@prjohn

Can anyone clarify how the pricing of the electricity market now operates?

When the electricity supply industry was first privatised, all generators were paid at the rate of the most expensive, so the more efficient, cheaper, operators made higher profits. But some of the generators would bid in at a low price or even zero to ensure they would be selected, relying on the more expensive generators to set the price.

As far as I am aware this system was changed some years later, such that each generator was paid the price that they bid in. So that if they bid in too high they may not get selected and hence not earn any income. This was to ensure that the market was not being manipulated in any way.

I also though that large scale renewables such as wind and solar farms were guaranteed a set payment, to encourage investment, but if this guaranteed payment was exceeded, any additional profit was paid back to the government.

We appear to once more have the situation where everyone is being paid at the price of highest cost generator, or am I missing something?

An Energy Supplier will usually try to sign a PPA (Power Purchase Agreement) with producers, especially if this secures them electricity from a renewable source.

If they need to make up a shortfall within a half-hour trading period, then they bid on the European market, ExSpot. Whichever is the last 'trade' within that 30-min block defines the price which must be paid to all producers who made contracts during the period.

If demand is lower than expected within a 30-min block, then an Energy Supplier can use any excess available under their PPAs to sell back to their rivals via ExSpot.

For those who prefer a less techie explanation, I published an illustrated narrative version of this energy purchase system over here on the OVO Forum.

Posted by: @transparent

An Energy Supplier will usually try to sign a PPA (Power Purchase Agreement) with producers, especially if this secures them electricity from a renewable source.

If they need to make up a shortfall within a half-hour trading period, then they bid on the European market, ExSpot. Whichever is the last 'trade' within that 30-min block defines the price which must be paid to all producers who made contracts during the period.

If demand is lower than expected within a 30-min block, then an Energy Supplier can use any excess available under their PPAs to sell back to their rivals via ExSpot.

For those who prefer a less techie explanation, I published an illustrated narrative version of this energy purchase system over here on the OVO Forum.

So we have gone back to the original market model, where a small number of producers can set the price and manipulate the market.

It is therefore time we went back to the system where each producer bids in a price, and that is what they get paid. If a producer tries to push up the price too high, then they may not get any business. It would also help limit the excessive profits that some producers are making.

We also now have other options.

Community Groups can be formed to collaboratively 'own' renewable energy assets which can be 'sold'. Such groups are known as Energy Aggregators.

They can also buy-in electricity for their community members, thereby sidelining the domestic energy suppliers.

Many of these groups use Piclo to handle the trades, create invoicing and ensure legal integrity.

@derek-m - do you need a Super Yacht? 4 month holiday in Morocco is much more affordable..

And probably cheaper than the gas bill if stayed here!!

@transparent think we're off at tangent again..

Doesn't matter, wasn't what I meant and sure anything written here won't fix the scale of the problems we face.

I can't even get a response from the Energy or Business Secretaries over boilers wasting 22% of gas input by default at a time consumption will be critical.

I've plenty of gas, fixed until late '24 and generator with transfer switch on stand-by and only buy in 1000kwh Electricity and 2,500kwh Gas per year, and that's soon to be LPG.

Posted by: @diverted-energy

@transparent think we're off at tangent again..

Doesn't matter, wasn't what I meant and sure anything written here won't fix the scale of the problems we face.

I can't even get a response from the Energy or Business Secretaries over boilers wasting 22% of gas input by default at a time consumption will be critical.

I've plenty of gas, fixed until late '24 and generator with transfer switch on stand-by and only buy in 1000kwh Electricity and 2,500kwh Gas per year, and that's soon to be LPG.

My experience of writing to both my MP and BEIS is that you will just get some bog standard answer which may or may not be relevant. You will probably find that the ministers don't understand what you mean and can't find anyone within their department with the knowledge and experience to explain.

Someone, government or councils need to set up a task force to check peoples heating systems and adjust them if necessary and also help with home efficiency measures. Unfortunately you will probably find that the cowboys and scammers jump on the bandwagon instead of reputable people. 

I hear you @diverted-energy but don't think I'm off on a tangent on this occasion. There are existing community groups operating as Aggregators. Their members do not pay the electricity tariffs set by the big Domestic Suppliers. They pay whatever rate their group manages to set, a lot of which will be home-grown renewable-generation. They also trade heat between adjacent properties, sharing the costs of installing high-output 3-phase GSHPs.

Posted by: @diverted-energy

I can't even get a response from the Energy or Business Secretaries over boilers wasting 22% of gas input

Posted by: @derek-m

My experience of writing to both my MP and BEIS is that you will just get some bog standard answer

 

My MP forwards my 'briefings' to the relevant Ministers and their Departments, together with his own comments (which I don't get to see).

One written response earlier in the month hadn't taken proper account of what I'd stated. It got sent back to the Minister for reappraisal... as it should, of course!

It helps to go through the right channels. If I write to BEIS about the cost of electricity, the response will be through a civil servant who replies by stating the current policy. But if my MP writes to the minister responds, then it gets much more thorough attention. A civil servant mustn't be found out sending 'bog standard' replies back to an MP!

County and Borough/District Councillors are also helpful. I keep them briefed on relevant energy matters where the Council can take positive action. Not only do I then meet with them, but they also visit me to see first-hand some of the energy strategies I'm testing.

If the Council needs energy information of a technical nature, I can suggest the form of words and, where possible, identify the best individual in the energy industry to provide an answer.

Those same Councillors also write to my MP, reinforcing the messages.

Please don't give up on getting responses from Government. It can take a little time to cultivate relationships with a Council or an MP, but those are the best routes to send energy-related suggestions and feedback to the right people.

Posted by: @derek-m

... councils need to set up a task force to check peoples heating systems and adjust them if necessary and also help with home efficiency measures.

I wholeheartedly agree. This is happening in Devon... and Cornwall too I believe.

Councillors refer constituents to a qualified Energy Advisor from a local community group. Subject to certain criteria, a free home visit can be arranged.

This includes a house survey, free LED bulbs (and other goodies) and checking the electricity/gas bills. If a change of tariff or supplier would help, then the Energy Advisor facilitates it.

It's very similar to much of the advice being given here on this Forum, but tailored to the particular house, and at the level which the householder can understand.

@derek-m You asked "

Can anyone clarify how the pricing of the electricity market now operates?" I found this information explains the current situation very well.

https://www.taxresearch.org.uk/Blog/2022/08/29/we-could-massively-reduce-the-price-of-energy-in-the-uk-by-changing-the-way-we-regulate-energy-prices/

@prjohn I'm not sure it does really. It looks like a bit of a one sided rant to me.  Maybe this might provide a bit of balance.

https://www.nationalgrideso.com/who-we-are/markets/electricity-markets-explained

and this, and the links in it, is really good on the CfD mechanism; no politics just facts. 

https://www.lowcarboncontracts.uk/show-me-the-money

@kev-m

I think that this concerns the fixed rate contracts with some of the renewable generators. If say they are guaranteed a payment of £100/MW, but the present rate is £200/MW, the difference is paid by the generator into the fund which eventually will be paid to the suppliers, the likes of Octopus etc.

It was interesting that the price of gas fell by 11% recently, when the EU just mentioned that it was considering some form of change to the energy market. It would appear that there may be some traders taking advantage of the situation to bump up their profits. A possible remedy could be hanging, drawing and quartering.

I suspect the higher gas prices recently may also have been due, to some extent, by Germany, using its balance of payments surplus to pay higher prices to get the gas to fill up its storage quicker than planned.

I am also concerned that the Natural World, has decided that the harmful effects it has suffered by the infestation of humans, has gone too far, hence the wild fires, floods and droughts that are becoming much more frequent. I was talking to a guy called Noah the other day, he has just bought a 'boatload' of wood, but he didn't explain why.