The spark gap seems to have narrowed this time from 4.3 to 3.6. While electricity prices are going up by nearly 5%, gas prices are going up by 27%. I thought they were still exploring various options to decouple electricity from gas prices. What changes have they made to make such a big impact. Surely, I am missing something. Not that I am complaining, as heat pumps are now more attractive from a running cost perspective.

Posted by: @jeff

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If the gas price falls in the next months, expect the ratio between gas and electricity unit rates to widen at the next cap, obviously unless the government make more changes

Posted by: @chandykris

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What changes have they made to make such a big impact. Surely, I am missing something. Not that I am complaining, as heat pumps are now more attractive from a running cost perspective.

I am not aware of another policy change (if there has been one it has not been publicized) .  Perhaps it just reflects the market and the fact that the direct impact of the war is on gas prices.  Yes electricity prices are linked to gas but maybe not 1:1?

Just a guess based on the fact that I have not heard a policy announcement, @transparent may know  the facts.

No, I'm also unaware of a policy change.

It's possible that the Secretary of State has got fed up with 'advice' from Ofgem or NESO, telling him that he can't just use price differentials to make heat-pumps appealing. So this could be a surprise move by him, albeit in keeping with his political aims.

I can see this from both 'sides' of the argument. I know Ed is upset that he seems to be thwarted in his desire to provide cheaper energy to the mass of working people. He believes this is directly related to the need for more renewable generation.

It matters not whether I agree with him on politics or strategy.
I'm simply observing that a sharp increase in the price of domestic gas can be readily explained by following what he's been saying publicly.

I'm also going to assume that DESNZ can't mandate one price rise for domestic gas consumption, and a different one for commercial use. In both cases, the gas is being bought from sellers in the same wholesale market.

Conveniently for the Secretary of State and NESO, that raises the price for electricity generated by Combined Cycle Gas Turbine plants (CCGT).

CCGTs would have to cease operation in order to met the NESO target for decarbonisation of the grid by 2030 (or 2035 if you read other announcements).

It's also CCGTs continuing to run in 'Combined Cycle' mode which underpins low cost electricity after midnight, as offered by the classic Cheap Rate tariffs. They might have to operate at a loss to achieve that, but it's viable to do so if it means the generation plant doesn't drop out to Open Cycle mode.

In this instance, the rise in the international price of gas has played into the hands of the UK Secretary of State for Energy. He's unlikely to ignore that opportunity.

@transparent Not sure whether any.new offshore wind turbines (Dogger Bank?) are going operational in the July quarter which could drag prices down. Or maybe they have successfully managed to push some legacy solar farms to CfD. The cynic is me is thinking that had policy changes been the reason, you would have heard a million times already on government media rounds and PMQs!

Posted by: @chandykris

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The spark gap seems to have narrowed this time from 4.3 to 3.6. While electricity prices are going up by nearly 5%, gas prices are going up by 27%. I thought they were still exploring various options to decouple electricity from gas prices. What changes have they made to make such a big impact. Surely, I am missing something. Not that I am complaining, as heat pumps are now more attractive from a running cost perspective.

Posted by: @jeff

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If the gas price falls in the next months, expect the ratio between gas and electricity unit rates to widen at the next cap, obviously unless the government make more changes

 

It happens every time. 

When wholesale gas prices rise it always has more of direct effect on retail gas unit rates.

Electricity unit rates are effected by wholesale gas prices but not as much as there are a lot more costs that make up the unit rate of electricity and because the amount of times gas electricity plants set the price of electricity has fallen. 

Ditto when gas wholesale prices fall so gas unit rates fall faster than electricity unit rates. 

Posted by: @chandykris

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. The cynic is me is thinking that had policy changes been the reason, you would have heard a million times already on government media rounds and PMQs!

Not sure that is the case.  The current government is very poor at self promotion, perhaps it's greatest weakness.

On a wider point the past few posts are a perfect illustration of how we collectively dissuade the people we need to be in politics from becoming politicians, and this forum is pretty civilised by comparison to much else.

I think we would all agree that we want politicians who are competent, truthful and sensitive.  Yet we criticise politicians for things over which they have no control, misrepresent what they have said, describe world events as 'playing into the their hands' (implying that the world made a mistake which the politician exploited, not that the politician made a sound or even neutral judgement) and implicitly criticise them if they dare to promote what they do.

Would you want this job?  I certainly wouldnt.  Only a crook or delusional altruist would, and the latter would also have to be thick skinned to put up with the sh1t that the public throws at them.  

Is it surprising that we get (largely) a mixture of crooks and somewhat thick skinned (for which we again criticise them) delusional altruists, when this (or worse) is how we habitually treat them?  Not at all IMHO!

We get the politicians we deserve and I am far from convinced we deserve the best.

I would love the opportunity. But, as told by my loved ones, with my libertarian capitalistic values asking for low tax, I might not last a month in the top job!

Posted by: @jamespa

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Would you want this job?  I certainly wouldnt. 

Posted by: @chandykris

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I would love the opportunity. But, as told by my loved ones, with my libertarian capitalistic values asking for low tax, I might not last a month in the top job!

Posted by: @jamespa

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Would you want this job?  I certainly wouldnt. 

 

Good point and yet another reason to dissuade the people we need as politicians from seeking the job.  It's insecure and guaranteed ultimately to end in failure ("all political careers ultimately end in failure").

One of the most caring and in many ways effective (local) politicians I have ever met, who belonged to a party I have never and would never vote for, lost their seat (in my view cruelly) in 2022.  They were, understandably, devastated.  They died just a couple of years later.  

In case you are wondering they fitted into the category of thick skinned delusional altruist.  I think the 'thick skinned' element was a product of circumstance and necessary to survive.  Fortunately the delusional element was not particularly prominent.

Posted by: @chandykris

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Or maybe they have successfully managed to push some legacy solar farms to CfD.

I doubt this would happen at scale since the announcement, assuming this required legislating, applying and renegotiating.. 

Hopefully it will not take too long to see real decoupling of prices. As if there was any problem with the policy, the clamour of a u-turn would be deafening us.. 😁

I think too little is spent talking about what is going well..

Posted by: @batpred

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Posted by: @chandykris

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Or maybe they have successfully managed to push some legacy solar farms to CfD.

I doubt this would happen at scale since the announcement, assuming this required legislating, applying and renegotiating.. 

Hopefully it will not take too long to see real decoupling of prices. As if there was any problem with the policy, the clamour of a u-turn would be deafening us.. 😁

I think too little is spent talking about what is going well..

It is a long way off from the idea being floated by the government in an announcement in April. 

They haven't even opened a consultation yet that they suggested would be later in the year so I don't expect to see any change to contracts this year. It is just as big an issue as gas spikes as these generators benefit from the gas spikes. Unfortunately the design of the subsidy didn't take into account high spikes due to wars. 

They did increase the Electricity Generator Levy to tax the excessive profits of the 35GW of capacity of renewable generators under the ROC contracts but obviously this did not reduce bills, it just gets pushed into general government spending. 

They also removed 75% of the Renewable Obligation Certificates temporarily and stuck the cost on general taxation so no real saving just moving the deck chairs and tax payers somewhere pick up the bill. 

They could yet mess it up by agreeing too high a wholesale CfD cost. 

The CfD portion of our bills has been rising and may double anyway as circa half the CfD contracts approved aren't yet built and operated and some high rates hace been approved. 

Posted by: @transparent

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Posted by: @iradiate

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what if I configured it to charge as much as it could during the cheap tariff period (00:30 to 05:30) in winter and switch to charging by day in summer.?

That tells me your highest priority is cost per kWh, rather than "being green" for example.

Charging a storage battery in the small hours of the morning means that you'll predominately be using electricity generated by a Combined Cycle Gas Turbine (CCGT) plant.

When a CCGT starts up, it's basically a jet-engine with an exhaust running at over 1000°C.
It takes a few hours before that exhaust heat has raised the temperature in a boiler to a sufficiently high temperature and pressure to rotate the turbine in the 2nd stage of generation.

Once the plant moves from Open-cycle to Combined-cycle the efficiency will increase to about 50%. That's not great, but it's cheaper than throwing wasted heat into the atmosphere.

CCGT managers therefore wish to keep operating in Combined Cycle mode throughout the night. To do so they lower the price to something very small, possibly even operating at a loss. But at least they're supplying electricity which might otherwise have been generated by an offshore wind farm.

 

As you can imagine, the Cheap-Rate overnight period isn't going to be with us for much longer.

This could be a better thread for a discussion on electricity rates. 

I would be surprised if Gas CCGT would be a massive contributor to enable cheap overnight electricity rates. My gut feel is the main overnight engines are generators that have little to lose by continuing to produce when consumption drops: nuclear power stations, wind, import from countries with excess, in some cases CCGT. But perhaps I am missing the data? 

Maximising the use of the grid when it is less busy also tends to reduce the need for investment in grid upgrades (that so many of us judge as having significant environmental impact). 

I assume production overnight is significantly less carbon intensive, since gas generation peaks with peak demand (and of course on days when renewable production would be lowest).  

When a CCGT turbine increases efficiency to 50%, it causes lower emissions per energy unit, but clearly at the cost of additional carbon emissions to maintain that rate. 

Posted by: @etchedpixels

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The long term cost of power is difficult to play pricing games on. Aside from the geopolitics of gas the grid is shifting with new nuclear due eventually (but likely to be HS2 grade 'soon'), and a lot of existing and new renewables that will be freed from the grid capacity mess thanks to privatisation and under-investment for decades. That's likely to make prices more volatile even if they average downwards. Export is certainly on the downward slope, and anyone planning to spend a decade doing clever battery arbitrage is increasingly going to be up against commercial battery farms doing the same thing at scale with lower costs.

Good point, I do expect the bonus of putting my energy storage to use for the export during peak rates to not last forever… specially if planning permission continues to have support from central government.

There’s some talk of peak rate becoming less relevant with the increase of heat pumps, but the install base of heat pumps is still minimal..  

Another factor would be more solar systems having batteries but nothing tells me there’s any significant retrofit of batteries.. 

I am sure others will have more insights..