4 ms·

I find the whole energy sector a complete mystery in the UK. The same electricity comes out the sockets whether you are with British Gas or Octopus. As far as I

I find the whole energy sector a complete mystery in the UK. The same electricity comes out the sockets whether you are with British Gas or Octopus. As far as I can tell the wholesale rates are fixed and the amount charged to a customer is capped. It's not a functioning market at all. The only differentiating factors are how little overhead they can introduce in handing customers (with the advent of the internet and smart meters this is obviously low) and how well they do at avoiding loss through people who fail to pay.

stu432 4y ago
Wholesale rates aren't fixed. I think you may be referring to where the government has invested a significant amount into a power station and so agrees a strike price/contract for difference setup for an agreed number of years, which were often woefully unfair to the taxpayer. Though, current prices even start to make Hinkley Point look like a good deal.
tialaramex 4y ago
The wholesale rates are not in fact fixed, there's a wholesale electricity market. It runs in half hour blocks, there are estimates of what's available to be dispatched, and what use is expected, and the market seeks a price which will be acceptable to enough of the cheapest dispatchable producers to get approximately the desired energy, then that's what everybody is paid for the energy - it's a bit like a Dutch Auction. As well as the short term energy market, "suppliers" like Octopus also hedge by purchasing contracts to supply electricity far in advance. In fact the bulk of electricity is purchased this way, which makes that half-hour short term market look more volatile than the reality of energy trading. It also means that to be a serious player you need a lot of capital to make your purchases earlier and with better data than your competitors. The existence of numerous consumer suppliers is, indeed, pointless, it's just Tory orthodoxy which causes these to exist, you obviously don't need the suppliers since they just basically shuffle paperwork. But there really are wholesale prices, and so there really is a wholesale energy market, even if there was a single government consumer supply company, it would be buying energy from the market, at the market price. Unless you want the government to also own all the power generators, and all the other countries we are buying energy from, which I think those countries might not agree to.
deleted 4y ago
[deleted]

stu432 4y ago

Wholesale rates aren't fixed. I think you may be referring to where the government has invested a significant amount into a power station and so agrees a strike price/contract for difference setup for an agreed number of years, which were often woefully unfair to the taxpayer. Though, current prices even start to make Hinkley Point look like a good deal.

tialaramex 4y ago

The wholesale rates are not in fact fixed, there's a wholesale electricity market. It runs in half hour blocks, there are estimates of what's available to be dispatched, and what use is expected, and the market seeks a price which will be acceptable to enough of the cheapest dispatchable producers to get approximately the desired energy, then that's what everybody is paid for the energy - it's a bit like a Dutch Auction. As well as the short term energy market, "suppliers" like Octopus also hedge by purchasing contracts to supply electricity far in advance. In fact the bulk of electricity is purchased this way, which makes that half-hour short term market look more volatile than the reality of energy trading. It also means that to be a serious player you need a lot of capital to make your purchases earlier and with better data than your competitors. The existence of numerous consumer suppliers is, indeed, pointless, it's just Tory orthodoxy which causes these to exist, you obviously don't need the suppliers since they just basically shuffle paperwork. But there really are wholesale prices, and so there really is a wholesale energy market, even if there was a single government consumer supply company, it would be buying energy from the market, at the market price. Unless you want the government to also own all the power generators, and all the other countries we are buying energy from, which I think those countries might not agree to.

deleted 4y ago

[deleted]