9 ms·

If you are wondering why the air quotes around "50% cheaper", it's because the price of electricity is set based on the price of gas. Crazy, right ? https://www

If you are wondering why the air quotes around "50% cheaper", it's because the price of electricity is set based on the price of gas. Crazy, right ? https://www.greeniow.org.uk/why-uk-electricity-prices-are-tied-to-gas/ https://www.greeniow.org.uk/why-uk-electricity-prices-are-ti...

ZeroGravitas 7mo ago
The quotes are because it's a quote. It was part of Energy secretary Ed Miliband's statement which is quoted in the article.
triceratops 7mo ago
It sounds like a crazy system. But wouldn't it also make deploying renewables there wildly profitable? Sunlight is free but you get paid like you burned natural gas.
- PunchyHamster 7mo ago
  It does. It's basically scamming taxpayer into funding private companies renewable investments.
  - triceratops 7mo ago
    https://news.ycombinator.com/item?id=46982694 https://news.ycombinator.com/item?id=46982694 It's not a scam. Interesting your mind went there though. We know what you're about.
- blibble 7mo ago
  that is the idea but under the cfd mechanism the treasury takes the excess over the strike price
- 7952 7mo ago
  Renewables are heavily effected by capital costs. So a renewable energy scheme selling at wholesale prices may sometimes be ridiculously profitable. But it will also have higher interest rates that could wipe out that benefit for the developer. The more successful renewable energy is the lower the average wholesale price is likely to be. And the temporary peaks are likely to correlate with times where the weather conditions will reduce renewable output. All these reasons make CfD's positive for both consumers and developers. The fact that schemes can be developed outside of this just shows how good the technology is.
- benj111 7mo ago
  "sunlight is free" This is the UK btw...
Epa095 7mo ago
That's just marginal pricing, which is the pricing in many (most?) markets. It just means that the price is determined by the price where the demand curve crosses the supply curve.
- triceratops 7mo ago
  > That's just marginal pricing, which is the pricing in many (most?) markets. I don't pay Johnnie Walker Blue Label prices for Jim Beam.
  - Epa095 7mo ago
    But with power the final product it's the same, the production method is different. So it's more like this: I make a product for 5 and sell it for 6. My production facility is maxed, but there is still much demand. So I (or someone else) sets up another factory, making them for 8 and selling for 9 (there is demand enough). Now, will I keep selling at 6? No, my prices will also increase (to maximise my profit), and the final price will be where the demand curve crosses the supply curve. I am wind, the new one is gass. We both make the same product, we sell at the same price, but I make a larger profit.
    - Dylan16807 7mo ago
      You get simple supply and demand with uniform prices in commodity markets but I'm doubtful that's most markets in general.
    - triceratops 7mo ago
      Makes sense. But in a normally functioning market, production at 5 will rapidly ramp up to capture the excess profits to be made by selling at 8. Eventually this will drive everyone's prices to 6 and the ones stuck producing at 7 (natural gas) will be driven out of business. According to this comment https://news.ycombinator.com/item?id=46982118 https://news.ycombinator.com/item?id=46982118 there's additional "treasury" (is that the tax authority in the UK?) weirdness that prevents renewables from capturing these profits.
fsh 7mo ago
This is highly misleadling. Nobody is setting the price, it is determined by an open market. This naturally drives it towards the price of the cheapest energy source with available capacity (often natural gas). It would be irrational to sell electricity for cheaper than this. If more batteries get deployed, the price will more often get set by battery storage instead.
- PunchyHamster 7mo ago
  Not how it works > In this model, the price of electricity is set by the most expensive source needed to meet demand at any given time. Often, this is gas-fired power plants. Even if cheaper renewable sources like wind and solar are supplying a significant portion of electricity, the overall market price is influenced by the cost of gas. If you don't cover 100% of the current power usage from batteries, the price will be price of gas plants. The gas plants could be 1% of given moment, yet still set price
  - fsh 7mo ago
    That is exactly what I wrote. Gas plants being at 1% implies that there is no cheaper source with available capacity. Why should anyone sell electricity for less then?
  - ginko 7mo ago
    So if I offer my services providing electricity through a bicycle transformer for the cheap cheap price of $1000 per kWh does that mean everyone has to pay that price.
    - gorfxx 7mo ago
      Every 30 mins the UK energy suppliers put in a bid for how much energy they can produce and what price they will do it for. The UK then selects the cheapest N companies to fufill the predicted energy demand. Each company selected is then paid the price of the most expensive supplier chosen which is usually gas.This is a simplification of what the Octopus Energy CEO explains in the link below starts ~1:40. https://youtu.be/5WgS-Dsm31E https://youtu.be/5WgS-Dsm31E

ZeroGravitas 7mo ago

The quotes are because it's a quote. It was part of Energy secretary Ed Miliband's statement which is quoted in the article.

triceratops 7mo ago

It sounds like a crazy system. But wouldn't it also make deploying renewables there wildly profitable? Sunlight is free but you get paid like you burned natural gas.

PunchyHamster 7mo ago
It does. It's basically scamming taxpayer into funding private companies renewable investments.
- triceratops 7mo ago
  https://news.ycombinator.com/item?id=46982694 https://news.ycombinator.com/item?id=46982694 It's not a scam. Interesting your mind went there though. We know what you're about.
blibble 7mo ago
that is the idea but under the cfd mechanism the treasury takes the excess over the strike price
7952 7mo ago
Renewables are heavily effected by capital costs. So a renewable energy scheme selling at wholesale prices may sometimes be ridiculously profitable. But it will also have higher interest rates that could wipe out that benefit for the developer. The more successful renewable energy is the lower the average wholesale price is likely to be. And the temporary peaks are likely to correlate with times where the weather conditions will reduce renewable output. All these reasons make CfD's positive for both consumers and developers. The fact that schemes can be developed outside of this just shows how good the technology is.
benj111 7mo ago
"sunlight is free" This is the UK btw...

Epa095 7mo ago

That's just marginal pricing, which is the pricing in many (most?) markets. It just means that the price is determined by the price where the demand curve crosses the supply curve.

triceratops 7mo ago
> That's just marginal pricing, which is the pricing in many (most?) markets. I don't pay Johnnie Walker Blue Label prices for Jim Beam.
- Epa095 7mo ago
  But with power the final product it's the same, the production method is different. So it's more like this: I make a product for 5 and sell it for 6. My production facility is maxed, but there is still much demand. So I (or someone else) sets up another factory, making them for 8 and selling for 9 (there is demand enough). Now, will I keep selling at 6? No, my prices will also increase (to maximise my profit), and the final price will be where the demand curve crosses the supply curve. I am wind, the new one is gass. We both make the same product, we sell at the same price, but I make a larger profit.
  - Dylan16807 7mo ago
    You get simple supply and demand with uniform prices in commodity markets but I'm doubtful that's most markets in general.
  - triceratops 7mo ago
    Makes sense. But in a normally functioning market, production at 5 will rapidly ramp up to capture the excess profits to be made by selling at 8. Eventually this will drive everyone's prices to 6 and the ones stuck producing at 7 (natural gas) will be driven out of business. According to this comment https://news.ycombinator.com/item?id=46982118 https://news.ycombinator.com/item?id=46982118 there's additional "treasury" (is that the tax authority in the UK?) weirdness that prevents renewables from capturing these profits.

fsh 7mo ago

This is highly misleadling. Nobody is setting the price, it is determined by an open market. This naturally drives it towards the price of the cheapest energy source with available capacity (often natural gas). It would be irrational to sell electricity for cheaper than this. If more batteries get deployed, the price will more often get set by battery storage instead.

PunchyHamster 7mo ago
Not how it works > In this model, the price of electricity is set by the most expensive source needed to meet demand at any given time. Often, this is gas-fired power plants. Even if cheaper renewable sources like wind and solar are supplying a significant portion of electricity, the overall market price is influenced by the cost of gas. If you don't cover 100% of the current power usage from batteries, the price will be price of gas plants. The gas plants could be 1% of given moment, yet still set price
- fsh 7mo ago
  That is exactly what I wrote. Gas plants being at 1% implies that there is no cheaper source with available capacity. Why should anyone sell electricity for less then?
- ginko 7mo ago
  So if I offer my services providing electricity through a bicycle transformer for the cheap cheap price of $1000 per kWh does that mean everyone has to pay that price.
  - gorfxx 7mo ago
    Every 30 mins the UK energy suppliers put in a bid for how much energy they can produce and what price they will do it for. The UK then selects the cheapest N companies to fufill the predicted energy demand. Each company selected is then paid the price of the most expensive supplier chosen which is usually gas.This is a simplification of what the Octopus Energy CEO explains in the link below starts ~1:40. https://youtu.be/5WgS-Dsm31E https://youtu.be/5WgS-Dsm31E