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Gordon Hughes's avatar

David - I would like add a couple of points based on my experience of REMA and nodal pricing. In principle I am strongly in favour of it but you can never trust DESNZ to do anything competently. That leads to my first point. A couple of years ago I participated in the early online meetings in which the goals for REMA were discussed. The crucial point that came over was that DESNZ was entirely captured by the concerns of renewables lobbyists and related parties. The overwhelming concern was how to make life easier and more profitable for investors in battery systems. The Department's interest in consumer interests was minimal because the staff was preoccupied with responding to lobby groups. This is a classic example of a ministry that is dominated by producer interests.

Second, I have spent a lot of time recently studying the PJM market, which is the largest regional transmission system in the US by population. It uses nodal pricing, which works well. The differences in area prices are relatively small with nodal premia rarely more than 10% of the base energy price. However, there is a crucial difference with the way PJM works and the views espoused by Octopus. In PJM it is supply - not demand - which moves in response to nodal price differences. No-one expects a chemical plant to move from New Jersey or Pittsburgh to Virginia. However, utilities locate and operate their gas plants where they can take best advantage of nodal price differences.

The point here is that renewable producers like Octopus want everyone else to fit in with their convenience and profit. In PJM the utilities and system operator understand perfectly well that most large energy users don't see the choice as being one of moving from NJ or PA to Virginia. If electricity prices are too high where they are now, they will move to the Middle East or Asia. That, of course, is what is happening in the UK but the Department and renewables firms can't admit that. So what you get is the ridiculous idea of moving very expensive and completely uneconomic uses like electrolysis, because, after all, they are heavily subsidised and what difference does a bit more subsidy make. It is all a self-sustaining fiction in which the idea that UK businesses have to compete in the rest of the world is simply ignored.

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Martin E's avatar

Greg and his minions, Clem Clowton their Director of External Affairs being one, still repeatedly claim prices will ‘fall for everyone’. But it’s obvious over several months now it is always without exception a one way conversation, Greg simply doesn’t like answering questions on the subject of the subsidy offloading. Talk about heat pumps and he and the rest of octopus are all ears and still remain very ‘chatty’ it’s as if by failing to engage they will prevent the grubby truth emerging, after all it’s the exact same ‘listen to me’ policy Ed Miliband has used for many years.c

Yes you could theoretically make constraint costs disappear by resisting demand to generation, but all the other costs? If that were the case we’d have standalone renewables sited with demand, with zero subsidy requirements.

Whilst there have been many examples of co-located fossil fuelled generation next to demand (Lynemouth, Wilton, Rocksavage & Saltend being a few) it’s never really happened with ‘new renewables’. But it has happened in the past, Dolgarrog hydro and aluminium in North Wales is long gone, the purpose built hydro and aluminium smelter at Lochaber is I believe the last aluminium smelter standing in the UK, still with cheap hydro, as they are grid connected at 132kv I wonder if they get ROC or FiT subsidies?

Besides the staffing and housing issues and people simply not wanting to move we simply don’t have enough spare supply to even meet ‘decarbonisation’ let alone supply for anything new (witness the bottleneck in west London on housing and commercial development due to distribution demand constraints) an issue that like everywhere else in the country be could, with an adequate water supply, be fixed with a suitably sized SMR at each Grid/Bulk supply point with very little requirement for new HV overhead or cable infrastructure build..

Meanwhile the rest of industry just dies as deindustrialisation to China etc is deemed normal.

The cynic in me would say locational pricing is merely the warming up act before all the electricity related costs are instead placed on gas to make electricity ‘cheaper’ That is what Miliband and the obvious supporters of locational pricing like Greg at Octopus are looking forward to, a captive electricity market where people cannot say ‘gas is cheaper’

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