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Yes. But these things can be orthogonal. Or actually brcause gas is expensive. https://www.bbc.com/news/articles/crkep1vx3mro https://www.bbc.com/news/articles
by ghighi7878 7mo ago
Yes. But these things can be orthogonal. Or actually brcause gas is expensive.
https://www.bbc.com/news/articles/crkep1vx3mro https://www.bbc.com/news/articles/crkep1vx3mro
The price for wholesale electricity is set by a bidding process, with each generating company saying what it would be willing to accept to produce a unit of electricity.
Once built, the cost of generating power from renewables is very low, so these typically come in with the cheapest bid. Nuclear might come next.
Gas generators often have the highest costs, because they have to buy gas to burn, as well as paying a "carbon price" - a charge for emissions.
The wholesale cost is set by the last unit of electricity needed to meet demand from consumers. This means that even if gas only generates 1% of power at a given time, gas will still set the wholesale price.
- eliben 7mo agoCalifornia is a great example; highest electricity prices in the US (not counting Hawaii, which makes sense) despite significant hydro and fantastic solar capacity. In the last few years California runs 100% renewable on many days (and growing) every year. Economics 101: prices are not set by what goods cost to create + markup. Prices are set by how much people are willing to pay.
- gentooflux 7mo agoWhy is it "people are willing to pay" and not "corporations are brazen enough to charge"? These utilities are necessities and relatively few people have access to cheaper alternatives to them.
- vovavili 7mo agoBecause, under usual circumstances, self-interested corporations compete against each other to get as close to what people are willing to pay for energy as possible.
- cap11235 7mo ago> compete against each other Citation needed.
- beejiu 7mo agoThe regulations mandate that the market operates that way. It's the government that should be held to account.
- bronson 7mo agoBecause PG&E is a for-profit company. They are supposed to charge what the market will bear.
- toyg 7mo agoYou could solve that with a stroke of a pen, by re-nationalizing.
- p12tic 7mo ago> In the last few years California runs 100% renewable on many days (and growing) every year. How many is "many days"? Gas is still used for at least one fifth of electricity. https://app.electricitymaps.com/map/zone/US-CAL-CISO/5y/monthly https://app.electricitymaps.com/map/zone/US-CAL-CISO/5y/mont...
- eliben 7mo agoAccording to the official tracker (https://www.energy.ca.gov/data-reports/clean-energy-serving-california/tracking-progress-toward-100-clean-energy https://www.energy.ca.gov/data-reports/clean-energy-serving-... and elsewhere) there were 279 days in 2025 where California was on 100% renewable for _some_ time during the day (could be hours, could be minutes at mid-day). In total hours equivalent of 77.3 full days over 2025.
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- sam345 7mo agoMeaning it's supply. Overall dupply low because fossil fuels discouraged and penalized, demand high, price high.
- dotancohen 7mo agoI know nothing about California so please correct me if I'm wrong. You mention significant hydro and solar capacity in California. So minimal carbon externality: lung disease and climate change. If you consider that externalised cost into the cost of electricity elsewhere, does not California and other renewable-rich electric grids fare more competitive on price? E.g. the problem is not the expensive renewables in California, rather, the problem is that the cost of declining human and animal health and climate change is externalised for the fossil fuel.
- WarmWash 7mo agoPG&E's prices are not a function of what people will pay though, it's a function of what people expect. CA wants green energy now (aggressive targets), needs to have fire hardened infrastructure (expensive upgrades), and wants full service to sprawling remote areas using modern infrastructure. The combination of these is incredibly expensive. If you don't believe me, buy PGE stock and get your dividend from their "greed". But honestly, the stock is an awful performer, because the actual problems facing them are real.
- jeffbee 7mo agoCalifornia has high volumetric rates, but mostly that is because it has much more distributed generation than any other state, uses far less grid power, so the grid rates are dominated by fixed grid costs. Actual monthly electric bills in California are not remarkable at all. According to the EIA the typical residential electric bill in California is almost exactly the same as Texas: $174.59 vs. $173.94.
- hvb2 7mo agoI've read this before and I don't understand how this doesn't become/is untenable. Doesn't this mean that solar/wind are insanely lucrative? Also, this would mean that in order to really bring the price down, gas needs to be taken out as a source. But gas is typically the source that balances the grid because its output can be changed quickly. So price wise, you might get a drop but you would lose your ability to react quickly to fluctuations in demand
- scratcheee 7mo agoYes, and I think that’s actually intentional, they’re rewarding renewables way over the odds without needing to give politically controversial benefits. The rewards are just an inherent result of the existing system. This is why renewables are growing rapidly in the uk. Of course we’ll need a way to resolve fluctuations both rapid and slower. Rapid fluctuations are handled by pumped hydro and increasingly by batteries. The slow fluctuations (day/night all the way to summer/winter and good/bad weather patterns) are much trickier, I think it’s still unclear how well handle them, but it will certainly be partly handled by having an excess of renewables, though we’ll likely need some other solutions too, nuclear is probably one of them.
- pydry 7mo agoThe irony is that your comment should be entirely inverted. Renewables are not rewarded way over the odds - in fact the ruling party banned onshore wind entirely and i remember them banning at least one offshore wind farm. Luckily it is very cheap to build. Now Hinkley Point C is another story. It's a hugely expensive boondoggle which is taking decades to construct at enormous cost and the reward at the end is that they are rewarded with a strike price that is 3x that of solar and wind. That is an obsecene subsidy forced on to customers for a power source that cant even do load following and doesnt help with fluctuations in supply and demand. The slow fluctuations on cold, windless nights or when nuke plants are down for unplanned maintenance are going to be managed with gas. Maybe one day it'll be gas synthesized with electricity from solar+wind overproduction on a day like today. The roundtrip is expensive, but will still be cheaper than nuclear power on a windy, summer day.
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- elcritch 7mo agoRenewables may be the cheapest at spot values, but there needs to be a way to price in the intermittent nature of the power.
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- pydry 7mo agoThere is. The cost of my electricity changes every half hour.
- ViewTrick1002 7mo agoPeople disliking renewables always say this. Then when asked what method to price in the Swedish nuclear fleet having ~50% of capacity offline multiple times last year and France famously having 50% of the capacity offline during the energy crisis I always get crickets for answers. It’s apparently fine when nuclear plants doesn’t deliver, but not renewables. The difference with renewables is that it’s even easier to manage. Their intermittency is entirely expected and the law of large numbers ensure we never have half the capacity offline due to technical issues at the same time.
- traceroute66 7mo ago> Or actually brcause gas is expensive. Gas in the UK is expensive because the Tories spent decades selling off the storage so developers could turn them into real estate. This continued well into the 2000's when, for example the lettuce (Truss) closed the Rough storage facility in 2017. Gas in the UK is expensive because of 1980's privitisation. Another one of the Tory's great ideas. The UK privitisation model is designed to generate profit. Norway made a different choice. Equinor is majority state-owned, and Norwegian extraction operates within a framework designed to capture resource rents for public benefit. Britain privatised its way out of that option decades ago in the Thatcher-era and has never seriously revisited it. Analysis from the University of Oxford[1] found that maximising oil and gas extraction from the North Sea would only save households £16 to £82 per year – and this would rely on tax revenues collected being distributed to households to offset their energy bills. Dr Anupam Sen, co-author of the analysis, said the idea that “draining” the North Sea would make the UK more energy secure and significantly cut household bills is “sheer fantasy”. “We show that regardless of the remaining lifetime of North Sea oil and gas, a ‘drill baby drill’ approach to extraction would actually cost households more money versus continuing on our path to clean energy.” The authors stress that savings gained from the clean energy transition are recurring annual reductions in bills which would continue indefinitely, whereas North Sea oil and gas are finite resources that would run out around 2040. [1] https://www.smithschool.ox.ac.uk/news/drill-baby-drill-approach-north-sea-would-cost-households-more-fully-renewable-uk-finds-oxford https://www.smithschool.ox.ac.uk/news/drill-baby-drill-appro...
- RobinL 7mo agoWhy would additional storage make a significant difference to the price of gas?
- nicoburns 7mo agoPresumably because the price is a volatile, and storage gives you more flexibility around when you buy.
- traceroute66 7mo ago
- jordand 7mo agoYeah I'm in the UK and for electricity, I'm on the green Octopus Agile tariff, which tracks the wholesale price updating every 30 mins. Given the abundant green energy today, and peak times between 3-7pm, right this second I'm paying £0.02/kWh, but at 6pm, I'll be charged £0.40/kWh. In the coming months with gas supply reduced, and consumer demand steady, it will have a knock on impact to me given it tracks wholesale cost so I'll have to consider moving off the tariff given I'll be paying more overall.
- krona 7mo ago> The price for wholesale electricity is set by a bidding process, with each generating company saying what it would be willing to accept to produce a unit of electricity. Without mentioning how Contracts for Difference (CfD) works, this is a slightly disingenuous oversimplification.
- qxmat 7mo agoThis is absolutely correct. HN readers can learn more about the merit order and marginal pricing here: https://www.next-kraftwerke.com/knowledge/what-does-merit-order-mean https://www.next-kraftwerke.com/knowledge/what-does-merit-or... You can read more about gas markets in the Global Gas Market guide by A115 here: https://a115.co.uk/global-gas-market/ https://a115.co.uk/global-gas-market/ (you can download the PDF guide at the bottom without giving any information)
- collinmcnulty 7mo agoWhich, importantly, drives more renewables and storage development because it makes the renewables fantastically profitable to run: near zero cost for you, but paid the price set by gas.
- roenxi 7mo agoThey aren't orthogonal - the reason that gas is being used is because renewable can't reliably power the grid! If you look at something like https://grid.iamkate.com/ https://grid.iamkate.com/ you can see that in the last 24 hours the gas peak is when the wind dies down and the sun isn't shining, around 6-8pm. Happens to be a real price peak at that time. This isn't some weird and unexpected outcome, we've had at least a decade of evidence with this sort of low-wholesale-high-retail price dynamic. That isn't gas is expensive, it is simply policy that the UK, rather naively, is trying to run their grid 24/7 based on processes that are not available 24/7. That is an expensive trick to try and pull off. Poor people need a way to signal that they won't use electricity in the evening if they want to be able to afford power is my read on the situation. Not very civilised but if that is how the UK approaches reliable cheap energy as a target then it seems the most reasonable outcome.
- trollbridge 7mo agoSeems like a very good case to get storage and power backup in people's homes. Industrial users could install their own gas fired generators. Residential consumers could have simple battery based backup, or even a generator which would double for helping during powerouts.
- roenxi 7mo agoBigger question is why they haven't already - these trends have been in place for a very long time and this current phase of the UK energy crisis has been on display for years. Anything legal and cost effective would have been done by now if the market had anything to say about it. Which suggests something odd is afoot. Maybe storage is more expensive than gas, maybe the UK government has regulated the option out of existence. Maybe something else.
- energy123 7mo agoProbably because it doesn't make economic sense to install storage prior to renewables being so substantial that you start having to curtail.
- 7mo ago
- shafyy 7mo agoWell explained, thank you! This is called the marginal price. Many people are not aware of this and are then think renewables are expensive.