Essay by Eric Worrall
According to The Guardian, a publicly owned company could overcome the impediment of private companies, which are reluctant to cut household energy bills by investing in renewables.
There’s a simple way to reduce the average UK electricity bill – and make energy cleaner
Christopher Hayes
Thu 6 Apr 2023 01.30 AESTRecent research estimates that a publicly owned generating company could reduce electricity costs by £252 per household a year
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The price spike currently afflicting customers, retail suppliers and government alike originates in the domestic wholesale energy market. Despite 43% of our electricity being generated from clean energy sources, prices are determined by the most expensive source needed to satisfy 100% of the demand in a given period. The result is that energy derived from mainly clean sources is being slapped with a gas price tag. What then fills the yawning chasm between these generators’ lower production costs and the higher price they’re getting? Profit. Just look at British Gas-owner Centrica’s 60% profit margins in its generation business.
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Public ownership of the UK’s clean energy generation, selling at cost without markup, is the only option that short-circuits the trade-offs that we otherwise take as given, such as the urgent need to decouple the price of clean energy from gas; and to supercharge investment in clean energy.
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Read more: https://www.theguardian.com/commentisfree/2023/apr/05/reduce-average-uk-electricity-bill-public-ownership-clean-energy
To accept Christopher Hayes argument, you have to believe that private companies are refusing to invest in enough renewables to bring down the price of energy, because they don’t want to make a profit, and that public ownership is required to short circuit their reluctance to make money?
Or is Chris trying to hint that renewables are too expensive for private companies to afford, despite being the cheapest form of energy?
Perhaps WUWT readers can explain to me what Chris is trying to say.
I note that the Henry Hub gas price has come down from $9 in Sep to $2 now, and the US price of electricity has continued to go up.
2 + 2 = ?
You convince yourself that the correct method is the average of 30 people you ask this question to.
A couple say 4, more say 5, even more say 6 and some give answers all the way up to 11.
The average ends up being 8.
The answer is obviously 8.
The wisdom of the group is paramount. Checking individual answers would be a heresy and “not on narrative”.
Anything is possible.
The arithmetic mean is 8. The geometric mean is 7. The median is 6. Michael Mann applied a novel statistical method and found the answer was 12.
The answer is obviously not 8, it is 12.
Or is Chris trying to hint that renewables are too expensive for private companies to afford, despite being the cheapest form of energy?
Perhaps WUWT readers can explain to me what Chris is trying to say.
marginal supplier sets the price.
Price = the marginal cost, for gods sake
As I said to Nick, that is not what I asked, I understand the marginal cost system.
I’m asking for help to understand Chris’ explanation that private companies don’t want to make money, by investing in more renewables.
They simply want guarantees of bigger subsidies. Government has tried to wind them down a little, now that they begin to see how expensive it’s all going to be. But they will end up in blind panic with a capacity shortage and high blackout risk, at which point they will agree to anything to keep the lights on. Even diesel generators.
marginal supplier sets the price.
Price = the marginal cost, for gods sake
That’s fundamental economics but we don’t have a level playing field with the electrons consumers rightly demand here- Namely those that can be reasonably guaranteed 24/7/365 (ie short of unforeseen mechanical breakdown) at the required frequency and voltage. Have a guess which ones are short changing the consumer and actively dumping to their long term detriment?
Ipso facto that requires all sorts of regulatory gymnastics to control an utterly phoney and corrupt marketplace in order to keep the lights on. The bovine excrement PR to try and explain away why unreliables actually equals expensive power to the end consumer inevitably follows.
Actually, it’s the other way around (though it can be expressed either way), and it only applies in perfect competition.
It’s probably more correct to say that profit is maximised when marginal revenue == marginal cost (== price in a perfectly competitive market.
https://biz.libretexts.org/Courses/Lumen_Learning/Book%3A_Microeconomics_(Lumen)/10%3A_Module_8-_Perfect_Competition/10.11%3A_Profit_Maximization_in_a_Perfectly_Competitive_Market
Monopolies also maximise profit when MR == MC, but price will be higher than MC.
https://biz.libretexts.org/Courses/Lumen_Learning/Book%3A_Microeconomics_(Lumen)/11%3A_Module_9-_Monopoly/11.16%3A_Profit_Maximization_for_a_Monopoly
Oligopolies are more complicated, because all the sellers are reacting to each other
https://socialsci.libretexts.org/Bookshelves/Economics/Book%3A_An_Interactive_Text_for_Food_and_Agricultural_Marketing_(Thomsen)/07%3A_Imperfect_Competition_and_Strategic_Interactions/7.05%3A_Section_5-
In a poorly run market that is designed to benefit certain suppliers.
If consumers were driving the market, it would be designed to supply reliable power at the LOWEST COST. If you couldn’t do both, don’t apply.
I had ecoloons tell me that