[grw_]

That's great- but UK has almost highest energy cost in Europe- almost €0.48/kWh. By comparison France (which has consistently invested in nuclear for the past half-century) has almost half that. Until UK has enough energy that it can be priced as in other European nations it will suffer with low competitiveness of energy-intensive industries.

[energy123]

Okay, but why is it expensive? The insinuation of your comment is that wind energy is to blame for high costs, and nuclear is the reason for low costs. But in the US, some of the cheapest energy is in states with wind higher than the UK at 60%, such as Iowa.

Perhaps the blame is because the previous Tory government banned onshore wind, the cheapest form of wind energy, a ban only lifted recently under Starmer? I don't know the reason, but it deserves a more serious analysis.

[grw_]

My comment wasn't implying that importance of wind in the UK energy mix (or lack of investment in nuclear) is specifically the reason for high costs but I agree that government policy is indeed to blame.

As to whether the cause is Tory ban of onshore wind- I'm skeptical. I don't think wind is any cheaper than gas once you include the necessary energy storage capacity- especially when there is huge amounts of gas sitting under the north sea which the new Labour government is planning to ban pumping: https://www.forbes.com/sites/gauravsharma/2024/07/12/sudden-...

[ZeroGravitas]

Even offshore wind is about twice as cheap as electricity from north sea gas, onshore about twice as cheap again.

Also, they're banning looking for new gas, the cost of which is 91% subsidised.

> The new 80% Investment Allowance will mean businesses will overall get a 91p tax saving for every £1 they invest – providing them with an additional, immediate incentive to invest. This nearly doubles the tax relief available and means the more investment a firm makes, the less tax they will pay.

https://www.gov.uk/government/publications/cost-of-living-su...

[secondcoming]

In the UK energy prices are linked to natural gas prices.

[cjrp]

Yep, it's linked to the most expensive form of generation at that time (which is often gas); known as marginal cost pricing.

https://commonslibrary.parliament.uk/why-is-cheap-renewable-...

[vfclists]

Yanis Varoufakis should enlighten you, ie if you can really understand what is going on.

https://www.youtube.com/watch?v=NicE0-N9ux0

TLDR version - https://www.youtube.com/watch?v=R3bo-s_OY4Q

This is why. Prices are set by what electricity retailers think the "market will bear". Unlike suppliers bidding in which the lowest price wins, our electricity prices are set by the highest bidders.

It al

[Arnt]

No, they're not set by the highest bidder. They're set by the tenth lowest bidder, except that the number isn't ten.

If the number of suppliers needed happens to be ten, then the ten lowest bidders prevail, and the highest bidders lose out. The ten lowest bidders all get the rate offered by the tenth lowest bidder, ie. if a supplier bids at its own cost, it'll likely make a profit (or not get a contract at all).

[verzali]

Where do you get that price from?

This report - https://commonslibrary.parliament.uk/research-briefings/cbp-... - from a few days ago says "the average price of electricity 23.4 p/kWh", which is €0.28/kWh.

France is generally cheaper, but I can tell you I pay more than €0.20/kWh and probably closer to €0.25 if I actually check my bills...

[rjwilmsi]

23.4 p/kWh sounds about right. When prices go up next month (October 2024) I will be paying 30.5p / kWh day and 13.2p / kWh overnight (midnight to 7 am). Those are retail/consumer prices subject to government price cap, I believe commercial customers pay more.

[happymellon]

Unfortunately electricity is priced at the most expensive rate. So wind is significantly cheaper to produce than gas, however since gas turbines are still part of the overall grid we pay gas prices for wind power.

We have the most expensive electricity, and its either going to require complete replacement of gas produced electric or replacement of all contracts. I think I can have a good guess as to what is most likely to happen first.

[tialaramex]

No, the wholesale prices are the most expensive clearing price as otherwise somebody is getting paid less than they agreed and why should anybody participate in a "market" where that happens?

Maybe it's easier to see why this is how it works with physical goods in a model rather than fungible electricity and numbers that make no human sense.

We want to buy 100 oranges.

Alice has 40 oranges, and she's willing to part with them for 60p each

Bob has 18 oranges, he wants 56p

Carol has 36 oranges, wants 70p each (!)

Dave has 60 oranges for only 49p

If we insist on having Alice's Oranges and Dave's Oranges but only paying 49p each for them, obviously Alice is going to be very angry about that, we're stealing her oranges, she didn't agree to be paid this little. Also Bob would likely be somewhat angry, he thought we'd buy his cheaper oranges, and instead we just stole Alice's !

So, what we actually do is we take all Dave's oranges, all Bob's oranges, and twenty two of Alice's oranges, and we pay Alice's price for all 100 of them.

Now, Dave has a lot of power here, because we need 100 oranges which the other orange suppliers couldn't cover without him, he could set his price as high as he likes. So it's important under a system like this to ensure you have lots of suppliers so that nobody gets as much power as Dave has.

Unlike our model orange market, the wholesale electricity market is thirty minutes at a time. So 48 prices per day. So if the wind picks up for a few hours at night, for those hours most likely the clearing price will be set by wind prices, the gas generators stay online (typically better to lose a few quid per MWh to idle at low power than eat the restart cost on those generators although you might want to schedule any maintenance for predicted high wind periods) but the prices are set by wind.

In spring that happens fairly often, might even happen for several days in a row. Mid-winter, not so much.

[happymellon]

> we're stealing her oranges, she didn't agree to be paid this little

What are you talking about. If I walk into shop A and buy an orange for 10p, then walk into shop B and buy an orange for 15p, I didn't steal 5p from shop A.

[tialaramex]

Maybe you need to read more slowly, let's try just the essential two facts

"Alice has 40 oranges, and she's willing to part with them for 60p each"

See? Sixty pence.

"If we insist on having Alice's Oranges and Dave's Oranges but only paying 49p each for them"

We're only paying forty-nine pence for Alice's Oranges.

But Alice's price was eleven pence more - we are stealing from Alice

We're trying to determine a single clearing price, the oranges are just an analogy to make it easier to see why we can't choose the lowest price.

[happymellon]

What you did was take my original comment and try to make it more verbose.

Your "well actually" was argumentative and added nothing.

The solution is to either remove the expensive sources or change how we do the purchasing. Nothing you said changed that.

[tialaramex]

Your original post falsely claims it's the "most expensive rate". It's not, the most expensive rate is higher, often much higher.

What is paid is the clearing rate and I explained why. Fantasies about "changing how we do the purchasing" won't change the facts either.

[sirk390]

> France ("consistently invested in nuclear for the past half-century" ).

Not really and this is currenctly causing a big problem. France stopped building new reactors after 2002. They only built 1 new generation EPR, which was very late and 6x the cost. Many of the reactors are very old and need to be replaced, but it's difficult to do because of the bad experiences of Flamanville's reactor.

[BenoitP]

1 > 0. And most of the cost comes from maintaining engineer's salaries on a single project.

If new projects get ordered I'm quite confident costs will move closer to the actual bill of materials, per unit.

[maigret]

There are other EPR projects abroad and most did overshoot costs by more than 5 to $10B and having a decade delay. Meanwhile renewable and storage keep getting cheaper and better at massive speed. Even France adds much more renewable than nuclear capacity right now. Which is a pragmatic approach... Stay skilled in nuclear and keep minimum investment to keep the industry alive but invest mostly in renewable.

[mattlondon]

I had the same thought back when the Ukraine war started and gas prices soared. "It's ok" I thought " I am on a tarrif that pays a penny more per kWh to use 100% renewable energy so my price should not be impacted by gas prices". How naive was I - prices obviously shot up.

They just charge for the most expensive generation method for all electric usage on the grid from what I can tell, regardless of source.

Not sure if this is a "UK problem" in terms of regulations or legacy infrastructure, or if there is some more general economic-theory behind it.

[Someone]

> I am on a tarrif that pays a penny more per kWh to use 100% renewable energy so my price should not be impacted by gas prices". How naive was I - prices obviously shot up.

> or if there is some more general economic-theory behind it.

It’s economics 101: supply and demand. If electricity from renewable sources wouldn’t get more expensive, demand for it would soar. Since supply can only follow slowly (it takes time to build wind farms/install solar panels), demand would outstrip supply, so prices go up.

[rjwilmsi]

To me it made sense to price electricity at retail based on gas price when gas was the main source and the cost for that source is mostly about the market fuel cost. (There were and are other price guarantee schemes for nuclear where the ongoing fuel cost is only a small part of total costs. And the grid electricity price for wind is agreed by another set of rules - strike price).

However, we're now beyond that point so it seems to me that the pricing model should change. With the planned growth rate of new wind (and solar) by 2030 for the UK I assume it's going to happen one way or another.

[mavhc]

Why should the wind farm get paid less than the gas power station? They should be paid more for not polluting

[mattlondon]

Because their costs didn't increase was my naive assumption.

[ZeroGravitas]

In the long term, you want the cleaner, cheaper sources to be paid the same as the gas, as the short term profit encourages businesses to enter the market and build more solar and wind, and this then decreases the price. Kind of basic market dynamics.

In the short term, when a geopolitical rival is invading your neighbours and using its control of certain resources to destabilise your own country, the windfall profits should be seized and returned to the people.

This happened somewhat slowly and piecemeal in europe because big energy companies had too much sway over the political process.

[IshKebab]

Prices are affected by supply and demand.

[orwin]

Not electricity prices. You can't have a free market when it comes to electricity. You can fake one, but it's like a ptomelaic solar system.

[IshKebab]

You definitely can have a free market for electricity. Why do you think you can't?

[mavhc]

But also by the ability to get the supply to the demand, what would be the term? The bandwidth?

You're free to make your own electricity grid

[vfclists]

If there is a genuinely free market.

[andrepd]

This is a good explanation (ignore the inflammatory/propagandistic title): https://www.youtube.com/watch?v=R3bo-s_OY4Q

[tialaramex]

Nobody else seems to have explained what happened here so I guess I'll attempt to do so.

As you probably noticed, although you have a "100% renewable energy" tariff, the company who sold you this tariff did not lay new cables to your home to supply this energy. Indeed, they don't lay any cables, anywhere, they're just a paper company, they have an office maybe, a call centre, maybe a few web servers in the cloud. Clearly they do not make "100% renewable energy" and they couldn't deliver it to you if they did.

Instead your home is hooked up to exactly the same electricity as everybody else in your area, by a specialist supplier who deliver electricity to everybody (well, all ordinary residential customers and most small businesses, the situation for an industrial Aluminium Smelter or whatever isn't the same) but don't have you (or any of your neighbours) as direct customers. This is good news - when it's dead calm and dark, but freezing cold, your electricity still works because it's the same electricity as your neighbours.

So what were you buying for one penny per kWh extra? In the UK when a wind farm makes electricity they get an imaginary coupon for the fact that this is "green" renewable energy called a Renewable Energy Guarantee of Origin or REGO, they can snip this coupon off the electricity and sell these two things separately. The electricity is valuable (in another response elsewhere I might cover why it might be more valuable for them but it's irrelevant to you) and so obviously they should sell that for the prevailing market price or better if they can. But the REGO eh, not so much. But they can sell it, even if for not very much, and so they do.

You are paying one penny per kWh for a promise that your supplier will buy enough REGOs to add up to the amount of electricity you used. That probably cost them much less than a tenth of a penny per kWh. So, really you just gave them free money.

In theory if most electricity users in the UK cared, and bought these "100% renewable" tariffs, the REGOs could go up in value and you'd make a real difference and it would all be worthwhile. In reality very few UK consumers even bother to pick a cheaper electricity tariff, let alone seeking a "renewable" tariff. So, next time your tariff renewal comes up, ignore whether it's "renewable" that's not better or worse, just focus on price. Wanting to do good is an excellent motive, but this is the wrong place to attempt that.

[davedx]

Where are you getting that price from? The numbers I can find are roughly half that: https://www.uswitch.com/gas-electricity/guides/regional-ener...

Please post sources.

[IshKebab]

> €0.48/kWh

This is way off. It's actually capped at €0.29/kWh at the moment. If you're talking about wholesale prices it's even more way off, and basically the same as France.

https://www.ofgem.gov.uk/energy-price-cap

https://tradingeconomics.com/united-kingdom/electricity-pric...

[brnt]

I wish I as a consumer could pay wholesale prices! Naturally, there is a whole cottage industry, namely consumer energy market, trying to trick us into overpaying.

[IshKebab]

Yeah, well in fairness there are other costs... But a lot of it is to pay for the middle men and they mostly exist because of Thatcher.

When she privatised electricity they split it into like a dozen different markets (supply, transport, retail, metering, billing, etc.) and coordinating all of those companies is insanely complicated and expensive.

[zipy124]

That's because of the way pricing is set in the UK.

If the UK Grid needs 1001 MWs for a day and can source 1000 MWs at £0.05/Kwh from wind and 1MW at £0.50/Kwh from gas, then it pays £0.50/Kwh for both. This gives larger profits to cheaper sources of electricity, therefore hoping that it will accelerate the growth. Whether this works or not is up for debate.

TLDR: We pay the most expensive price for all electricity regardless of its cost.

Easy explainer: https://www.sustainabilitybynumbers.com/p/electricity-pricin...

[oezi]

What I don't understand: If solar and wind cost 5-7 cents / kWh, but really is able to charge double or triple, then it should be a very lucrative investment. Shouldn't this lead to massive build-out?

[rjwilmsi]

You are mixing the grid and retail electricity prices.

The retail electricity prices are linked to the wholesale gas cost. So consumers pay the same unit rate for electricity regardless of source/time of day etc. (simplification). Average 23p / kWh or so.

However, the producers of the electricity get paid the grid spot price. Plus any source-specific government-agreed subsidies (for nuclear, or the strike price for wind auctions).

So the typical/average UK grid electricity spot price is around £70 per MWh or 7p per kWh, so while retail is 23p / kWh a solar producer doesn't get paid 23p.

What you will also find is that the spot price, while it varies a lot, tends to be higher in the UK late afternoon / early evening, and higher in the winter than the summer, both of which are normally times when solar output is lower.

[tialaramex]

Some consumers, e.g. customers of Octopus energy, choose to pay half-hourly retail prices which shift as that auction spot price shifts.

Octopus isn't allowed to pass on the full burden (e.g. if the spot price soars to £5000 per MWh, which is crazy, Octopus has to eat that and charge their customers £1 per kWh as promised. even though that's much less than £5000 per MWh) and of course they want a profit (say spot price is £150 per MWh, Octopus charges 18p per kWh, they kept a few pence for operating costs and profit) but if you are able to react nimbly then this allows you to get a significantly better deal than if you're paying a fixed rate.

This is possible because of Smart Meters. The meter sends your usage, not once a month, or even once a day, but every half hour, so they can bill you 2p per kWh at 3am but 35p per kWh at 5pm reflecting the very different energy profiles and production.

[rjwilmsi]

Yes, I'm aware of the Agile Octopus tariff etc. but answered based on what >95% of UK retail consumers are doing.

From historical data, Octopus would also pass on a negative spot price to customers on that tariff so consumers could sometimes get paid to use electricity.

As you say I'd imagine that certain customers with high flexibility, maybe/particularly those with some battery storage (or an EV to charge), could make huge savings.

I don't know what sort of margin Octopus apply on that tariff, I expect it's a bit higher than the 3 p / kWh you suggest (when normal tariffs would average something like 15 p / kWh difference between average wholesale and retail).

[tialaramex]

Yes, I don't know what their margins are, including I don't know whether they recover their desired margins from all supply evenly (e.g. 15p per kWh all the time), proportionally (maybe 30p per kWh when wholesale electricity is expensive, 0p per kWh when it's very cheap) or according to some crazy formula, this strikes me as "secret sauce" for such a business.

For a huge fraction (maybe 95% for all I know) of UK retail consumers they're still with their legacy incumbent supplier, even though those deals are usually more expensive and the service is no better, "privatization" was largely a waste of everybody's time and money. But at least in principle they could all choose Octopus.

[oezi]

No, I wasn't talking about retail pricing. I was talking about the spot market prices being determined by the most expensive generator (gas).

https://en.wikipedia.org/wiki/Electricity_market#Bid-based,_...

[tialaramex]

But, that page insists the UK does not use this system. So, why link it and then say this is what the UK does ?

[rcxdude]

The UK does use that system, but it's only one price for the whole country.

[rcxdude]

It is undergoing a massive build-out. Solar and wind are still growing exponentially.

[gnfargbl]

The actual mean price I have paid for electricity this calendar year is £0.14/kWh (€0.17/kWh). This is using Octopus Agile, which is an hourly tariff which tracks the market.

I do have an EV and try to charge it at the lowest possible rate (including an occasional negative rate when it's very windy), which brings the average down.

[tlocke]

Comparing electricity costs between countries probably says more about government subsidies than the underlying cost of generation. Nuclear fission is an expensive source of electricity (see the high subsidies for Hinckley C) and so I suspect France's nuclear power is heavily subsidised.

[throw0101c]

> Nuclear fission is an expensive source of electricity (see the high subsidies for Hinckley C) and so I suspect France's nuclear power is heavily subsidised.

There are no subsidies in Ontario, Canada, and nuclear is the second cheapest (CA$ 0.101/kHw) after hydro-electric (6.2¢/kWh); see Table 2:

* https://www.oeb.ca/sites/default/files/rpp-price-report-2023...

[tlocke]

For nuclear, the subsidies are often in insurance and decommissioning and long-term storage of waste.

So looking at insurance, it's impossible to fully insure a nuclear power station, and so the state effectively insures it.

With long term storage of waste, the material has to be securely stored for about 10,000 years. As far as I know, only Finland is doing this so far.

With decommissioning, it always costs more than is set aside, and so the taxpayer gets left to pick up the pieces eventually.

With your example of Ontario I don't know how these costs I've outlined will be handled, but if it's anything like the UK the costs will be pushed onto the taxpayer.

[throw0101c]

> With long term storage of waste, the material has to be securely stored for about 10,000 years. As far as I know, only Finland is doing this so far.

It has to be stored for 6-10 years for cooling after it is taken out of the reactor. Then after 200-300 years the only way it is dangerous is if you (a) eat it, or (b) grind it up and snort it like cocaine.

The '10,000 year stuff' is not very 'hot' and any radiation given off can be blocked by aluminium foil. The dangers over thousands of years is overblown:

* https://www.youtube.com/watch?v=z2t2tYQsK94

> With your example of Ontario I don't know how these costs I've outlined will be handled, but if it's anything like the UK the costs will be pushed onto the taxpayer.

The generation companies will be handling nuclear waste in Canada:

> The Act required Canadian electricity generating companies which produce used nuclear fuel to establish a waste management organization to provide recommendations to the Government of Canada on the long-term management of used nuclear fuel. The legislation also required the waste owners to establish segregated trust funds to finance the long-term management of the used fuel.

* https://en.wikipedia.org/wiki/Nuclear_Waste_Management_Organ...

[brnt]

You are right, but the same holds true for other sources: many externalize costs (e.g. CO2 emissions and thereby climate change, or glass fiber composite in windmills being notoriously hard to recycle).

It still may be an acceptable price, externalizing certain known or unknown costs to the state, but when it comes down to it, no source really does this well. That being hard to price is a good reason.

[ZeroGravitas]

If the UK adopted regional pricing, Scotland would have the lowest electricity costs in Europe. (And, every region would see cost go down).

Notably, the previous Conservative government managed to effectively ban onshore wind power in England, but not in Scotland.