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Power Prices Rocketing

June 25, 2021

By Paul Homewood

 image

https://www.catalyst-commercial.co.uk/works/june-2021-energy-market-brief/

It’s rather been under the radar and seems to have attracted little attention in the media, but this year we have seen a massive rise in wholesale power prices, which currently stand 70% higher than a year ago. In part this simply reflects a recovery from pandemic lows, but as the OFGEM chart below shows, historically prices have rarely got above £60/MWh, so we are now in unknown territory. (The OFGEM chart is only up to Feb 2021).

electricity-prices-day-a

https://www.ofgem.gov.uk/energy-data-and-research/data-portal/wholesale-market-indicators

 

Power prices closely follow gas price trends, because gas-fired generation is the marginal source of supply:

 image

https://www.catalyst-commercial.co.uk/works/june-2021-energy-market-brief/

And as Timera revealed last month, the principal reason for rising gas prices this year has been carbon prices, which have also risen sharply. In the last year, according to Catalyst Energy, EU carbon prices have risen from €21.34 to €54.40 per tonne in the last 12 months. The newly introduced UK ETS is running at £51.75 per tonne.

EU carbon prices have risen as a consequence of a concerted EU policy push to ramp up emissions reductions, reflected by the recent decision to increase the targeted emissions cut to 55% from 1990 levels by 2030.

Rising carbon pricing have two effects:

  • It directly adds to the cost of coal and gas-fired generation.
  • It encourages switching from cheap coal generation, to more expensive gas, because coal is more carbon intensive. The consequent increased demand for gas therefore pushes up market prices for both gas and power.

Certainly other factors are in play, such as strong Asian demand for natural gas. Also Russia is happy to play the market, by keeping supply tight and prices high. But these appear to be only marginal factors.

Meanwhile UK and European customers are soon going to their energy prices rocket. This is of course the real purpose of carbon prices, which have always been intended to make renewable energy competitive with fossil fuel energy, by raising the cost of the latter.

27 Comments
  1. June 25, 2021 10:42 am

    The road to perdition.

    The verb apolluein, from which the word is derived, has two meanings:

    (1) to lose;

    (2) to destroy.

    Both of these pass over to the noun, so that apoleia comes to signify:

    (1) loss;

    (2) ruin, destruction.

  2. JimW permalink
    June 25, 2021 10:42 am

    Cue avalanche of article in the MSM ‘proving’ renewables are cheaper than fossil.

  3. Jack Broughton permalink
    June 25, 2021 11:01 am

    Other countries (e.g. Germany) subsidise industrial power more and penalise domestic customers more, to cover the climate madness. This at least makes their industry competitive; it amounts to a stealth tax which people seem to accept better than income tax (except the French of course).

    Erl Happ is correct we are on the road to perdition, but the media cannot see that.
    Andrew Neil gave an XR leader quite a pasting last night on GB News, but it will take more than this to get anywhere.

    • Phoenix44 permalink
      June 26, 2021 8:23 am

      It only makes their industry competitive in terms of exports – which is utter madness as it requires Germans to effectively subsidise the consumption of German production by foreigners. This of course is the result of a generation or two of German politicians who are utterly ignorant of basic economics. That ignorance has destroyed swathes of the economies of Italy, France and Greece and led to huge imbalances in the Eurozone economy.

  4. Ian Wilson permalink
    June 25, 2021 11:19 am

    It may expose the folly of stopping fracking, putting us dependant on Russia and Qatar.

  5. Joe Public permalink
    June 25, 2021 11:38 am

    From the Catalyst report:

    “In May 2021, all tracked wholesale GB gas contracts rose, with the most pronounced rises observed across near-term contracts. Gas prices across the board remained comfortably above their levels seen at the same time last year, amid a consistently bullish commodity market and EU gas storage levels remaining at multi-year lows.”

    (My bold)

    For Britain, just how low is shown at bottom of this Nat Grid page:

    https://mip-prd-web.azurewebsites.net

    • Jack Broughton permalink
      June 25, 2021 4:34 pm

      Interesting graphs. The UK has gone from 44 TWh storage in north sea fields to 13 TWh last year and now seems to depend on LNG: guess LNG is cheaper to store than cavern storage???

      Throws up a question about CCS: would it be cheaper to store the CO2 as dry ice?

      • Joe Public permalink
        June 25, 2021 7:07 pm

        According to OFGEM GB Gas Storage Facilities Aug 2018:

        1.696 bcm volume >> 18,656 GWh; with a daily draw-off capability of 1,518 GWh (63.25GW)

        PLUS Britain has a further 12,000 GWh of LNG storage

        Click to access 181207_storage_update_website.pdf

        LNG is stored as LNG because it’s energy-intensively liquified at source, so maintained as liquid at the entry ports, until needed.

        Isle of Grain, Kent – owned by National Grid, storage of a million m^3

        South Hook, Milford Haven – jointly owned by Qatar Petroleum, Esso and Total, storage of 3/4million m^3

        Dragon, Milford Haven – owned jointly by BG Group and Petronas, storage of 1/3rd million m^3

    • It doesn't add up... permalink
      June 26, 2021 1:06 pm

      Poor renewables output and cold weather adding to heating demand have seen gas stocks heavily eroded across Europe. They are struggling to recover.

      https://timera-energy.com/an-uphill-battle-to-refill-european-gas-storages/

  6. Joe Public permalink
    June 25, 2021 11:47 am

    “This is of course the real purpose of carbon prices, which have always been intended to make renewable energy competitive with fossil fuels.”

    Rather – it is an unintended consequence of making fossil fuels expensive like renewables!

    • AC Osborn permalink
      June 25, 2021 3:29 pm

      Not unintended at all.

  7. GeoffB permalink
    June 25, 2021 11:51 am

    Just got next years renewal from AVRO. Electricity was 12.82p/kWh now 17.85p/kWh that’s a 39% increase. standing charge is up from 15.75p/day to 17.85p/day up 13%.

    Gas is up from 2.35 to 3.166p/kWh that’s 34 %, standing charge is also up 13%.
    Thanks for low cost renewable!!!!!!!!

    I looked around but they are still one of the cheapest around, but it seems all the suppliers are converging on the same prices, probably as a result of market rigging. OFGEM (the useless twats) are supposed to keep consumer prices down, yet they fail on every measure.

    • Ray Sanders permalink
      June 25, 2021 12:24 pm

      Similar for me with Avro. However, for my area (Kent) Symbio Energy are offering 12 month fixed electricity at 10 p per day standing charge with 12.629p per kWh. They do not offer gas. While you do not have to get both gas and electric from the same supplier, trying to get a half way reasonable gas only tariff at the moment is nigh on impossible. If anyone knows of one I would be very interested.
      N.B. Symbio do not seem to offer any form of either Economy 7 nor time of use tariff.

      • GeoffB permalink
        June 25, 2021 3:11 pm

        Checkout trustpilot for symbio reviews, I think I will stay clear of them. We just have to face up to the consequences of all the loony green plans putting up our costs, the madness of subsidising intermittent renewables and carbon taxing reliable fossil fuels will destroy western civilisation. The only bright spot is that hitting consumers with ever increasing costs now may be the best way of getting some more opposition to the climate change act. A few power cuts this winter would also help out.

      • bobn permalink
        June 25, 2021 6:40 pm

        I just changed to Delta Gas and Power who offered an excellent rate (no standing charge! But why should there be a standing charge?). Of course in 12 months when the contract finishes they’ll jack it up to something silly and i’ll have to change again.

      • Joe Public permalink
        June 25, 2021 7:15 pm

        To Bobn:

        “… why should there be a standing charge?”

        Because that pays the fixed costs for balancing costs, metering costs, your supplier’s sales processes etc etc making the commodity available 24/7 for you to choose whether you want 1kWh or a hundred-thousand kWh per year. 😀

      • Jordan permalink
        June 26, 2021 12:16 pm

        To add to JP, wires are also mainly fixed costs, and a very significant element of total costs.
        I view energy costs as principally two elements: the energy itself, and security of supply.
        Producing some energy isn’t necessarily very expensive, but “producing some energy” doesn’t really make the grade in terms of expectations of reliability.
        Security of supply is expensive because it (should) involve designed-in redundancy to avoid single points of failure. Redundancy (or to put it in a less emotive term, reserve) has to be added to almost every single element of supply, from fuel sources, to reserve generating resources, to multiple-circuit transmission and distribution alternatives. For connection, major cities are connected to at least n+2 security of major feeders.
        Take a look at the following pie chart published by Ofgem. The environmental and social costs are mostly levies to pay for unreliables. There are also hidden environmental costs in wholesale and networks as a consequence of the “carbon price”.

    • It doesn't add up... permalink
      June 26, 2021 12:55 pm

      OFGEM are supposed to ensure that green interests are looked after. It’s the law, from Ed Miliband’s 2010 Energy Act. Consumers are only ever second fiddle, if that.

  8. June 25, 2021 1:19 pm

    Wow, £80 = US$111, which is about four times our average wholesale electricity price here in North Carolina.

  9. June 25, 2021 1:47 pm

    You will own nothing and you will be happy.

    • Julian Flood permalink
      June 25, 2021 2:05 pm

      and you will be bloody cold.

      JF

      • Dave Fair permalink
        June 25, 2021 5:16 pm

        And hungry.

  10. June 25, 2021 4:56 pm

    That’s the real end game isn’t it. Turn energy use into a vice and then tax it to help you curb your vices. Necessities may have a low tax, luxuries may have a moderate tax but government feels justified in taxing your vices at 100-300% of their cost.

  11. June 25, 2021 8:45 pm

    At Scotch Corner earlier this week they were offering a litre of unleaded for £1.52. Needless to say I did not fill up there.

  12. June 25, 2021 9:41 pm

    It appears that prices are highest in the summer, is that because that is when the largest % of overpriced renewables are in the mix because demand is low?

  13. Phoenix44 permalink
    June 26, 2021 8:29 am

    I’m not sure this strategy will work. Higher energy prices are paid by us all, not just directly in our homes but in pretty much everything else we consume too. We already have a big inflation problem and this will only make it worse. Anybody under 40 has no idea what inflation is nor any idea what high interest rates are. They are going to learn why they matter pretty soon, as is this extraordinarily profligate government.

  14. Stonyground permalink
    June 26, 2021 10:11 am

    Wife and I went for a walk on Hornsea seafront this morning. The offshore wind farm is currently stationary.

    OT but did anything come of that request from, was it Bristol University? for photographs showing the devastation being caused by climate change? I would love it if they had been deluged with pictures of beautiful idyllic scenes and decided to can the idea.

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