[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.