Electricity costs. Why is the UK so expensive (and what can be done about it)?

[Tobes]

I came across this video on a different forum that discusses the basis for the UK electricity costs in a very accessible way.
It happens to discuss Ripple energy (who's second project I am a member of) as well as other issues and solutions to stabilising the UK electricity costs longer term .

View: https://youtu.be/IEnFmrgEbWo?si=kJmqZadfL-uP-n0m


In light of other threads here around reducing energy costs and the sources of electricity - I thought it may be of interest.

 

[Mr Plodd]

What a fascinating video! I certainly recommend you watch it, especially the earlier part that deals with how our electricity price is arrived at. It will probably make you angry, it did me!

 

[otherclive]

I was surprised at how we arrived at this situation wrt electric pricing. My ideal would be an all electric house not on storage heaters. Had one in Plymouth in 1974, and again in Canada in the mid 1980s. No water to leak, no servicing, no pumps, valves or refrigerants etc. Looking at Ripple I wondered if there's an option there to skip the future heat pump option totally. But it dawned on me that the older you are there's less time to recoup your investment. Can you will your share?

 

[Tobes]

I was surprised at how we arrived at this situation wrt electric pricing. My ideal would be an all electric house not on storage heaters. Had one in Plymouth in 1974, and again in Canada in the mid 1980s. No water to leak, no servicing, no pumps, valves or refrigerants etc. Looking at Ripple I wondered if there's an option there to skip the future heat pump option totally. But it dawned on me that the older you are there's less time to recoup your investment. Can you will your share?

With Ripple, yes you can leave you share in your will to a beneficiary. They have a specific section of their sign up for this.

 

[Tobes]

What a fascinating video! I certainly recommend you watch it, especially the earlier part that deals with how our electricity price is arrived at. It will probably make you angry, it did me!

It's pretty maddening isn't it, and particularly so because as a consumer, you have almost no way of influencing or changing the model.

 

[RogerL]

I was surprised at how we arrived at this situation wrt electric pricing. My ideal would be an all electric house not on storage heaters. Had one in Plymouth in 1974, and again in Canada in the mid 1980s. No water to leak, no servicing, no pumps, valves or refrigerants etc. Looking at Ripple I wondered if there's an option there to skip the future heat pump option totally. But it dawned on me that the older you are there's less time to recoup your investment. Can you will your share?

A quick bit of arithmetic on the "Joe" example on the Ripple website shows a projected annual return of 9.4% - that's ignoring inflation and particularly ignoring any future changes in energy rates.

If/when Britain increases the proportion of renewables, the cost of energy should drop - particularly if any future government drops the gas price connection for renewables - in other words, some energy costs may reduce significantly at some point in the future, meaning that savings from the Ripple scheme may drop significantly - possibly down to zero.

As they say on Dragon's Den "I'm out"

 

[Buckman]

Interesting video. As I have always said too many fingers in the pie! A kwh of electric probably costs less than £0.10p at source, but then we have all the add ons.

 

[otherclive]

It's pretty maddening isn't it, and particularly so because as a consumer, you have almost no way of influencing or changing the model.

I understand the Government are looking to see how the pricing model can be changed to bring more benefit as more cheaper renewables come on line. What they can do about the lengthy contracts awarded to gas fired power stations remains to be seen. But with more renewables, nuclear, imports via connectors, battery storage and grid changes etc gas usage for electric generation will become much reduced and even at the contract prices may make having a gas station uneconomic. Time will tell.

 

[RogerL]

I understand the Government are looking to see how the pricing model can be changed to bring more benefit as more cheaper renewables come on line. What they can do about the lengthy contracts awarded to gas fired power stations remains to be seen. But with more renewables, nuclear, imports via connectors, battery storage and grid changes etc gas usage for electric generation will become much reduced and even at the contract prices may make having a gas station uneconomic. Time will tell.

Part of the problem is that the contracts for renewables tie the price paid per kw to the cost of gas powered energy - so the surge in gas price due to the invasion of Ukraine has made renewables more expensive for the consumer despite no increase in costs for the producer.

 

[Tobes]

A quick bit of arithmetic on the "Joe" example on the Ripple website shows a projected annual return of 9.4% - that's ignoring inflation and particularly ignoring any future changes in energy rates.

If/when Britain increases the proportion of renewables, the cost of energy should drop - particularly if any future government drops the gas price connection for renewables - in other words, some energy costs may reduce significantly at some point in the future, meaning that savings from the Ripple scheme may drop significantly - possibly down to zero.

As they say on Dragon's Den "I'm out"

It's worth noting that the price that ripple gets is related to the long term grid rate. Today, it's receiving 4.5p per kWh as a long term supplier. This is a very different rate to - for example - a gas peaker plant that might be closer to 40p per kWh, but is only used for a short period each day (and its this high price that sets the grid cost while it is in use). The strike price for wind is not likely to fall much lower (it's already the lowest cost form of generation), unless supply completely outstrips demand.

Having said that - I don't see Ripple as an investment, but as a very long term (25 year) hedge against the price of electricity, with the added bonus that - on average - I know my grid usage is being supplied by my own generation.

 

[Tobes]

Part of the problem is that the contracts for renewables tie the price paid per kw to the cost of gas powered energy - so the surge in gas price due to the invasion of Ukraine has made renewables more expensive for the consumer despite no increase in costs for the producer.

That is (IMHO) not _quite_ accurate. The contracts for renewables are tied to the grid price, not the gas price. But because of the way the grid settles the cost of electricity on the last kW generated, that is (today) invariably based on gas.

If we imagine a future where the vast majority of of load is covered by renewables, nuclear and (perhaps some) base load gas (not peaker, but forecasted medium load), and the last kWh is covered by pumped storage, grid level flow battery and even EVs with vehicle to grid, the cost of the last kWh is no longer linked to gas price, but to the _lowest_ bid from the fast reacting energy store. This has the potential to completely reform the cost of the grid, making it not just lower over all, but also far more stable in terms of costs. Thats good for everyone as it allows for fare more stable returns on long term investments.

 

[otherclive]

Part of the problem is that the contracts for renewables tie the price paid per kw to the cost of gas powered energy - so the surge in gas price due to the invasion of Ukraine has made renewables more expensive for the consumer despite no increase in costs for the producer.

Your video explained that very well. But how long are these gas contracts ? As long as there is the link UK electric prices will remain high. As more non gas comes on line there will surplus gas capacity still potentially creating artificially high prices. Perhaps nationalise the gas stations and shut down surplus ones. Cannot believe. I’ve said that 🙈

 

[Buckman]

Perhaps nationalise the gas stations and shut down surplus ones. Cannot believe. I’ve said that 🙈

It would be interesting to know which countries in the EU have their electric supply nationalised? In SA we have one supplier Eskom who "sells" to the municipalities who then sell it onto the consumer.

 

[otherclive]

It would be interesting to know which countries in the EU have their electric supply nationalised? In SA we have one supplier Eskom who "sells" to the municipalities who then sell it onto the consumer.

It would but there are many where government have part ownership so does that count as nationalisation. Like EDF is 96% owned by the French state, other national governments own lesser shares of what ostensibly appear to be private companies. Is it good news for Hinckley C that any budget overspends could see the French taxpayers bailing us out. Mon Dieu. 🇫🇷. Nice thought.

 

[Mr Plodd]

Is it good news for Hinckley C that any budget overspends could see the French taxpayers bailing us out. Mon Dieu. 🇫🇷. Nice thought.

But any overspend, plus interest, will without doubt, be recouped from the consumer.

 

[otherclive]

But any overspend, plus interest, will without doubt, be recouped from the consumer.

Uhm…… since the French government nationalised EDFin 2023 , but previously had a 96% share it’s inevitable that the French taxpayer will have to contribute some substantial sums. There may be a government to government fudge to soften the blow, but EDF had the contract based on a quite generous return on the price per megawatt generated over its lifetime.

Hinkley Point C woes threaten to break UK and France’s nuclear fusion

Cross-Channel dream is turning sour as EDF’s costs mount and Britain faces a long wait for the power to come on

www.theguardian.com