From NOT A LOT OF PEOPLE KNOW THAT
By Paul Homewood
We still keep being told that our sky high power prices are due to reliance on gas.
Silly Jilly wrote this in the Guardian a month ago:
One of Labour’s key election promises was to cut energy bills by £300 a year by 2030 while making Britain a “clean energy superpower”.
The job is already halfway complete: renewable energy made up more than half the UK’s electricity for the first time last year. So why does Britain continue to have one of the most expensive electricity markets in the world? Industrial users complain those costs are driving companies out of business and discouraging investment in the UK.
The reason behind Britain’s sky-high wholesale energy costs is simple, according to experts. It is down to Britain’s reliance on gas – the price of which was sent soaring by Russia’s invasion of Ukraine – in power plants and home heating.
“Great Britain’s dependency on gas imports has been the most important factor behind higher gas and power prices in the market,” Kate Mulvany, the principal consultant at the energy advisory company Cornwall Insight, said.
Prof Michael Grubb of the UCL Institute for Sustainable Resources said in a recent research paper that, although fossil fuels used to be cheaper than renewable energy sources, “that has turned on its head as gas prices shot up and the cost to produce renewables such as wind and solar power has plummeted”.
He said: “If we actually paid the average price of what our electricity now costs to produce, our bills would be substantially cheaper.”
It was accompanied by a deliberately deceptive graph, purportedly showing how wholesale price trends of electricity closely matched those of gas. The choice of the y-axis means that you could show anything you wanted. And, of course, wholesale prices only make up a minor part of retail prices.
There have been many attempts to unravel these Guardian lies, but here I present a very simple, unambiguous and undeniable analysis which totally shreds such claims.
- According to official data, in 2024 the UK used 179 TWh of natural gas for power generation.
- At the end of December 2024, the wholesale price of gas was 117 p/therm, or £39.93/MWh.
- The value of that gas was therefore £7147 million.
- Total electricity supply in 2024 was 303 TWh.
- The OFGEM price cap for April to June 2025 was 25.74 p/kWh, excl VAT, giving a retail value of £77992 million.
- In addition standing charges add approximately an extra £5 billion for domestic users, plus other users.
We can therefore see that the cost of natural gas only makes up about 8% of the total retail value of electricity.
We can analyse these same numbers using 2019 prices.
- The wholesale price of natural gas was typically around 50 p/therm, so the value of gas used in generation was about £3 billion a year; the rise in the price of gas since has therefore added about £4 billion to the cost of electricity.
- The OFGEM price cap in 2019 was 17 p/kWh, giving an annual value of £51 billion
- In addition, standing charges were approximately £2 billion in 2019, compared to the current £5 billion.
- The total retail value of the electricity market would therefore be about £56 billion at 2019 prices.
To summarise, the retail value of electricity has increased from £56 billion to £83 billion. Of this £27 billion increase, only £4 billion is due to gas.
The rest, in one way or another, can be described as “policy costs”. These include renewable subsidies, various system balancing costs, standby capacity and grid upgrades.
But they also include the structure of the marginal pricing mechanism employed, whereby all generators benefit from higher wholesale prices, on the back of higher gas prices.
The answer to all these problems lie with government.
What is certain is that the answer is not building more renewables.
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“making Britain a “clean energy superpower”“
That’s a poor mix of words. Even if by some miracle the UK or anywhere else could find a way to dependably produce its electricity from ruinables- that doesn’t make it a superpower of any sort. It’ll be a poorer, weaker nation. But just add the word superpower and voila, sounds irresistible.
Appeal to emotion logic fallacy.
The Left could not care less about any economic or physical arguments against ‘renewable’ energy. The simple facts are that energy is a societal choke point and climate alarmism is the garrote of choice. The additional fact that some insiders stand to make a few pounds, or bucks, in the process of applying the latter is just gravy.
I see that Starmer is now pushing the idea of war with Russia as the latest device to try to hold the population in thrall, perhaps because he can see that net zero is bust: people aren’t buying it, literally. Not heat pumps nor EVs.
Previous generations kept to a Cold War. Miliband has a totally different concept of what that means.
Once intermittent sources are introduced into the grid, the cost of conventional rises.
The conventional power plant has a capital cost that much be recouped over the lifetime of the power plant. Consider an imaginary conventional plant that produces electricity at 10c/kwh, with 5 cents of that going to recoup capex costs and 5 cents to operating costs.
Along come intermittent sources who want to run full tilt on “free fuel” 25% of the time. The conventional plant now has to raise its price to 11.67 c/kwh (5/.75 = 6.67 capex + 5 opex) to pay off the capex Intermittent sources rise to 50%, well now the conventional plant has to run at 15 c/kwh (5/.5=10 + 5 opex). Wind gets to 75%, now the conventional plant runs only 25% of the time, but the capex it has to pay off stays the same. So now conventional is at 25 c/kwh.
The same math applies to intermittent sources. They too have a capex cost that must be paid off over the life of the windmill or solar panel. Solar can’t even get to 50% in theory, wind is lucky to get that high. So those sources too must increase their prices to recoup capex over the lifetime of the source.
So no introduction of intermittent sources can do anything but increase the price of power, a double whammy since we now have two infrastructures to build, both of which mush have higher rates to pay off opex. But say the advocates, we can build batteries. Sure. That pushes the capex cost of intermittent even higher, while reducing the use of conventional even more, forcing them to raise their rates even further to pay off their capex.
Well say the advocates, that’s the price we have to pay to get to 100% renewables. Spain got there and the grid crashed taking many parts of Europe with it. They’ve since decided that having conventional on hand might not be a bad idea even if it only runs 10% of the time. Well that means it has to raise its price to 11X in order to pay off the capex.
An actual power grid has, of course, many sources and the reality of any given grid is not so simple. But the notion that you can introduce intermittent sources into the grid without increasing prices is nonsense. The conventional has to be there or the grid collapses, and the less you use it the higher the price is to pay off the capex to build it.
But it gets worse. Wind and Solar won’t sign contracts unless you promise to take everything they generate. So if they generate more power than you need, where does the power go? If you’re lucky, you’ve got a neighboring grid you can sell to. Except now you are introducing YOUR intermittency into THEIR grid. If they happen to need your excess energy when you product it everyone’s happy. But the most likely scenario is they don’t need it and can only take it if they ramp down their own conventional sources, which results in higher prices to cover opex. Like the Province of Ontario, you might find yourself in the absurd situation of having to PAY someone else to take your excess power.
Food like to the advocates. May you have all the success in the world as that’s the only way to drive the disaster you are creating through the cloud of rhetoric and into the minds of voters.
Just another glaring example of how “progressives” are never capable of thinking anything through properly.
Which is the most compelling reason why they should never be allowed anywhere near the levers of public policy making or government.
Do not kid yourself. They are capable of thinking things through. The problem is, if the conclusions do not benefit them personally, they do not speak of them and act on some false premise that personally benefits them.
Where renewables start getting eye-wateringly expensive is when you have to curtail more and more surplus output as you increase capacity. Look at Seagreen, which only produces around 16% uncurtailed average capacity factor, around a third of what it’s supposed to, so its output already costs 3 times as much as LCOE. Worse, we pay it to curtail. Its average revenue according to its accounts was 264/MWh.
Gas Only Explains A Small Part Of Electricity Price Rise
Ed Miliband Explains A Lot.
Lets carpet the UK with solar panels and then dim the Sun…
If you dim the sun, there is less sunlight and less warm weather for food plants and for pasture grass for the animals.
True. However all governments (correct me if I’m wrong) remain in power by creating problems for their countries and then rushing in with proposed but ineffectual solutions to be hailed as saviors.
I suppose it’s one way to correct for overinvestment in solar leading to negative prices.
The idiocy of that is clear as a button hook in the well water.
UK natural gas wholesale price, £2 more than in late 2018:
The chart shows price in p/therm. Divide by 2.93 to get £/MWh, or by 10 to get £/MMBtu.
And your point?
What is the rate of inflation over that same interval?
I don’t understand.
The y-axes they chose were “Gas price p/therm” and “Electricity Price £/kwH”. How does this enable them to show whatever they wanted? Surely if gas prices went down while electricity prices went up, they’d be left with an embarrassing graph.
More than half of the UK’s power comes from gas. Under those circumstances, wouldn’t a rise in gas prices usually produce a rise in electricity prices?
So between 2019 and December 2024, gas prices more than doubled.
So you’re telling me that while gas prices more than doubled, retail prices less than doubled. Gas went from 50 to 117 while prices went from £51 billion to £78 billion.
How is this possible? Well apparently OFGEM kept the retail price artificially low. But how does that prove that “gas explains only a small part of electricity price rise”?
One would think you’d show us a graph of how the price of gas-generated electricity rose from 2019 to 2024, and then compare it to a graph of the price of non-gas-generated electricity rising faster from 2019 to 2024. But you didn’t do that.
Perhaps I’ve missed the point somehow.
In your 2024 figures, you say that the price of gas was £7.147 billion while the retail price was £77.992 billion, meaning that over 90% of the retail price is spent on something other than gas. (Where does it go, then? I’m confused.)
In your 2019 figures, you didn’t mention the amount of gas consumed and thus you didn’t calculate the total value of the consumed gas, so I’m unable to compare it to the overall retail price.
If the ratio of gas price to retail price changed between 2019 and 2024, that might tell us something. But you didn’t give us those figures.
I suggest you ask Grok or Perplexity what the components of the retail price in the UK are. I did. The answer is too long and detailed to post, and I don’t see any reason to do the work to summarize it for you when you can ask and do it for yourself.
While you are at it, ask about the components of the wholesale price too, which will be a large part of the answer to the first question.
The Paul Homewood piece asks a very specific question. The bigger question is about the cost of wind and solar. A couple of answers here, read Porter, Montford and Hughes essays.
https://www.netzerowatch.com/
Which, again, I’m not going to summarize for people who can read them for themselves.
Very important information. This needs to be given to every news source in Great Britain and a public list made of every outlet that refused to report it. We have been lied to long enough it is time for the lies to stop.
Quite amusing that the Australian Labor Party also talks about making the country a ‘renewables superpower’ and, yes, promised in the 2022 election to cut all our energy bills by $275 by 2025. And yes, instead our energy prices doubled. We have massive reserves of coal, gas and uranium – all of which we export in huge amounts – but our governments, state and Federal, are trying to replace those energy sources with, of course, wind and solar. Economic suicide.
The deal is Australia supplies China with coking coal, LNG and metallic ores while China flogs them turbines and solar panels.
Well, the sun is free and the wind is free (just ask Nick), so of course the intermittent, unreliable, grid destabilizing electricity is cheaper.