From NOT A LOT OF PEOPLE KNOW THAT
By Paul Homewood
Via Net Zero Watch:
Liz Truss has taken office as Britain’s new prime minister and will on Tuesday finalise a £100bn package to address the UK’s energy crisis by capping the cost of gas to bring down bills for households and businesses.
The measures are the priority for Truss, who was appointed by Queen Elizabeth at the monarch’s Balmoral estate in Scotland on Tuesday after beating her rival Rishi Sunak for the Conservative leadership.
Under the plans being worked on by the Treasury, the UK government would subsidise the wholesale cost of gas allowing suppliers to cap the price of energy to households and businesses, leaving taxpayers exposed to any further surges in energy markets.
Truss’s team said the package would provide protection from the biggest energy shock for decades, preventing mass corporate casualties and keeping millions of households out of fuel poverty. It is not clear whether the caps for households and businesses will be set at the same level.
One senior official confirmed that Truss’s team was drawing up the plans ahead of a potential announcement on Thursday: “There will be a cap, freeze or guarantee on the wholesale gas market,” he said.
She will address the nation as PM for the first time in a speech from Downing Street at about 4pm, after which she will begin to name her cabinet.
The rescue package will be a huge challenge for Britain’s straitened public finances since Truss has also promised tens of billions of pounds of tax cuts. It would be paid back either through consumer bills or taxation over the long term.
The relief package was discussed on Monday night by energy executives and Jacob Rees-Mogg, who is tipped to be the next business secretary.
Capping gas prices would lower wholesale electricity rates. About 40 per cent of Britain’s electricity is generated by gas-fired power plants, which tend to set wholesale rates for the rest of the market, even though other technologies such as wind produce power more cheaply.
In the long term, Truss’s new government wants to decouple electricity prices from gas entirely, a policy the EU is also pursuing.
Brussels is also recommending that EU member states take emergency measures to cap wholesale gas prices.
Full story
This is actually one of the options I have been considering. It has the great advantage that, by reducing electricity wholesale prices, it puts an end to the windfall profits being made by renewable energy firms and other non=gas generators.
As such it is a much cheaper way of subsidising electricity (and gas) markets than the solutions already put forward by both the government and opposition parties.
It is, of course, also a much simpler solution than radically remaking the energy markets in the way I have recently laid out. Though this is something which will need to be done sooner or later, it would not address the immediate problems.
In the long run, of course, we need to begin boosting domestic supplies of gas.
Price caps, subsidies, and printing money won’t provide one additional SCF of gas. They need to drill and exploit their shale gas. And build some beautiful clean coal plants.
Wait until this winter when they get a cold high pressure system with minimal wind. It’s going to be ugly.
”windfall profits being made by renewable energy firms’… UK renewables are obliged to return income which is over the strike price for their asset. Given the wholesale price is over that of many recent strike prices, UK renewables are returning that cash right now.
Griff
Wrong, wrong, wrong
Wind and Solar suppliers are currently making £43 billion windfall profits. They are doing this by selling at the strike price. This is currently set by the cost of gas.
Not bad for supplying 7% of the total energy for the UK.
Supplying at over the strike price is one of your red herrings
Yes. Griff, one fears, either doesn’t know how renewable pricing works in the UK, or is being deliberately deceptive.
Yes, if they supply over the strike price they return it. But if the strike price is so high that they make profits which, were they oil or gas or coal companies, would be called ‘obscene’, they just pocket them.
There is also the recent loophole that they have been refusing to supply at contractual prices but instead have been selling at open market prices which are set by… the price of gas. The profits from this will not be returned.
He’s a f’kn eejit.
griff under the Contracts for Difference scheme wind farms can delay by up to 3 years taking up the CfD. Since the price of energy rose in autumn 2021 nobody has taken up a CfD. They are all selling at the market price and making bumper profits. CfD like so many Government schemes is very flawed.
Haha Putting a price limit on something that doesn’t exist; a subsidy to purchase something that isn’t there. Isn’t the problem the absence of energy, not its price?
The problem is absence of intelligent thought and policy.
Government cap means the treasury bleeds dry but because no one sees the real cost, real change is avoided.
Its all backward and stupid, so much so its a wonder Trudeau isn’t behind it.
I mean, we lead the world in stupid.
Canada is back.
You are a meany….. /sarc>
This will work until British govt finances collapse, as they inevitably will.
So much for Liz Truss and the spirit of Margaret Thatcher.
What did Liz Truss mean when she said “kicking the can down the road will not do” (https://www.rnz.co.nz/news/world/474124/truss-promises-immediate-action-on-energy-if-appointed-uk-pm)
The previous govt policy was to provide the UK citizens with financial help whilst keeping their fingers crossed that it would all end soon and things get back to normal. This was ‘kicking the can down the road’ and not dealing with the underlying causes of the problem. One rather hopes that Truss and her team will try to sort out the underlying cause and get something done sooner rather than later.
Why, when prices have gone through the roof, is green unicorn energy not coming to the rescue? They certainly do not need any subsidies with these high prices either so should be opening the floodgates.
Yes, that is a very good question. One which every sane person in the UK ought to be asking. But I don’t know how sane Truss is.
Get in the “Wayback Machine” and look at how Price Controls have worked in the past.
History 101: Price controls don’t work – Chicago Tribune
Inflation — just above 4 percent in 1971 — was in double digits when the controls were lifted.
[SNIP]
The history lesson for this Congress (or any other government body) could not be clearer. Price controls could create shortages and leave our economy dangerously exposed to disruptions in supply. In the 1970s, we were the only nation on Earth to have gas lines. Why would anyone ever want to go back to that?
https://www.chicagotribune.com/news/ct-xpm-2007-06-07-0706061080-story.html
For the umpteenth time, this is not a price control!
The government is not telling energy companies what they can sell their products for, they are simply topping up consumer payments.
I understand it, you understand it but there does appear to be an element on the site that simply doesn’t understand or comprehend what they just read. It must be an adult (il)literacy problem!
“In the long term, Truss’s new government wants to decouple electricity prices from gas entirely, a policy the EU is also pursuing.”
Its a most noble ambition, but the only way to achieve it is to stop trying to move to wind and solar power generation, since they require backup, and the only backup that works fast enough and on the right scale is gas.
So the more wind and solar you install, the more you couple your electricity prices tightly to the price of gas.
And yet there are still large numbers of people in media and government who think the solution to the gas price and supply problem is to install more wind and solar! They really think (or have been sold) that its a measure which will decouple gas and electricity prices.
Moreover the unreliable wind industry is bigger than ever and its costs are no longer falling. Earlier this year Wind Europe said Europe’s 5 major turbine manufacturers were operating at a loss. And as more wind goes offshore those costs are only going to go in one direction and it is not down.
Capping the cost of gas and bring down prices.
ROTFL. Decouple … LMAO.
They live a Bizzaro world. The problem is that we let them and probably will continue to do so right up to societal collapse.
If you had anything to do with it, the country would fall.
The retail price of energy is being frozen at the consumer end. The difference between the frozen price and the wholesale bill is being paid by the government.
Like your rich uncle bunging you a few quid every month for the six months you find yourself unemployed and your benefits don’t quite pay the mortgage.
Please try to understand what are, to most of us, fairly straightforward concepts.
Smacking the “invisible hand” while it is in the cookie jar are we? Poor start. It will be a
bit chilly, but, hey….you will be paying less for fuel you can’t buy….or something like that.
Did we read the same article? If we did then one of us has a comprehension problem and it isn’t me. The UK will buy fuel at market prices, got that? Ok so far, are we? The government will cap the cost to the consumer and pay the difference to the energy provider. Did you get that? Are you still as fricken’ confused as you seemed to be from your post? To recap, they’re not trying to impose a price cap on fuels, just on the cost to the consumer.
Coming next: LIz Truss to nationalize UK fossil fuel industries
Don’t be an idiot all your life.
Really? How does it feel?
Thanks for being a model of what being an idiot all ones life looks like, so he knows what to avoid. 😉
Wot a maroon! Everyone (except Jeremy Corbyn and his fellow travellers) know that you only need to nationalise one of them to put enough of a thumb on the scales – nationalise one energy provider and market forces should do the rest for the consumer. Marxism is such a ridiculously blunt tool, don’t you feel? No subtlety at all.
definition of maroon: adjective – of a brownish-crimson color
Now, you were saying something about subtlety . . .
guess you never watched much Bugs Bunny in your youth.
What a Maroon – Meaning, Origin and Usage – English-Grammar-Lessons.com
John,
I did watch Bugs Bunny TV cartoons in my earlier years.
But then I grew up, and never looked back to those cartoons as a source of inspiration in my writings.
🙂
So you only pretended to not know what the expression being used meant in order to be snide. That makes you look even worse than had you admitted to not knowing what the expression meant.
You are mistaken.
I admit to having watched Bugs Bunny cartoons long ago.
I truthfully posted (implied) that I have no memory whatsoever of the particular phrase “what a maroon”, either associated with that show or coming from elsewhere.
I make no apologies for that fact.
So, everyone in the country gets a new credit card upon which they will buy their way into long term poverty.
It may just come to that if the gamble doesn’t pay off. Of course if the public really hates her and Labour win the next election it’ll get even worse and much, much faster.
“Capping gas prices would lower wholesale electricity rates. About 40 per cent of Britain’s electricity is generated by gas-fired power plants, which tend to set wholesale rates for the rest of the market, even though other technologies such as wind produce power more cheaply.”
I doubt wind produces energy more cheaply if you include all the costs involved in getting the windmills manufactured in China and put in the ground in the UK and amortize those costs over their 10 to 20-year lifespan. Also, if you count the costs of backing them up 24/7 with fossil fuels to maintain the grid.
Unreliables also push up the price of the gas used to back them up because the gas power plants don’t know in advance when they will be required to back them up and thus cannot get stable long term contracts for the gas they use.
Ah, more gas for the Germans.
“About 40 per cent of Britain’s electricity is generated by gas-fired power plants, which tend to set wholesale rates for the rest of the market, even though other technologies such as wind produce power more cheaply.”
In what world does wind produce energy more cheaply than gas?
Price caps are not the preferred choice in the long term, however if she starts up all coal plants, nuclear plants and gas plants as well as mine lots of coal, drill lots of gas and builds more gas and nuclear plants, I am with her with the caveat that the caps require a built in limit.
https://12ft.io/proxy?q=https%3A%2F%2Fwww.telegraph.co.uk%2Fpolitics%2F2022%2F09%2F07%2Fliz-truss-vows-never-exorbitant-energy-bills%2F
Plenty of advice-
With no new windfall tax on energy firms, a cap on nuclear and renewables is urgently needed (msn.com)
But we’ll see if she gets the overarching dumping problem and sorting out a level playing field once and for all.
Dear Liz, risk some longer term strikes and reopen some of those UK coal mines. Remove ALL subsidies from green energy and allow fracking. Get some plans on the table for building some new nuclear reactors.
Some people are talking about Third World status for Britain.
I shake my head…. all that green stuff.
And they want to do it to America.
Instead of fixing a real problem let’s……
I thought Nixon proved that wage and price controls don’t work