Free Electricity
By Paul Homewood
David Turver looks at the myth of “free” electricity:
The full post is here.
As David explains, there is no such thing as free electricity. The costs of generating and distributing electricity are largely fixed, so matter how you slice the pie, what the public pay in total remains unchanged.
Here are his conclusions:
Free electricity sounds too good to be true. Agile Octopus customers benefit from “price plunges” at times of low demand and high renewables generation. Then rest of us pick up the tab for the subsidies paid to the wind and solar generators. It certainly looks like Agile Octopus customers are freeloading off the rest of us – another example of something sounding too good to be true not being quite as advertised.
Moreover, even though there are some measures being taken in the terms of CfD contracts, there is ample scope for battery operators to game the system, making money for themselves and keeping the wind and solar operators happy because suddenly they do not have to contend with negative prices. Note that the planned £10bn spend on batteries will not generate any more electricity. Its just an extra cost to give the illusion that wind and solar power are reliable. That cost needs to be added to the cost of renewables too.
The losers in this arrangement are all the other energy customers who pay for this “free electricity” gimmick.
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NOT A LOT OF PEOPLE KNOW THAT 
Octopus Agile customers that use more energy during the cheaper periods use less energy during the pricier periods. Therefore demand is lower during the peak thereby reducing the need to purchase expensive interconnector electricity. The Agile tariff reduces costs for everyone.
It is not the Octopus tariff that is causing expensive electricity, it is the Net Zero policy. The solution is to elect a government that will change the Net Zero legislation.
You may be right in what you say, but people who have had solar panels installed (at 54ºN latitude, for God’s sake!) have no excuse for not knowing that they are directly benefitting from obscene subsidies paid for by the additional charges imposed on others, including little old ladies living in tower blocks who cannot possibly plunder others.
And what makes you think that the Uniparty gives two hoots about the expense of interconnector energy? Well worth keeping ‘a leg’ in the EU and making sure that THEY themselves are less likely to have power cuts.
Finally, yes, we certainly need to abolish Ed Miliband’s Climate Change Act 2008, and hold to account all those who devised it and voted for it (all MPs but just five). Please tell me which candidates will promise to do this, or even consider doing so?
Currently, rescinding Net Zero via the ballot box appears to be impossible, so it appears that we are being r*ped and it is now a question of adopting the most comfortable position.
But, but, you can save loads of money look:
https://www.telegraph.co.uk/money/net-zero/spent-25000-net-zero-energy-ill-make-it-back-10-years/
“Mr Abbott’s house in Dunoon, Scotland, is now equipped with solar panels, a home battery and a smart meter.
“I have future-proofed our energy costs. A lot of people don’t factor in the long term view, that cost is going to increase. Every time it goes up, the value of my system goes up,” he says.”
Weren’t renewables supposed to reduce costs? I don’t know if I’m typical, but I spend less than 2,500pa on energy, so couldn’t possibly make this work. On the other hand, the dividend on £25k invested might go a good way to paying for my leccy and gas.
I’m surprised Rob White hasn’t been the subject of Paul’s derision yet as he seems to be the new solar puff piece go-to having moved off tax and pensions.
you get nothing unless “someone” pays.
“Someone” has already paid, these tariffs encourage using what we have at our disposal as efficiently as possible by using excess generation when it is available rather then paying even more to buy expensive electricity from the French when UK generation is low.
Net Zero is the problem not Octopus tariffs.
Not so. The price at peak doesn’t diminish because the price at peak is driven by supply issues, not demand issues. Back up generation has to pay its fixed costs via demand, whether that’s 1 MWh or 100. And I doubt whether the amount shifted to off peak from peak by these customers even shows up. As it says above, the majority of the cost of generation and distribution is fixed. That has become more so with renewables. Reducing demand avoids blackouts, it doesn’t affect the total cost of the system.
The average price at peak is impacted by how much expensive interconnector electricity is required to fill the gap left by inadequate UK generation. The peak demand determines the peak supply, reduce the peak demand reduce the peak supply, buy less from Europe.
The experience of DFS is that even when we pay aggregators £6,000/MWh for organising demand reduction the actual reductions achieved are trivial but the gaming of the system is significant. That among those who volunteer as keen greens, not ordinary punters. Electricity demand is very price inelastic, which is why prices soared so high during the energy crisis. The high prices were essential for achieving demand destruction, much if which was provided by shuttered shops and industry.
If we look back to the Triad system with its draconian peak use charges for large industrial customers we find it was effective at reducing peak demand on the grid. However it provided economic justification for investment in diesel backup generation behind the meter. It was a higher cost overall than had the investment been made in say grid OCGT instead, and contributed to industry moving abroad where such costs do not apply.
I don’t think it really works much like that. People who opt for the Agile tariff will have a demand pattern that makes it their best option. They are not going to be saving much energy use at grid peak hours that they aren’t already saving.
A typical case would be the single worker who goes to the wine bar after work, not getting home until late when the wine stained shirt can be put in the washer dryer to start at 3 a.m. They bingewatch Netflix on the weekend when prices are low. It would be a very poor option for a family that has to feed and amuse children precisely in peak hours.
In fact many of the Agile customers have invested in oversize solar systems and a battery, and they take advantage of the generous export tariff arrangements only offered to those with a ToU tariff.
https://octopus.energy/smart/outgoing/
The solar bunce is actually another subsidy to approved Octopus customers paid by the rest of us.
Smoke and Mirrors, UK domestic electricity price (kWh) is one of the most expensive in the world, depending on which report you read, it is somewhere between 10th and 1st. The vast subsidies for wind and solar are just crazy. It is a disaster in the making.
Those who can both afford a solar array with battery, and have the luxury of infrastructure that is adequate to provide a signal for use by a smart meter, will cost the rest of us more money. Once again rural communities with poor signal will lose out. We will have the last laugh I hope when the electricity companies can block supply to smart meters.
I thought that the FiT ended years ago, so if someone buys solar panels and battery today how does that cost others money?
Because they can benefit most from dynamic pricing, and as the article points out, that will cost those of us who can’t use dynamic pricing. FIT isn’t the issue.
There’s still plenty of FiT schemes in operation, and the FiT tariffs get index-linked upwards every year.
So no effect on someone buying solar and battery today.
It is the Net Zero policy that costs people money not the dynamic tariffs that are designed to make the best of the situation.
Read the article.
True, but dynamic pricing seeks to avoid blackouts. It does not, and cannot, reduce costs in total. A wind turbine that never despatches still has to be paid for.
Demand shifting by using “excess” wind power instead of expensive electricity not bought from Europe both helps to keep the lights on and saves money. The wind turbines are fixed cost but the top up power is variable.
The reason that we have the high fixed costs of 1,000’s of turbines, Chinese solar, and Chinese batteries is a direct result of the Net Zero legislation, it is the law, debating the implementation of coping strategies misses the point.
Dynamic tariffs are about propaganda more than real effect so far as demand is concerned. They are designed to normalise the idea that electricity will not always be available at the flick of a switch. They are actually a precursor to rationing by smart meter.
Highly volatile prices are a signal of a supply system inching towards collapse with inadequate dispatchable capacity aggravated by useless oversupply when it happens to be windy or sunny.
The full article is worth the read to understand what a complete disaster our electricity system is thanks to decades of morons in government. It shows that those who call for it to be nationalised have no understanding that it is already government run courtesy of the mass regulation of the industry. It is not unlike the railways that since Covid have become controlled by the government so other than the rolling stock is already nationalised.
The rolling stock is effectively nationalised since the government guaranteed the debt of ROSCOs that lease it out. The government’s own plans for Great British Railways intend to formalise that by having a single state owned entity that owns the track, trains and stations. See
https://gbrtt.co.uk/
Labour’s nationalisation plans would serve only to expose taxpayer wallets to Union demands for higher wages more directly. It would formalise the micromanagement that already exists via ORR.
The battery backup business model just got way better. Not only can you arbitrage volatile energy pricing, you can get PAID to charge your batteries.
Paid to store it; paid to sell it.
You can also get paid not to discharge into an oversupplied market.
https://timera-energy.com/blog/negative-prices-and-high-bm-acceptance-drive-bess-revenues-across-the-weekend/
No. ‘Fixed cost’ has an actual meaning in business. It is contrasted with ‘variable cost.’
In power generation, fixed costs are things like boilers, buildings, plant operator salaries. These are considered ‘fixed’ because you have to pay for them, whether you are generating or not.
Variable cost varies with production. Fuel is a variable cost. The more you generate, the more fuel you need, so your cost goes up.
Wind/solar have the odd situation where there is virtually no variable cost. So claims of ‘the wind is free’ are heard. It’s death is that its fixed cost is extreme, especially if it had to pay for its necessary backup. So far, it gets free backup. At the levels of market penetration envisioned by the greentards, backup goes away, or wind/solar have to pay for it . . . neither of which is viable.
But the costs of generation and distribution are largely fixed. That’s the whole point. And with renewables, the percentage that is fixed increases greatly, because back up gas is then about paying for the plant, not the fuel, as the cost of the plant has far less generation to be spread over. Electricity is now far more expensive because the fixed cost we have to cover has doubled (renewable capacity plus transmission AND back-up capacity) whilst the variable cost hasn’t halved. Indeed, renewable capacity is so much more expensive I suspect its more than doubled.
The fixed cost element of CCGT is very small. Averaged over a year’s output it is in single figures per MWh even for a new plant. The only important cost is the fuel.
Ballpark numbers
1GW costs £700m to build, with a 40 year life. The capital charge to amortise the investment is of the order of 6%, or about £42m per year. If it has 50% utilisation it will generate 4,380GWh, giving a cost of under £10/MWh. Higher utilisation as a modern efficient plant would see the cost reduced pro rata.
The £10bn spend on batteries seems a bit low to me. We have nearly a GW of BESS capacity approved in Devon and I recall that the cost is ~£1million/MW. Doea anybody have a better cost figure?
I believe that Harmony Pillswood sot about £75m for 196MWh.
The battery energy storage capacity can range from about 1MWh to about 4MWh for an installed power capacity of 1MW.
Yes, in my career, I’ve installed some on NG 15 year EFR contracts
Try not to live near them – BESS Li-ion thermal runaway fires & explosions release vast amounts of highly toxic hydrogen fluoride & phosphoryl fluoride gases
Yes I know. I’ve been campaigning against them on the grounds of the risk to people and the environment following a fire/explosion.
As previously posted here by John Brown: Royal Society’s “Large Scale Electricity Storage” report estimated that we need 55 TWhrs (e) to guarantee reliable, dispatchable power from an 80/20 wind/solar mix.
https://royalsociety.org/-/media/policy/projects/large-scale-electricity-storage/large-scale-electricity-storage-report.pdf
Europe’s biggest battery at Pillswood = 196MWhrs = £75m; therefore battery cost to meet the Royal Society’s estimate would be £21 trillion.
I got about 20 pages into the report, trying to find how the stored hydrogen was going to be used, and who owned it. Gave up.
I did see this:
So the device that produces the hydrogen will also ‘reconvert it to electricity.’
Wut?
That’s going to be a neat trick. The critical – derailing – question is, “How are you going to produce electricity from this stored hydrogen?”
And where?
The “who owns it” relates to the problem with battery storage: the owners will use them to arbitrage pricing.
STORAGE ≠ BACKUP !!!
The entire report is based on the premise that storage equals backup. That depends on who owns what, and what equipment is available. Which the report DOES NOT ADDRESS. The report is high level wishful thinking.
Hit the nail right on the head GC. Wanna irrigate the entire Sahara desert? Sure I can write a report on how to do it – obviously it will be total fantasy but no doubt some people might discuss it….bit like this laughable Royal Society dross.
As with wind, government has fallen into the childish trap of believing Green businesses are virtuous and won’t act to make the most money possible.
this laughable Royal Society dross.
IME, the important elements from most reports can be summarised into one sheet of A4 as an executive summary; the most important elements should be summarised into the first paragraph.
The Royal Society are declared believers, e.g :
Royal Society said:
Rigorous analysis of all data and lines of evidence shows that most of the observed global warming over the past 50 years or so cannot be explained by natural causes and instead requires a significant role for the influence of human activities.
The statement from the believers at the Royal Society that a grid comprising renewables would create the requirement for 55 TWhrs (e) of effective storage for the UK is a gift from the believers, although the statement does need to be expanded with:
battery cost to meet the Royal Society’s estimate would be £21 trillion, which is equivalent to approximately 130 years of NHS expenditure.
They hope to convert CCGT to burn hydrogen fuel, or a mix thereof, instead of gas – the rub is, with net zero renewables, there will never be sufficient grid stability to manufacture hydrogen on mass via electrolysers
“We studied it real, real hard. We looked at EVERYTHING.”
Argumentum ad ignorantiam.
cannot be explained by natural causes
By them! They don’t know, ∴ it MUST be human.
Adolescent logic. From PhDs!
Adolescent logic. From PhDs!
Unfortunately, the irrational words by the Royal Society confirm that the power of belief can corrupt logical thought processes; this from a society with a mission statement that reads:
to promote excellence in science and the application of science for the benefit of humanity
“Agile Octopus customers are freeloading off the rest of us“
So are the drivers of EVs. Which means that EVs impose a regressive tax on the rest of us. Virtue-signalling is really vice-signalling.
Correct. And there is a range of EV add ons from Octopus to prove the point.
https://octopus.energy/ev-tariffs/
There are no free lunches – an empirical phrase, of timeless truth and accuracy