An important reason that power is expensive in the UK is that it doesn't use zonal pricing and is effectively not giving the right price signals to consumers of power to move closer to where the cheap power is (e.g. data centers) or to conserve power when power is expensive; or producers of power to invest in power generation closer to where the power is scarce and expensive.
Another point to make is that the national wholesale price of power in the UK is based on the price of the most expensive thing in the market at any point. Which now that they shut down coal is usually gas which at this point the UK mostly imports because gas production in the North Sea fields has been petering out. It no longer is the cheap resource it once was.
Even Scotland which either exports or curtails dirt cheap wind power most of the time gets to pay expensive gas rates for their power. Why is power curtailment a thing there? Because there is no price incentive to use the power. Otherwise people might be doing sane things like charging their EVs, powering their heat pumps, etc. Instead Scotland imports gas for heating and petrol for driving their cars. At the same time they curtail wind power by the GW.
Greg Jackson from Octopus (who are the largest energy operator in the UK) has been calling for this for some time. I don't live there but his name comes up a lot in several of the clean energy podcasts I follow. Smart person that has a lot of sensible things to say on this topic.
Zonal also has issues with congestion, lack of locational price signals, and something called inc/dec gaming. A Nodal design (like in many US wholesale markets) fixes this, but some of the key policy makers are reluctant to go in that direction as it would be a ~7 year project and would introduce revenue uncertainty in the meantime when they are trying to decarbonize and need to make it easy for developers to get financing. Both pro/against arguments for nodal pricing have merit. There have been many discussions on this in government.
Marginal cost based pricing is extremely unintuitive to those outside of the field, but nearly all economists support it. The reason is that this eliminates a lot of the gaming in pay-as-bid designs and helps incentivize investment in more efficient/cheaper generation, while driving out less efficient clunkers that may not be profitable anymore. The reality is of course far more complicated. These markets have saved untold amounts of money by optimizing over large regions, but you can also point out "missing money" problems where there simply isn't enough investment in generators with access to firm fuel (as opposed to when we just had monopoly utilities). As a result, much of the US has an "at risk" or "very high risk" of not having enough generation during summer/winter peak.
> and is effectively not giving the right price signals to consumers of power to move closer While I sympathise with the notion of zonal pricing, there are side-effects to making the change, especially when power is intermittent e.g. https://www.uksteel.org/steel-news-2024/businesses-write-to-... . I'm not sure what the correct metric is.
> the national wholesale price of power in the UK is based on the price of the most expensive thing in the market at any point How much of the electricity demand goes through a bilateral agreement (or one where generation and retail are the same organisation, like EDF)? Also I seem to recall that the "pay the highest accepted bidder model" used to be argued as lowering the bids, resulting in a lower cost to the consumer!
> The UK has achieved the fastest rate of grid decarbonisation among advanced economies. A lot of this progress occurred when renewables were still expensive, so we are stuck with a cost hangover. Luckily, renewables are getting much cheaper, so the tradeoffs in future policy are very different.
A silver lining at least. Iām old, so wonāt see the benefits of this Iām sure, but itās still nice to know weāve made some tangible progress toward a cleaner future
The graph shows the price for 3100 kWh. I'm not sure if that is a very low annual amount or a very very high monthly amount.
The average US household uses 10,000 kWh annually ~833 kWh per month. So I'm guessing most Americans reading the article and looking at the interactive graph are thinking either: this is very cheap or very expensive, depending on whether they are assuming it's monthly or annual.
In the US the average price for 3100 kWh in California would be $1062 which is among the highest in the continental US. So right in line with GB.
In New York it would be $710. Florida it would be $454.
So it's high, but not as eye-watering as it seemed to me initially.
We mostly don't have AC, we have tiny houses, our heating is gas powered. We don't use huge amount compared to the US
That's the annual figure. But just for electricity. Most UK homes are heated with gas, and many have gas stoves, so the average kWh annual gas figure is much higher (~12,000kWh).
We're at ~3.6 MWh in a ground floor apartment with 2 adults, with water heating (e.g. showering) electric but building heating on gas (though we use a space heater a lot as well, probably to the tune of 0.2 MWh/year)
Median income and take home pay should be brought into account though. California has one of the highest even by US standards so a $1000 bill for the median Californian family feels much less expensive than for the median Manchester family.
Yeah the "network costs" bit should probably have a caveat about how they are a natural monopoly and are absolutely rinsing the UK for profits.
https://www.theguardian.com/business/2022/nov/20/unite-union...
"Supplier costs and margins" probably should take a fair bit of the blame too.
When Thatcher privatised the UK energy industry to make it "competitive", they basically created an entire complex web of middlemen. The systems they use to communicate is enormously complicated, still kind of stuck in the 90s (think CSV over FTP), and would be basically unnecessary if it were just one company.
Ok in fairness electricity makes more sense to privatise than water or railways - at least you can choose where to buy your electricity from, within reason.
They aren't rinsing profits.
Out of the Ā£1700 average annual bill, supplier profits are Ā£43...this is significantly higher than has been the case normally because of the volatility in energy prices. This return is also controlled by the regulator.
For scale, the cost of government subsidies is Ā£183.
Predictably the first thing the incoming government did was: announce massive new subsidies, and create a state-owned energy company.
Network costs have also gone up because of the well-known problems with performing work on any kind of infrastructure in the UK.
The politics are part of the reason why costs are so high. We constantly rotate through insane policies that relate to the fever dreams of a lawyer. The reason why prices are high is because we have policies in place to increase prices. Companies are not making big profits (again, their returns are controlled by the regulators). Look at share prices, collapsing in the sector (unless they are getting government money).
It does kind of make sense to have a market for the "generation" side with all the different types of power source that exist now. But the infrastructure is privately owned? That's crazy. Like privatising the motorway network!
They did try with the railway network (Railtrack) which was subsequently renationalised and only the train operating companies being private (and even they, like electricity generating companies, are often state-owned by other countries...).
Handing an entire national network monopoly to a single company is foolish.
It's an interesting rathole to go down. On the one hand, there are private equity firms buying power stations and deliberately turning them off to reduce supply, knowing that National Grid will call them in a few hours paying them an even higher rate to turn them back on... but also those operators get detected and, months later, fined out the wazoo by the regulator for pulling a stunt like that.
https://www.theguardian.com/business/2023/jan/29/gas-fired-p...
https://www.theguardian.com/business/2023/aug/31/uk-electric...
https://www.current-news.co.uk/ofgem-fines-intergen-37m-for-...
Also, electricity isn't any less of a monopoly. You can choose your supplier, but they do no more than administer your metering and billing (including the government insisting they install smart meters). Your house is still connected to the same domestic grid as everybody else, and it's National Grid plc that is selecting who's generating and when, and getting paid for it.
They aren't deliberately turning power stations off. We have a renewable system so when those sources aren't generating then we need gas.
All the BBG article proved is the inherent problems with the system that we have. Rather than anyone being blamed for creating that system, rather than anyone being blamed for regulating that system, we get the same politically-motivated nonsense about "evil companies"...this is why we have high electricity costs. There is literally zero political incentive to lower them and, as we have seen, very high political gains from proposing fictional solutions. Guess what? We are still going to be in the exact same place in a few years because we haven't changed the thing causing this (over-reliance on renewables).
> but also those operators get detected and, months later, fined out the wazoo by the regulator for pulling a stunt like that.
The ones that were detected were fined, we don't know how much of that goes on but more subtly.
How does one subtly turn off a power station?
National Grid plc has minute-by-minute graphs. It can see you taking the piss, and its friends in Ofgem are on speed-dial.
https://www.ofgem.gov.uk/sites/default/files/2023-08/Final%2...
I remember reading in the UK papers about one of the first water companies to privatize. The very first act of the board was to vote themselves a BIG pay raise.
It's only relatively recently that this is being dealt with:
https://www.theguardian.com/business/2024/dec/19/thames-wate...
How much does digging a hole or laying a cable cost here in the UK compared to elsewhere? I'm just trying to get a feel for whether things like the transmission/distribution network costs are higher than elsewhere.
The HS2 project is mostly that - and very, very expensive it seems.
Is 906 GBP (~1100 USD) typical for a household? That seems outrageously high.
In a historic home in the Midwest a single month in the depths of of the winter could easily be 700-800 usd.
Thatās crazy. I live in New York in an old drafty house. My highest bill is about $400-450 and itās much colder here. Those rates are brutal.
Annually, that sounds about right.
Oh, I thought this was monthly. The article doesn't specify, and all other bills I've seen are monthly. Do Brits pay annually?
Electricity consumption will vary during the year so it seems fair to give the yearly total to have the actual cost; and you can divide by twelve if your prefer a monthly average.
Meanwhile, if they only gave a monthly figure, one could wonder if it's an average or if it's taken in January or July.
You don't pay annually, but because of the substantial variation in energy usage throughout the year, you'll generally price-compare on an annual basis, and usually the monthly payment is a kind of pro-rata value where you over-pay in summer and under-pay in winter.
Normally pay monthly by Direct Debit, but because usage varies so much between summer and winter we assess and estimate usage annually.
Yes
Type | yearly usage | average annual cost
Low (flat or 1-bedroom house / 1-2 people) | 1,800 kWh | Ā£669.95
Medium (3-bedroom house / 2-3 people) | 2,900 kWh | Ā£943.36
High (5-bedroom house / 4-5 people) | 4,300 kWh | Ā£1,291.34
source: https://www.britishgas.co.uk/energy/guides/average-bill.html
Some of these are "costs" which reduce costs elsewhere.
Smart meters for example, though rollout has hit snags and they've become targets for weird conspiracy theories, they are basically designed to give better real time info on electricity demand which helps with managing the grid.
This in theory should save money elsewhere.
Similarly for CfD. Yes the government may on net be paying a subsidy to get wind power built but what was the next best option? If that costs more than the CfD then that's a win.
But why do you need smart meters at the level of individual houses? Wouldn't putting them on substations get the same benefit with much less cost?
They also identify outages and let you do automatic efficiency stuff ā you can enroll in a plan where your car charges during off-peak periods, for example.
It eliminates the need for staff to manually read them and guarantees they are read correctly every month.
Yes, but those don't help manipulate consumer behavior and awareness.
Apparently the UK government estimated that in 2016 and 2019 the average household saved Ā£11 on their bill due to this feedback from smart meters. This page estimates the cost at Ā£15 so 2/3rds is recovered just from that effect.
Maybe, but the long term planning has been atrocious, millions of smart meters already need replacing because of the 3g switch off.
It's massively wasteful if they are all going to need replacing again in 10 years when 4g is switched off.
Not to mention the concerns about electricity companies remotely forcing meters into prepayment mode or switching off people's electricity supply.
Something (2G?) is generally staying available so "smart" devices can work for decades.
29p / kWh doesn't hold a candle to PG&E costs in the San Francisco Bay Area.
It's ironic that it's quite a bit cheaper to use natural gas here, since we're supposed to convert to electricity to save the planet.
The cost of bailing out owners of burnt down homes in Paradise, CA worth $0 for $700k is rolled into every San Francisco PG&E bill.
I think that's a bit of color on that, since those homes weren't worth $0 until PG&E caused a fire that burnt them down by neglecting required maintenance.
In a way it's subsidizing people in the country side.
Did PG&E cause the fire? They are legally obligated to serve those customers. It would be safer if they simply didnāt do that no?
Wait till you read the facts behind this $41m bailout for 20 homes in one of the richest burbs of LA: https://www.latimes.com/california/story/2024-10-29/feds-to-...
You could argue that nobody should be living in a place guaranteed to be destroyed, whether by landslides or wildfires, but the government tried that in Palos Verdes and got sued, lost, and now is bailing out those homeowners to get out of services obligations all the same.
Suffice it to say, you have bought into a very well marketed point of view. There was a lot of ceremony to enact procedural blame on PG&E, but it obscures all the far simpler solutions, that are far more just. People in San Francisco are paying higher rates, no? So PG&E may have been responsible for something somewhere, but the liability is being borne functionally by taxpayers, via a compulsory payment for energy, to balance the books on assholes living in places at risk of wildfires with overinflated asset values. Ultimately, the government here has decided that you should get government-guaranteed-risk-free market rate returns on owner occupied real estate.
That's just factually incorrect. Paradise was forced to take PGE stock (at some unrealistic valuation) as a repayment. The settlement is years in the rear view mirror now. I actually live in the area and meet people from Paradise. Most people involved got absolutely shafted and the money is mostly going to lawyers and accountants in San Francisco. Surprise.
PGE costs have gone up because the state's Public Utilities Commission and many of our leaders in Sacramento are in bed with PGE. PGE has been vastly underinvesting in infrastructure development and maintenance for the last 50 years, which is at least partially the PUC's fault by letting them take profits instead of forcing them to either lower rates or reinvest. The Camp Fire shined a light on the neglect, now they have to play catch up on 50 years of deferred maintenance in many quite remote areas.
Local Sacramento ABC Station actually does some decent investigative report on this. If you are interested there is a fair amount of content to go through, as they started the investigation in 2022, the series is called Fire Power Money.
I appreciate your wisdom to use ChatGPT's search to verify your facts about the Paradise settlements. If you're asking me, is it a good idea to administer a settlement between PG&E and the Camp Fire victims? No. We agree there. I don't doubt for a second that ratepayers and victims are getting a bad deal! I don't think we should have ever agreed to the settlement, and Sacramento made a huge mistake.
But: the settlement's law traded on the exact empathy you do right now.
Here's where we disagree: what evidence do you need to see to be convinced that nobody should be living in your community? Harsh words right? It's the exact opposite of the empathy you are trying to get through, that I appreciate.
I think smart people struggle with climate science, viewing it as strictly a set of facts, when in fact it is deeply political: it is telling us where we can and cannot live, which is as powerful as violence-protected borders.
We have pretty unequivocal evidence that tells us on the time scales of realizing real estate returns, some communities will be "worth" "$0."
Do you think we should have insurance of last resort in California? Insurers read the same scientific studies and don't protect people's homes from wildfires. It is basically immaterial in the long term which human activity causes the wildfire - as you say, the settlement is in the rear view mirror - it could have been a gender reveal party that started the flame, and then, what would you do, make that person personally liable for billions of dollars? It would be bailout all the same, poorly administered, because it is simply impossible to not "absolutely shaft" someone who says their home is worth $700k when it is actually worth $0.
It costs $42m to just bail out 20 homes in Palos Verdes, a community with very politically powerful people. It's a slow motion crisis in California.
Do you think we should bail out all the home owners in San Francisco, who bought their homes at $40,000, pay tiny Prop 13 dynastically protected rates and therefore pay little taxes to their own community, and have things nominally worth $1.4m, when an earthquake hits? That's not your community, and suddenly, oh man, that sounds expensive, man, you don't have bottomless empathy for that community. Should nobody be living in San Francisco because of the earthquake risk? Tough question.
So what if I spin some narrative that someone somewhere is responsible or liable? It is impossible for any entity to pay off all those people, including the government - it couldn't even compensate the 10x fewer victims of Camp Fire.
The solution to me is simple: don't buy a house, and if you do, don't make it your only means of savings. I can escape a wildfire, and I think I can escape an earthquake, but my life will not be ruined, as long as I do not own an overpriced home. You are talking about leaders in bed with PG&E or whatever, conspiracies, and right in front of you, you are surrounded, in your community, by people who believe their real estate gives market returns risk free.
I sometimes catch myself thinking about whether itās worth collecting wood by the road to burn as a way to heat the house.
Some people on craigslist sometimes are giving away wood for free (you just need to arrange transport).
So yes, in some ways, it'd be whole lot cheaper, and nostalgic too.
I would say it's tragic, not ironic.
For reference, I think we get around 60-65c/kWh here...
I sometimes hangout on /r/homelab, and people are talking about their 600-700W homelab setup. That would cost about 300-350$/month here.
Yikes, my rate is $0.0825/kWH in the southern US. Part Nuclear but too much Natural Gas in my opinion.
People are screaming from the rooftops here when we occasionally hit 15 c/kWh in winter. In August this year our electricity cost was $15 for the whole house. Hydropower is nice like that.
My homelab in the basement is running an old Dell R730. It draws 200-300W depending on load. I could get something much more efficient, but then I would need to run a space heater in that room for most of the year...
That'd be GBP 0.48-0.52
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