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Retail electricity in the REMA future

 
Electricity, Tariffs, Monitoring, Electrics & Providers
Last Post by Derek M 3 years ago
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 ronin92
(@ronin92)
Estimable Member Member
Joined: 4 years ago
Posts: 64
Topic starter 08/02/2023 3:56 pm   [#818]

The REMA scenario expects/desires a future of (over?)-investment in intermittent renewables so they dominate electricity generation. The plot below shows hourly (day and night) distribution of excess demand in a given year in their scenario.

image

 

By 2035, excess generation is expected half of the time, by 2050, 66% of the time, perhaps with excess generation lasting many days. Because intermittent renewables have high capital costs but very low short-run marginal costs, the price of electricity will be zero/negative in a market structured like that today. The consequent price cannibalisation will make it impossible to recover the long-run costs of maintaining supply of that electricity and consequently, attracting the £260-400 billion BEIS wants invested into the transition. Also, while capacity will be required to cover periods of excess demand (e.g. low wind/sun), there will also be fewer opportunities to recover the investment costs for supplying that cover which will drive up the cost when cover is needed. They are therefore very interested in market structures where those costs can be recovered.

Anyway, so much for that, but where would we stand as electricity consumers? It appears to me that installing solar panels may not generate a decent return in that future since there could be significant amounts of cheap electricity available. Instead, having battery capacity to store up excess generation for later use could pay dividends.

Also, there is an industry with near-zero marginal costs today, telecoms. Will there be tariffs in future that sell bundles of off-peak kWh like mobile phone contracts today?



   
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 Benguela
(@benguela)
Eminent Member Member
Joined: 4 years ago
Posts: 29
09/02/2023 11:33 am  

Hi @Ronin92, interesting post.

A lot of what you say is new to me... I've heard of this review of electricity markets arrangements, but I'm hazy on the economics... will read up!

But being able to buy a bundle of off peak kWh would be absolutely perfect for me. Heat pump user and I'll sign up now, if it were available.

Indeed, it almost leads to another question. I know how much my heat pump consumption is per year. Why can't I 'bulk buy' my HP consumption a year in advance already (in 2023)? I know I'm an individual customer, but if I could get onto the futures market I could buy my energy ahead (just like the supply companies buy their electricity ahead). I would even promise not to use my HP during peak hours and my supplier is welcome to come and install a meter on my HP and charge me a fine if I do run it during peak hours. To me, this is the kind of thing we should be doing already, not in 2035.



   
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 Derek M
(@derek-m)
Illustrious Member Member
Joined: 5 years ago
Posts: 4425
09/02/2023 11:53 am  

Posted by: @benguela
↑

Hi @Ronin92, interesting post.

A lot of what you say is new to me... I've heard of this review of electricity markets arrangements, but I'm hazy on the economics... will read up!

But being able to buy a bundle of off peak kWh would be absolutely perfect for me. Heat pump user and I'll sign up now, if it were available.

Indeed, it almost leads to another question. I know how much my heat pump consumption is per year. Why can't I 'bulk buy' my HP consumption a year in advance? I know I'm an individual customer, but if I could get onto the futures market I could buy my energy ahead (just like the supply companies buy their electricity ahead). I would even promise not to use my HP during peak hours and my supplier is welcome to come and install a meter on my HP and charge me a fine if I do run it during peak hours.

If my understanding is correct, it is the buying ahead that is keeping both gas and electricity prices high, for consumers at the moment. I do believe that the market spot price is now lower than the Energy Price Guarantee, but the energy suppliers are still paying much higher prices to the energy producers, hence the very high profits that are being announced by various companies.

 



   
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