15 ms·

This 'solution' to high energy prices is already in place in France and the UK, but energy prices in both of those countries are very high.

vladvasiliu 4y ago
I don't know if it's still the case in the UK with Brexit, but in France and, I think, the whole of EU, electricity prices are pegged to gas prices [0]. They're looking to change this. [0] https://www.politico.eu/article/pressure-for-eu-level-intervention-in-energy-market-mounts-amid-soaring-prices/ https://www.politico.eu/article/pressure-for-eu-level-interv... In particular: Part of the problem is that the price of electricity is pegged to the price of the most expensive fuel required to meet demand for each day, called the merit order, which recently has been natural gas. And with Russia’s Gazprom curbing flows — paired with other global supply chain difficulties — the price of gas has risen to eye-watering levels, sending power prices soaring.
- mmarq 4y ago
  That’s not a problem, nor an invention or the EU. It’s how all perfectly competitive markets work: price equals marginal cost.
- fancyfredbot 4y ago
  I don't disagree, in fact I think that this is a natural consequence of free market pricing, but my point was that the OP says that in France the profits made from the high energy prices are flowing to the state entity and that this should solve the problem of high prices, but it doesn't seem to be doing that.
  - vladvasiliu 4y ago
    The thing in France is that the "state entity" (EDF) doesn't handle everything. It's not even fully "state" anymore. There has been a "liberalization" of the energy market for the end clients, and some have opted for "market pricing" from third-party companies. They're likely feeling the burn. In my case, my electric bill hasn't moved (my usage is fairly constant). I opted for the "state entity" and for the "regulated price". It's not entirely clear what will happen next year, though. Although there's talk about renationalizing the state entity, which would, probably, allow more lee-way to the state to control the prices. There's also talk about hurrying up the service of the stopped nuclear reactors. That could also help lower demand for gas, at least from the gas power stations that have to fill in the baseline, which should lower gas prices, hence electricity prices (via the peg). I'm unable to estimate the proportion of gas that has to fill in for nuclear compared to other uses. I admit I'm not very well versed in all this, so I may be missing something.
- demindiro 4y ago
  Do you happen to know why the price of electricity is pegged to gas?
  - sdnas211 4y ago
    Electricity demands can't be met without gas power plants. As there is sufficient demand (able to absorb the price at the moment, however high it may be), electricity prices converge on gas prices + generation costs (and some profits, probably). The only way to unpeg it from the price of gas (without changing the market itself) would be for demand of electricity to drop below levels that necessitate gas power plants, or for supply of gas to increase to surplus levels.
    - OJFord 4y ago
      What's bothered me is the opposite, why is electricity approx. 4x the cost of gas per kWh? It can't be that inefficient to generate electricity from gas, surely?

vladvasiliu 4y ago

I don't know if it's still the case in the UK with Brexit, but in France and, I think, the whole of EU, electricity prices are pegged to gas prices [0]. They're looking to change this. [0] https://www.politico.eu/article/pressure-for-eu-level-intervention-in-energy-market-mounts-amid-soaring-prices/ https://www.politico.eu/article/pressure-for-eu-level-interv... In particular: Part of the problem is that the price of electricity is pegged to the price of the most expensive fuel required to meet demand for each day, called the merit order, which recently has been natural gas. And with Russia’s Gazprom curbing flows — paired with other global supply chain difficulties — the price of gas has risen to eye-watering levels, sending power prices soaring.

mmarq 4y ago
That’s not a problem, nor an invention or the EU. It’s how all perfectly competitive markets work: price equals marginal cost.
fancyfredbot 4y ago
I don't disagree, in fact I think that this is a natural consequence of free market pricing, but my point was that the OP says that in France the profits made from the high energy prices are flowing to the state entity and that this should solve the problem of high prices, but it doesn't seem to be doing that.
- vladvasiliu 4y ago
  The thing in France is that the "state entity" (EDF) doesn't handle everything. It's not even fully "state" anymore. There has been a "liberalization" of the energy market for the end clients, and some have opted for "market pricing" from third-party companies. They're likely feeling the burn. In my case, my electric bill hasn't moved (my usage is fairly constant). I opted for the "state entity" and for the "regulated price". It's not entirely clear what will happen next year, though. Although there's talk about renationalizing the state entity, which would, probably, allow more lee-way to the state to control the prices. There's also talk about hurrying up the service of the stopped nuclear reactors. That could also help lower demand for gas, at least from the gas power stations that have to fill in the baseline, which should lower gas prices, hence electricity prices (via the peg). I'm unable to estimate the proportion of gas that has to fill in for nuclear compared to other uses. I admit I'm not very well versed in all this, so I may be missing something.
demindiro 4y ago
Do you happen to know why the price of electricity is pegged to gas?
- sdnas211 4y ago
  Electricity demands can't be met without gas power plants. As there is sufficient demand (able to absorb the price at the moment, however high it may be), electricity prices converge on gas prices + generation costs (and some profits, probably). The only way to unpeg it from the price of gas (without changing the market itself) would be for demand of electricity to drop below levels that necessitate gas power plants, or for supply of gas to increase to surplus levels.
  - OJFord 4y ago
    What's bothered me is the opposite, why is electricity approx. 4x the cost of gas per kWh? It can't be that inefficient to generate electricity from gas, surely?