Great work again David. The bureacrats always know better than the market (which is just a reflection of all the transactions we lowly folk make voluntarily). Unfortunately we knew that the market would have to be rigged to keep this farce going. Shifting subsidies was always an easy option.... but of course, if so cheap, why the need for subsidies in the first place?
Back in 1986 when OFFER and OFGAS were established their remit was to act in consumer interest. That was changed for OFGEM by Ed Miliband's 2010 Energy Act, which deemed green interest to be consumer interest and primary. The recent Energy Act converts OFGEM into the primary Net Zero delivery body. Consumers are a very long way down the list of priorities.
Very illuminating. Thanks. This is rampant eco-communism (aka stakeholder capitalism), Green in tooth and claw, softly, surreptitiously, ripping its way through our energy markets.
National Grid has barely started on its rewiring programme although its fair to say that the two Scottish operators have been spending big although we aren't seeing much benefit as constraint payments North of B6 boundary still remain very large element of balancing costs as well as TuoS charges being higher. So as NG works get underway we will see ever increasing charges for the "wires and cables" element in the energy cap for the next decade.
One thing that is fairer is those on prepayment meters now being charged the same as everyone else so im happy to the adjustment for that. Then we have all the other social schemes though like warm home discount which is the increased despite the lower charges now applicable for prepayment meters! The energy company obligation which in my area is now up 22% is money pit who ensures how the money is spent. ROCs you've mentioned but 15% overall increase in cost to the end consumer although i know its only CPI to the generators.
All in all its about time the mainstream media got hold of this and exposed how much of our electricity (and gas) costs are nothing to do with world events but self inflicted wounds.
Two factors that occur to me. OFGEM implemented their decision to allocate all TNUoS charges to demand last April. That actually lowers the costs generators have to recover in the market, while increasing standing charges for the grid network. In fact, a number of CFDs had a clawback clause in their contracts which meant that their strike prices were reduced by almost £10/MWh compared with straight indexation: Triton Knoll is one example. It is therefore bizarre that under the new zonal pricing just decided on, generator prices will once again reflect their effective use of the grid.
The second factor is that OFGEM has long assumed that retailers would implement a 12-18 month forward hedging programme. Immediately it implies the wholesale cost they allow reflects futures prices over the preceding period. These assumptions utterly failed during the energy crisis, because hedging on such a scale was impossible (and potentially bankrupting). The collateral required shot up because of the huge increase in market volatility. The natural providers of hedge sales such as nuclear could not afford the collateral, or the risk that their units might be forced offline by maintenance or even closure, exposing them to massive losses on forward sales.
Many smaller retailers never hedged anyway, having been happy to undercut the majors with their high cost rear view mirror hedges during a period of mostly falling wholesale prices culminating in the lockdown lows. They soon went bust in droves. The Big 6 were also badly hit because they had been unable to hedge on the assumed scale, and had to be bailed out with government loans during the height ofthe crisis: the OFGEM cap left them with large losses, added to when taking on SOLR business of failed retailers. Recent cap levels have been set to allow them to recoup losses.
I have long argued that pricing should be much more transparent, based on much prompter markets such as by futures delivery month in the month ahead. There should then be separate markets for seasonal borrowing to allow an even cashflow for a bill payer with clear debit and credit interest across seasons, and a separate market for price insurance via caps, collars and fixes, with proper standards for these complex financial products. As with commercial traders that might entail posting collateral or at least liability to exit fees.
Indeed the 2021 energy supplier fiasco was OFGEMs finest moment of utterly incompetent regulation to protect consumers interest. The losses were socialised onto consumers as the replacement suppliers (many of big six in irony which OFGEM were trying to undermine in the first place!) were allowed to claim the extra over costs for buying the energy and the administration of the scheme. Oh as an aside the administrators that wound up the suppliers have collected 20-30m in fees for themselves as well. Furthermore many of the failed suppliers hadn't fulfilled their obligations in ROC payments so that has had to be covered as well.
I have gone off topic but if OFGEM couldn't manage their basic duty to consumers here why on earth does anybody think they are competent in managing the wider industry is beyond me. A few MPs have tried to call them out but its got nowhere .
Kudos David, another great example of well considered and accurate analysis
I’m so impressed with it, I’ve posted it out, in the hope of educating as many people as possible, as to what is happening in our nations energy system
It’s clear Ofgem have become the net zero Stasi, happily rinsing consumers with supplier protective price caps, whilst hiding its true costs in a plethora of camouflage documents and dodgy graphs
It is also clear the vast majority of our 650 MPs are either ignorant to, or unaware of, how net zero is crippling our grid and consumers, with its upmost scam like rinsing of hard earned funds
As for moving costs from electricity, to gas bills, to make electricity (hence battery vehicles & heat pumps) look cheaper and gas more expensive (again to force the masses onto inept heat pumps), that is nothing short of legalised fraud and it is incumbant on all we realists, to challenge and hold to account, all forms of State sponsored greenfoolery
There is no doubt in my mind, that the climate con, decarbonisation grift and nonsense net zero are simply enforced, regressive policies, that are designed to erode living standards of the prole masses and must be resisted at every level, with analytical data, fact and common sense
"It is also clear the vast majority of our 650 MPs are either ignorant to, or unaware of, how net zero is crippling our grid and consumers, with its upmost scam like rinsing of hard earned funds"
I think the Climate Change Act may be the way to put a stop to this madness as I would argue what is being used in a way not intended by parliament and the government’s plan for net zero is unlawful. You don’t have to become a so called climate sceptic as even people who belief in AGW (for context I was in the green party for a time) see the whole climate political apparatus as farcical and full of grifters who have no real interest in solving (seem to oppose anything that is actually feasible) or even acknowledging potential problems.
No one honestly believes parliament intended to reduce peoples living standards include making air travel & car use the preserve of the rich & connected), ignore the duties in the electricity act – “the need to secure that all reasonable demands for electricity are met”
Using the common law understand of negligence I would argue the government’s plan for meeting targets under the Climate Change Act have to be technically feasible at scale and they can’t also contain legal fictions like pretending all the imported electricity is zero carbon & Renewable Energy Certificates.
This isn’t the case from intermittent renewables in 2024 as TW/h scale storage does not yet exist or for that matter carbon capture and storage.
But there were things that were technically feasible in 2008 at scale as far as I’m aware have not even being look at:
1 – a large scale (40GW+) replacement of coal and natural gas generating capacity with nuclear fission using existing reactor designs which France clearly demonstrated was possible
Personally I would worked with the Canadians to build 50hz replica of a multi unit CANDU site e.g Darlington Nuclear Generating Station but with 8 units like Bruce Nuclear Generating Station as we don’t seem to have the heavy forging capacity for pressure vessels for PWR or BWR in the UK (sorting that may slow things). It an established design were the bugs have being worked out and the skills need in refurbishments in Canada are similar to what a new build project would need so of the options the UK has its likely to be built on time and budget.
2 – I would have prohibited the demolition of all the old coal, oil and gas power station as they could clearly be repowered like many old coal power station in the post war period were to oil with small modular heat reactors based on what we use for nuclear submarines in the short term (as we have clear operating experience with them) but with an long term aim to make liquid fluoride thorium reactors work.
3 – looking at ways for new building to affordably meet the passivhaus standard
4 – natural gas heat pumps
5 – quadricycles
6 – reintroducing trolleybuses
7 – nuclear marine propulsion
Why do we have 28+ GWe wind capacity & are the direct and indirect subsidies for renewables value for money or unnecessarily regressive to people on low incomes compared to the alternatives? Why are subsidise linked to generation when helping with the capital cost would be a more rational approach for the tax payer (if we must build them). Also if the computer models on climate change are accurate in future there would likely be less wind at speeds suitable for wind turbines and our winters may get colder.
We already know about the Renewable Heat Incentive or Cash for Ash scandal in Northern Ireland – I want to know if the people who set up net metering & the solar PV feed in tariff personally benefited from it especially as we have people who have done well from subsidy payments who are now donating to probably all the main political parties which feels like Racketeering – we have organisations getting public funds (I include subsidies) then making donations to political parties to influence them to pay the, not saying charities should not be allowed to lobby e.g a charity that provides a service like a hospice or citizens advice to keep or increase its funding but it should not feel like politicians scratching their mates back especially if it increases the donor’s personal wealth & the donor’s personal wealth matches the total paid in subsidies to business they are linked to.
Totally agree with item 2 it was nothing short of a crime against the state to destroy those installations almost before the boilers were cold for political vanity photos.
On 6 batteries are now main provider of power for new local buses across much of UK so no need to have to install lots of expensive overhead line equipment that trolleybuses would have needed.
"Totally agree with item 2 it was nothing short of a crime against the state"
- I think it may have actually have being unlawful under the electricity act as they were not replaced like for like and I would say a crime against the people vs the state. At the time this started someone pointed out it was very suspicious how quickly they were being demolished instead of being abandoned or mothballed especially after there were fatal accidents at at least 2 power stations while being demolished. Good old fashion follow the money with the answer being the energy market rewards shortages so if you own other electricity generators it perversely makes sense to close. Increasing Gas capacity has decline from its peak in about 2012.
“On 6 batteries are now main provider of power for new local buses across much of UK so no need to have to install lots of expensive overhead line equipment that trolleybuses would have needed.”
- Even with the overhead line equipment trolleybuses would be cheaper in the long term as the batteries aren’t cheap and there are limited amount of full cycles you can recharge them before their capacity declines to the point they are unusable, they are also heavier than diesel buses so it will increase road maintenance costs. Trolleybuses will also last longer compared to even diesel buses so on some routes modern trolleybuses (with a short distance backup battery) will be the best strategy vs electric buses.
Great work again David. The bureacrats always know better than the market (which is just a reflection of all the transactions we lowly folk make voluntarily). Unfortunately we knew that the market would have to be rigged to keep this farce going. Shifting subsidies was always an easy option.... but of course, if so cheap, why the need for subsidies in the first place?
I thought the point of Ofgem and the other regulators was to protect the consumer? Thanks for exposing this.
Back in 1986 when OFFER and OFGAS were established their remit was to act in consumer interest. That was changed for OFGEM by Ed Miliband's 2010 Energy Act, which deemed green interest to be consumer interest and primary. The recent Energy Act converts OFGEM into the primary Net Zero delivery body. Consumers are a very long way down the list of priorities.
What happened to the duties in the electricity act? e.g. “the need to secure that all reasonable demands for electricity are met”
https://www.legislation.gov.uk/ukpga/1989/29/section/3A
+
the Secretary of State or the Authority shall have regard to the interests of—
(a)individuals who are disabled or chronically sick;
(b)individuals of pensionable age;
(c)individuals with low incomes; and
(d)individuals residing in rural areas;
Very illuminating. Thanks. This is rampant eco-communism (aka stakeholder capitalism), Green in tooth and claw, softly, surreptitiously, ripping its way through our energy markets.
National Grid has barely started on its rewiring programme although its fair to say that the two Scottish operators have been spending big although we aren't seeing much benefit as constraint payments North of B6 boundary still remain very large element of balancing costs as well as TuoS charges being higher. So as NG works get underway we will see ever increasing charges for the "wires and cables" element in the energy cap for the next decade.
One thing that is fairer is those on prepayment meters now being charged the same as everyone else so im happy to the adjustment for that. Then we have all the other social schemes though like warm home discount which is the increased despite the lower charges now applicable for prepayment meters! The energy company obligation which in my area is now up 22% is money pit who ensures how the money is spent. ROCs you've mentioned but 15% overall increase in cost to the end consumer although i know its only CPI to the generators.
All in all its about time the mainstream media got hold of this and exposed how much of our electricity (and gas) costs are nothing to do with world events but self inflicted wounds.
Two factors that occur to me. OFGEM implemented their decision to allocate all TNUoS charges to demand last April. That actually lowers the costs generators have to recover in the market, while increasing standing charges for the grid network. In fact, a number of CFDs had a clawback clause in their contracts which meant that their strike prices were reduced by almost £10/MWh compared with straight indexation: Triton Knoll is one example. It is therefore bizarre that under the new zonal pricing just decided on, generator prices will once again reflect their effective use of the grid.
The second factor is that OFGEM has long assumed that retailers would implement a 12-18 month forward hedging programme. Immediately it implies the wholesale cost they allow reflects futures prices over the preceding period. These assumptions utterly failed during the energy crisis, because hedging on such a scale was impossible (and potentially bankrupting). The collateral required shot up because of the huge increase in market volatility. The natural providers of hedge sales such as nuclear could not afford the collateral, or the risk that their units might be forced offline by maintenance or even closure, exposing them to massive losses on forward sales.
Many smaller retailers never hedged anyway, having been happy to undercut the majors with their high cost rear view mirror hedges during a period of mostly falling wholesale prices culminating in the lockdown lows. They soon went bust in droves. The Big 6 were also badly hit because they had been unable to hedge on the assumed scale, and had to be bailed out with government loans during the height ofthe crisis: the OFGEM cap left them with large losses, added to when taking on SOLR business of failed retailers. Recent cap levels have been set to allow them to recoup losses.
I have long argued that pricing should be much more transparent, based on much prompter markets such as by futures delivery month in the month ahead. There should then be separate markets for seasonal borrowing to allow an even cashflow for a bill payer with clear debit and credit interest across seasons, and a separate market for price insurance via caps, collars and fixes, with proper standards for these complex financial products. As with commercial traders that might entail posting collateral or at least liability to exit fees.
Indeed the 2021 energy supplier fiasco was OFGEMs finest moment of utterly incompetent regulation to protect consumers interest. The losses were socialised onto consumers as the replacement suppliers (many of big six in irony which OFGEM were trying to undermine in the first place!) were allowed to claim the extra over costs for buying the energy and the administration of the scheme. Oh as an aside the administrators that wound up the suppliers have collected 20-30m in fees for themselves as well. Furthermore many of the failed suppliers hadn't fulfilled their obligations in ROC payments so that has had to be covered as well.
I have gone off topic but if OFGEM couldn't manage their basic duty to consumers here why on earth does anybody think they are competent in managing the wider industry is beyond me. A few MPs have tried to call them out but its got nowhere .
Kudos David, another great example of well considered and accurate analysis
I’m so impressed with it, I’ve posted it out, in the hope of educating as many people as possible, as to what is happening in our nations energy system
It’s clear Ofgem have become the net zero Stasi, happily rinsing consumers with supplier protective price caps, whilst hiding its true costs in a plethora of camouflage documents and dodgy graphs
It is also clear the vast majority of our 650 MPs are either ignorant to, or unaware of, how net zero is crippling our grid and consumers, with its upmost scam like rinsing of hard earned funds
As for moving costs from electricity, to gas bills, to make electricity (hence battery vehicles & heat pumps) look cheaper and gas more expensive (again to force the masses onto inept heat pumps), that is nothing short of legalised fraud and it is incumbant on all we realists, to challenge and hold to account, all forms of State sponsored greenfoolery
There is no doubt in my mind, that the climate con, decarbonisation grift and nonsense net zero are simply enforced, regressive policies, that are designed to erode living standards of the prole masses and must be resisted at every level, with analytical data, fact and common sense
Hi, posted it where? I am not complaining, I just like to see where it ends up.
Guido Fawkes order-order blog - I’m hopeful parliamentarians will read it and ask searching questions of DESNZ
"It is also clear the vast majority of our 650 MPs are either ignorant to, or unaware of, how net zero is crippling our grid and consumers, with its upmost scam like rinsing of hard earned funds"
How is it possible to be this ignorant to simple issues like we don’t have enough generating capacity even in the planning to run all those heat pumps proposed to meet our equivalent instantaneous natural gas & heating oil demand for a normal let alone unusually cold winter e.g 1947 or 1963 – https://www.birmingham.ac.uk/news-archive/2018/gas-consumption-during-the-beast-from-the-east-how-the-local-gas-system-kept-us-warm ?
I think the Climate Change Act may be the way to put a stop to this madness as I would argue what is being used in a way not intended by parliament and the government’s plan for net zero is unlawful. You don’t have to become a so called climate sceptic as even people who belief in AGW (for context I was in the green party for a time) see the whole climate political apparatus as farcical and full of grifters who have no real interest in solving (seem to oppose anything that is actually feasible) or even acknowledging potential problems.
No one honestly believes parliament intended to reduce peoples living standards include making air travel & car use the preserve of the rich & connected), ignore the duties in the electricity act – “the need to secure that all reasonable demands for electricity are met”
Using the common law understand of negligence I would argue the government’s plan for meeting targets under the Climate Change Act have to be technically feasible at scale and they can’t also contain legal fictions like pretending all the imported electricity is zero carbon & Renewable Energy Certificates.
This isn’t the case from intermittent renewables in 2024 as TW/h scale storage does not yet exist or for that matter carbon capture and storage.
But there were things that were technically feasible in 2008 at scale as far as I’m aware have not even being look at:
1 – a large scale (40GW+) replacement of coal and natural gas generating capacity with nuclear fission using existing reactor designs which France clearly demonstrated was possible
Personally I would worked with the Canadians to build 50hz replica of a multi unit CANDU site e.g Darlington Nuclear Generating Station but with 8 units like Bruce Nuclear Generating Station as we don’t seem to have the heavy forging capacity for pressure vessels for PWR or BWR in the UK (sorting that may slow things). It an established design were the bugs have being worked out and the skills need in refurbishments in Canada are similar to what a new build project would need so of the options the UK has its likely to be built on time and budget.
2 – I would have prohibited the demolition of all the old coal, oil and gas power station as they could clearly be repowered like many old coal power station in the post war period were to oil with small modular heat reactors based on what we use for nuclear submarines in the short term (as we have clear operating experience with them) but with an long term aim to make liquid fluoride thorium reactors work.
3 – looking at ways for new building to affordably meet the passivhaus standard
4 – natural gas heat pumps
5 – quadricycles
6 – reintroducing trolleybuses
7 – nuclear marine propulsion
Why do we have 28+ GWe wind capacity & are the direct and indirect subsidies for renewables value for money or unnecessarily regressive to people on low incomes compared to the alternatives? Why are subsidise linked to generation when helping with the capital cost would be a more rational approach for the tax payer (if we must build them). Also if the computer models on climate change are accurate in future there would likely be less wind at speeds suitable for wind turbines and our winters may get colder.
We already know about the Renewable Heat Incentive or Cash for Ash scandal in Northern Ireland – I want to know if the people who set up net metering & the solar PV feed in tariff personally benefited from it especially as we have people who have done well from subsidy payments who are now donating to probably all the main political parties which feels like Racketeering – we have organisations getting public funds (I include subsidies) then making donations to political parties to influence them to pay the, not saying charities should not be allowed to lobby e.g a charity that provides a service like a hospice or citizens advice to keep or increase its funding but it should not feel like politicians scratching their mates back especially if it increases the donor’s personal wealth & the donor’s personal wealth matches the total paid in subsidies to business they are linked to.
Totally agree with item 2 it was nothing short of a crime against the state to destroy those installations almost before the boilers were cold for political vanity photos.
On 6 batteries are now main provider of power for new local buses across much of UK so no need to have to install lots of expensive overhead line equipment that trolleybuses would have needed.
"Totally agree with item 2 it was nothing short of a crime against the state"
- I think it may have actually have being unlawful under the electricity act as they were not replaced like for like and I would say a crime against the people vs the state. At the time this started someone pointed out it was very suspicious how quickly they were being demolished instead of being abandoned or mothballed especially after there were fatal accidents at at least 2 power stations while being demolished. Good old fashion follow the money with the answer being the energy market rewards shortages so if you own other electricity generators it perversely makes sense to close. Increasing Gas capacity has decline from its peak in about 2012.
“On 6 batteries are now main provider of power for new local buses across much of UK so no need to have to install lots of expensive overhead line equipment that trolleybuses would have needed.”
- Even with the overhead line equipment trolleybuses would be cheaper in the long term as the batteries aren’t cheap and there are limited amount of full cycles you can recharge them before their capacity declines to the point they are unusable, they are also heavier than diesel buses so it will increase road maintenance costs. Trolleybuses will also last longer compared to even diesel buses so on some routes modern trolleybuses (with a short distance backup battery) will be the best strategy vs electric buses.
What can the average person do?
Vote Reform UK, they will scrap net zero and concentrate on indigenous energy sources
https://www.netzerowatch.com/all-news/more-fantasy-energy-policy
I’m sure you’re aware of this David, yet more incoming bill hikes & stealth taxes to feed the greenfoolery monster