable of considering what I predict will turn into a groundswell of opinion demanding nationalisation.

[Dod101]

Surely the whole reason for the fuel price crisis is gas and electricity NOT flowing freely everywhere in Europe.

Or are Russian consumers also suffering a tripling of gas and leccy prices?

I can see this turning into an early general election. Calls for nationalisation of energy supplies to decouple our own resources from European market gyrations, if what you say is correct. Ms Truss is idealogically incapable of considering what I predict will turn into a groundswell of opinion demanding nationalisation.

Well I am no expert but you only need to look at the interconnectors to see that gas and electricity does flow freely between states in western Europe at least. I do not know how the Russian market works, if there is a market as such. I doubt very much that it would be in anyone's interests for us to decouple from Europe because the supply situation works both ways, to and from other European countries.

Others who know more about it than we obviously do may like to contribute though.

Dod

[scotview]

Ms Truss is idealogically incapable of considering what I predict will turn into a groundswell of opinion demanding nationalisation.

Aye, but if energy is nationalised who is capable of, or going to take the risk to drill holes into the seabed of the North Sea ?

Britoil, BNOC anyone ??

[Dod101]

I did not comment on that and anyway nationailse what exactly?

On a more positive note did you notice that Centrica are giving 10% of British gas profits to help poorer off families meet their gas bills?

Dod

[Dod101]

There are some major electricity suppliers who claimed that they are green energy suppliers. Since there have been no substantial changes to the costs of generating renewable (green) electricity, does this mean that their customers will not be affected by price increases? If not, why not? The nice little renewable green electrons are still being generated by wind, solar and nuclear. None of which use gas or oil.

That's a very good point. My Scottish Power bill says my electric (and I am all electric) comes from 100% renewable energy. Why is my electricity bill being used to subsidise others?

Because electricity supply is pooled. The only reason for the green electrons is to satisfy Greens, with their ESG credentials. Ovo tells me the same.

Dod

[servodude]

That's a very good point. My Scottish Power bill says my electric (and I am all electric) comes from 100% renewable energy. Why is my electricity bill being used to subsidise others?

Because electricity supply is pooled. The only reason for the green electrons is to satisfy Greens, with their ESG credentials. Ovo tells me the same.

Dod

Exactly.
There's no hypothecation on source on the wholesale market; and the market is created and run to create profit
- that's not a judgement that's how it is designed

[SalvorHardin]

Surely the whole reason for the fuel price crisis is gas and electricity NOT flowing freely everywhere in Europe.

Or are Russian consumers also suffering a tripling of gas and leccy prices?

I can see this turning into an early general election. Calls for nationalisation of energy supplies to decouple our own resources from European market gyrations, if what you say is correct. Ms Truss is idealogically incapable of considering what I predict will turn into a groundswell of opinion demanding nationalisation.

Well I am no expert but you only need to look at the interconnectors to see that gas and electricity does flow freely between states in western Europe at least. I do not know how the Russian market works, if there is a market as such. I doubt very much that it would be in anyone's interests for us to decouple from Europe because the supply situation works both ways, to and from other European countries.

Others who know more about it than we obviously do may like to contribute though.

Dod

Yes, the interconnectors and one-way pipelines mean that the European market in gas is fairly efficient so changes in supply (and demand) are quickly reflected in prices.

Gas isn't a global market to anything like the same extent as oil. Despite the claims of the liquified natural gas (LNG) industry, shipping LNG is still much more difficult (and thus more expensive) compared to shipping oil. If there was a gas pipeline between America and Europe then the price difference between American and European gas would be much less. At the moment the price difference is however encouraging the construction of new LNG terminals and has caused the price of LNG shipping to reach record levels.

The Russian domestic energy market is quite heavily subsidised, so prices there don't fairly reflect market conditions.

We may end up with a situation where politicians impose a price cap on gas, which will fix things in the short term but arguably make them worse in the longer term by encouraging over-consumption (if your total bill is capped then why not consume a lot more?) and discouraging investment (if your profits are artificially depressed by the state then why carry on investing in this sector when there are alternatives?).

I've been buying shares in several of the renewable energy producers. They're going to get the benefit of higher gas (and therefore electricity) prices, but they won't get much criticism because imposing restrictions on them would upset the green lobby which has a lot of power over our politicians and media.

As to why prices have risen so much, the main cause is that the demand for gas (and most energy sources) in the short term is what economics calls "highly inelastic". This means that small reductions in supply will produce large rises in the price. This is because customers can't easily change their consumption habits, so they have to keep on buying the same amount (or a bit less) at the higher prices.

Unfortunately a lot of people in authority and the media are completely clueless when it comes to this. They believe that the sharp rise in prices is due to profiteering and price fixing, whereas it's due to a reduction in supply.

The article linked below is about ten years old but it explains the situation very well:

https://www.power-grid.com/news/how-low ... s-go/#gref

[scrumpyjack]

Because electricity supply is pooled. The only reason for the green electrons is to satisfy Greens, with their ESG credentials. Ovo tells me the same.

Dod

Exactly.
There's no hypothecation on source on the wholesale market; and the market is created and run to create profit
- that's not a judgement that's how it is designed

Yes it is complete 'greenwash' for intermediaries like Ovo to claim that all their electricity is 'green'. All our electricity is provided by the National Grid in a pooled system and you can look at any time on gridwatch.co.uk to see where it is coming from. Ovo is simply a billing company like all the other 'providers' that consumers deal with.

[servodude]

Exactly.
There's no hypothecation on source on the wholesale market; and the market is created and run to create profit
- that's not a judgement that's how it is designed

Yes it is complete 'greenwash' for intermediaries like Ovo to claim that all their electricity is 'green'. All our electricity is provided by the National Grid in a pooled system and you can look at any time on gridwatch.co.uk to see where it is coming from. Ovo is simply a billing company like all the other 'providers' that consumers deal with.

Well there are "offsets" and "carbon pricing" which kind of work when things aren't completely borked
- but at the minute it's a bit like trying to keep warm by huddling around the report that says your house is insulated

[AF62]

I did not comment on that and anyway nationailse what exactly?

On a more positive note did you notice that Centrica are giving 10% of British gas profits to help poorer off families meet their gas bills?

Dod

And cleverly giving 10% of British Gas profits not Centrica profits, because they know full well that 99% of the population don't understand the difference.

[AF62]

Exactly.
There's no hypothecation on source on the wholesale market; and the market is created and run to create profit
- that's not a judgement that's how it is designed

Yes it is complete 'greenwash' for intermediaries like Ovo to claim that all their electricity is 'green'. All our electricity is provided by the National Grid in a pooled system and you can look at any time on gridwatch.co.uk to see where it is coming from. Ovo is simply a billing company like all the other 'providers' that consumers deal with.

All electricity at every moment in time to every consumer being 'green', probably not. But overall it is as all the electricity they sell has to be backed by a REGO (Renewable Energy Guarantee of Origin) provided by the generators of renewable electricity themselves.

[Dod101]

Thanks for these comments. Very helpful and none of this is of course rocket sense. Fundamentally simple economics of supply and demand.

Writing of pooled electricity, it used to amuse me when I was involved in an airport fuel tank farm as they were called. where there were say half a dozen separate silos/tanks for aviation fuel. Each had the name of a well known supplier emblazoned on the outside, Shell, Exxon, Total and so on, but each individual one shared exactly the same fuel and not only that, the same inlet. Basically jut how the electricity market works.

There should though I think be a government sponsored campaign to reduce our energy consumption, instead of which we will get at least half of the national news this afternoon spreading 'news' of the disastrous increase in the price cap for fuel, citing an average cost per household which will probably illustrate the actual cost over the next year of fuel for very few households. Since it is an average, most will be either higher or lower than the quoted figure.

Dod

[Dod101]

I did not comment on that and anyway nationailse what exactly?

On a more positive note did you notice that Centrica are giving 10% of British gas profits to help poorer off families meet their gas bills?

Dod

And cleverly giving 10% of British Gas profits not Centrica profits, because they know full well that 99% of the population don't understand the difference.

Indeed, although their announcement reads better.

Dod

[Mike4]

I did not comment on that and anyway nationailse what exactly?

On a more positive note did you notice that Centrica are giving 10% of British gas profits to help poorer off families meet their gas bills?

Dod

And cleverly giving 10% of British Gas profits not Centrica profits, because they know full well that 99% of the population don't understand the difference.

And especially clever given BG must currently be making a loss, given they are paying more for gas than they are allowed to charge for it.

Or have they been particularly prescient in striking their future contracts over the last few years?

[scrumpyjack]

All electricity at every moment in time to every consumer being 'green', probably not. But overall it is as all the electricity they sell has to be backed by a REGO (Renewable Energy Guarantee of Origin) provided by the generators of renewable electricity themselves.

But that is greenwash because it has no effect at all on how much green energy is produced or what share green energy is of the total generated. It is simply a purely notional allocation of for example a wind farm's output. To the extent that any resources are consumed in administrating this REGO rubbish it has a negative net effect!

[Mike4]

All electricity at every moment in time to every consumer being 'green', probably not. But overall it is as all the electricity they sell has to be backed by a REGO (Renewable Energy Guarantee of Origin) provided by the generators of renewable electricity themselves.

But that is greenwash because it has no effect at all on how much green energy is produced or what share green energy is of the total generated. It is simply a purely notional allocation of for example a wind farm's output. To the extent that any resources are consumed in administrating this REGO rubbish it has a negative net effect!

Another aspect to greenwashing is this concept of of a business promoting itself as being 'carbon neutral', as if that is something positive.

In its most basic form AIUI, it means if you are going to start a process that issues new carbon dioxide into the atmosphere, you plant a tree to gobble up the same amount of CO2 so your impact is 'net zero'.

You haven't done anything to improve the situation, just not made it worse. Which is a Good Thing, but it isn't actually helping.