4 ms·

Renewables and natural gas are two ways of producing the same product - electricity (let's ignore heating/cooking with gas for a second). The supply of energy i

Renewables and natural gas are two ways of producing the same product - electricity (let's ignore heating/cooking with gas for a second). The supply of energy is cut, demand remains the same, prices rise - this shouldn't be a surprise to anyone. Prices aren't determined by costs and never have been. Prices are only determined by supply and demand. Not saying it's right, but you're framing this as some kind of unexpected phenomenon when this is obviously how things work. More regulation is needed to stop people dying in the cold (obviously) but let's not forget why price signals are useful: the possibility for naked profiteering should act as a huge incentive for renewable generators to invest! But in reality, the UK government is going to start cracking down on wind and solar, which is insane. Residents of areas with planned renewable projects also have a habit of blocking them for inane reasons. If owning a wind farm is a license to print money, we should LET PEOPLE BUILD THEM!

iam-TJ 4y ago
But in this case "... Prices aren't determined by costs and never have been. Prices are only determined by supply and demand. ..." is patently incorrect! OFGEM (Office of Gas and Electricity Markets) [0] imposes retail price caps based on what it considers 'fair' for the retailers, and this came about specifically because retailers were charging standard-variable-rate and pay-by-meter customers excessively as well as having far too many 'offers' that confused customers. There's nothing to stop the government amending the legislation with a 1-clause Bill that gives OFGEM the power to impose a cap on the energy producers. I agree about building wind farms. I'm on a farm where a neighbour wanted to install a single turbine for local generation but it was refused - due to NIMBYs in villages 2 miles away complained it would "spoil their view" despite the fact most of them are out at work all day and probably only see that view for 2 minutes a day, if that! [0] https://www.ofgem.gov.uk/about-us/our-role-and-responsibilities https://www.ofgem.gov.uk/about-us/our-role-and-responsibilit...
- deleted 4y ago
  [deleted]
- kaashif 4y ago
  Yeah, you're right that prices are also affected by regulation. I should've been more precise - the price the suppliers want to charge is only set by supply and demand. They'll charge whatever the market can bear. If the cap is lower than that, they'll charge the cap. That's an inescapable feature of markets. If Ofgem caps the prices for producers, the reaction of the producers will obviously be to limit production. They'd prefer to produce when profits are high. The next step would be for the government to mandate production, and this is another stopgap measure on the way to admitting energy markets don't work when one of the largest global energy producers are actively fighting an economic war against us. My point is just that we shouldn't be at all surprised when markets don't work when one of the largest actors is behaving in an economically irrational way. We shouldn't be surprised when countries will abolish any kind of energy market and set supply and demand centrally by controlling producers and rationing.
ZeroGravitas 4y ago
Merit order prices for electricity are set by the price of the most expensive source, ehich is currently gas. There's good reasons for this in normal times. But at the moment various non-gas suppliers are getting windfall profits because of random world events. Generally you dont want to micromanage things because it makes businesses nervous, but if Margaret Thatcher can do windfall taxes, so can the next PM. At the very least we should stop subsidizing the fossil fuels.
ploppyploppy 4y ago
> the UK government is going to start cracking down on wind and solar, which is insane Source?
- kaashif 4y ago
  I was talking about both Tory leader candidates' statements promising restrictions on solar and wind e.g. https://www.constructionnews.co.uk/government/tory-leadership-candidates-take-aim-at-solar-and-wind-08-08-2022/ https://www.constructionnews.co.uk/government/tory-leadershi... Those statements hopefully amount to nothing, but they are extremely worrying.

iam-TJ 4y ago

But in this case "... Prices aren't determined by costs and never have been. Prices are only determined by supply and demand. ..." is patently incorrect! OFGEM (Office of Gas and Electricity Markets) [0] imposes retail price caps based on what it considers 'fair' for the retailers, and this came about specifically because retailers were charging standard-variable-rate and pay-by-meter customers excessively as well as having far too many 'offers' that confused customers. There's nothing to stop the government amending the legislation with a 1-clause Bill that gives OFGEM the power to impose a cap on the energy producers. I agree about building wind farms. I'm on a farm where a neighbour wanted to install a single turbine for local generation but it was refused - due to NIMBYs in villages 2 miles away complained it would "spoil their view" despite the fact most of them are out at work all day and probably only see that view for 2 minutes a day, if that! [0] https://www.ofgem.gov.uk/about-us/our-role-and-responsibilities https://www.ofgem.gov.uk/about-us/our-role-and-responsibilit...

deleted 4y ago
[deleted]
kaashif 4y ago
Yeah, you're right that prices are also affected by regulation. I should've been more precise - the price the suppliers want to charge is only set by supply and demand. They'll charge whatever the market can bear. If the cap is lower than that, they'll charge the cap. That's an inescapable feature of markets. If Ofgem caps the prices for producers, the reaction of the producers will obviously be to limit production. They'd prefer to produce when profits are high. The next step would be for the government to mandate production, and this is another stopgap measure on the way to admitting energy markets don't work when one of the largest global energy producers are actively fighting an economic war against us. My point is just that we shouldn't be at all surprised when markets don't work when one of the largest actors is behaving in an economically irrational way. We shouldn't be surprised when countries will abolish any kind of energy market and set supply and demand centrally by controlling producers and rationing.

ZeroGravitas 4y ago

Merit order prices for electricity are set by the price of the most expensive source, ehich is currently gas. There's good reasons for this in normal times. But at the moment various non-gas suppliers are getting windfall profits because of random world events. Generally you dont want to micromanage things because it makes businesses nervous, but if Margaret Thatcher can do windfall taxes, so can the next PM. At the very least we should stop subsidizing the fossil fuels.

ploppyploppy 4y ago

> the UK government is going to start cracking down on wind and solar, which is insane Source?

kaashif 4y ago
I was talking about both Tory leader candidates' statements promising restrictions on solar and wind e.g. https://www.constructionnews.co.uk/government/tory-leadership-candidates-take-aim-at-solar-and-wind-08-08-2022/ https://www.constructionnews.co.uk/government/tory-leadershi... Those statements hopefully amount to nothing, but they are extremely worrying.