Where is the kWh price heading in 2022?

[AliG]

I had to make an assumption and normally this kind of contract is pretty long.

 

I have looked a bit further into it and the CfD contracts are for 15 years.

 

Of course to model anything like this you need to make myriad assumptions. Indeed if anyone ever tells you they have modelled something, ask what assumptions they made as they often guarantee the outcome making the model of dubious value if the assumptions are wrong.

 

Assuming two years of high prices followed by 13 years of “normal” prices you would save £176bn at a subsequent cost of £466bn. The breakeven point would come at just over four years of prices that have only existed for a few weeks so far.

 

You are 100% correct that it would become less of the generation mix in future but the absolute cost would stay the same.

 

If for example you thought that wholesale prices would return to £50 and retail electricity prices to 13p The extra £466bn would I think increase the price by 2-3p for the next 15 years (that’s a bit of a guesstimate as I don’t have all the data).

 

This suggestion, like many, reduces current pain by spreading the costs over many years. There is certainly value in that, but as you might expect doing this on commercial terms involves a cost that ultimately increases the total cost. A bit like using PFI to build hospitals. Commercial interests will always suggest a solution that benefits them and the U.K. is highly unlikely to break existing contracts so instead would probably need to “incentivise” things to happen.

 

Rather than complaining a lot about this, I have been trying to think of solutions. I have heard suggestions that the government will increase tax thresholds to offset the cost. A bit like they showed during COVID, much as they are often lacking foresight and slow to act they do usually get their finger out when there is a real problem. I think this idea may have merit. The reason is that if you just subsidise the price of energy, people will just keep using it and it will show producers that they can increase prices with impunity. But if you give people extra cash to cover some of the costs they are then incentivised to reduce their usage so that they break even which is a much better plan in the long run. The trouble with this kind of solution is that outcomes will vary considerably from person to person, but it may be better for the country overall. The more the money we spend to fix this today reduces long term energy consumption the better. The trouble is it is hard to implement these things quickly.

 

Supplying Ukraine with more weapons to shorten the war is also probably a good use of cash. Indeed if Russia did not have nuclear weapons I think we would almost certainly see  NATO attack them as we would once again be having a war driven by energy.

[Kelvin]

What’s the support for business and in particular small to medium sized businesses. They employ most of the workforce and many are likely to go bust at the current energy prices. 

[markc]

5 minutes ago, Kelvin said:

What’s the support for business and in particular small to medium sized businesses. They employ most of the workforce and many are likely to go bust at the current energy prices. 

Non existent as usual! During covid we were classed as key workers/suppliers to rail industry so no furlough, but as virtually all works stopped on railway projects they didn’t buy any machines, just starting to pick up again now. Luckily we have a roughly 50/50 split so the construction and arboricultural machines kept us going. 

[Roger440]

7 minutes ago, Kelvin said:

What’s the support for business and in particular small to medium sized businesses. They employ most of the workforce and many are likely to go bust at the current energy prices. 

 

No help so far. at all.

 

Insolvencies up 20% on 2019 levels so far this year. Lots of reasons why, most of them obvious, but plenty of companies are not in a position to weather a storm significantly greater than covid. Unless government do something pretty radical, its going to be grim.

[AliG]

16 minutes ago, Kelvin said:

What’s the support for business and in particular small to medium sized businesses. They employ most of the workforce and many are likely to go bust at the current energy prices. 

Good point.

 

Of course they are not directly considered voters.

 

I am very surprised we are not seeing pubs, shops and restaurants restrict opening hours. Presumably they don’t have the heating on at the moment. Why open your restaurant for half a dozen people on a Monday night in January when the profit won’t cover the heating bill. My local Tesco is open until 11pm. I wouldn’t be surprised if they change to 8 or 9 over winter as the ship is almost empty after 9.

[Pocster]

Just now, AliG said:

Good point.

 

Of course they are not directly considered voters.

 

I am very surprised we are not seeing pubs, shops and restaurants restrict opening hours. Presumably they don’t have the heating on at the moment. Why open your restaurant for half a dozen people on a Monday night in January when the profit won’t cover the heating bill. My local Tesco is open until 11pm. I wouldn’t be surprised if they change to 8 or 9 over winter as the ship is almost empty after 9.

Do we think brothels might restrict their opening hours to save on fuel costs? . Asking for a friend.

[Roger440]

14 minutes ago, AliG said:

Good point.

 

Of course they are not directly considered voters.

 

I am very surprised we are not seeing pubs, shops and restaurants restrict opening hours. Presumably they don’t have the heating on at the moment. Why open your restaurant for half a dozen people on a Monday night in January when the profit won’t cover the heating bill. My local Tesco is open until 11pm. I wouldn’t be surprised if they change to 8 or 9 over winter as the ship is almost empty after 9.

 

Its already happening. Restricted kitchen hours seems to be the thing at the moment. But little in the way of reporting.

[markc]

13 minutes ago, pocster said:

Do we think brothels might restrict their opening hours to save on fuel costs? . Asking for a friend.

Nope, the extra generated heat will allow brothel reception areas to be used as heat banks 

[Kelvin]

1 hour ago, Roger440 said:

 

Its already happening. Restricted kitchen hours seems to be the thing at the moment. But little in the way of reporting.

Been the case for quite some time and since before the war largely driven by fewer patrons and/or a lack of staff to run longer shifts. The energy costs just pile on the pressure. Every business that relies on notional spending will suffer greatly. Hammered on all fronts. Cost increases for raw materials, energy costs, reduced footfall and online spending. It’ll solve their staff shortage problem. 🙄
 

 

[SteamyTea]

If we want to have a government step in and help, we will just have to raise taxes.

So what is LT suggesting; Reduced personal taxes.

That is more to do about winning Tory party members than any attempt at reducing household outgoings.

 I just hope that the voting Tory party members can see though the nonsense.

Trouble for them is, they probably won't vote for RS.

 

I have made myself a cheap, screw on, secondary glazing frame. Stop window draughts (or is it drafts) and add a bit more thermal resistance.

Shall posh it up a bit more for the living room.

 

 

[Ferdinand]

21 hours ago, AliG said:

Wholesale price of gas down almost 20% today, putting it back where it was the week before last. Shows why you cannot take the daily price and extrapolate it out for months/years.

 

How will that play with the 2 years out price?

 

I'm still of the opinion that this may blow over far better than the worst predictions - eg £6k price cap and so on - but still quite rough.

 

I see that bits of EU stakeholders  have started talking about a cap on the European gas price, and decouple the European electricity market from gas.

 

I think that would be possible in some measure here, for a limited period, but needs careful handling - for national reputation for future investment. I wonder, given what France has done to EDF, how they will get on attracting investment in future? 

 

F

[Ferdinand]

17 hours ago, Marvin said:

Hi @ProDave, @markc, @Miek 

 

re green energy after dark, as I understand it Drax B uses wood pellets (delivered from USA) I think its defined as a renewable energy source.....

 

In the EU market both gas and nuclear are defined as climate friendly energy sources, following a mud-wrestle between Germany and France earlier in the year.

[Ferdinand]

3 hours ago, Kelvin said:

Been the case for quite some time and since before the war largely driven by fewer patrons and/or a lack of staff to run longer shifts. The energy costs just pile on the pressure. Every business that relies on notional spending will suffer greatly. Hammered on all fronts. Cost increases for raw materials, energy costs, reduced footfall and online spending. It’ll solve their staff shortage problem. 🙄
 

 

 

This is a claimed energy bill I came across today for a small cafe in Leicester:

 

 

Picked up by the BBC:

https://www.bbc.co.uk/news/uk-england-leicestershire-62727814

[AliG]

20 minutes ago, Ferdinand said:

 

How will that play with the 2 years out price?

That fell around 20% as well. The two year out price is around £3 compared to £6 for this winter. When there is a big move generally all points on the curve are impacted in a similar way.

 

Prices down a further 6% today. This may be because European countries have finished filling their storage.

 

The piece will be crazy volatile for the foreseeable future. Very dangerous to lock in current prices. Much better to find policies that reduce prices and scare the markets. If that works maybe then lock in a better price.

 

Much as it it not the done thing I think there is plenty of room to cap the wholesale gas price at a level that is massively more profitable than in the wildest dreams of energy producers but still much less than today. Trouble is that you’d basically need Norway to agree as they are now the EU’s main supplier of gas. Not a word in the press for the fact they are more than happy to sell their gas at 10x the price they used to get for it and just pocket the money at the expense of their neighbours. They’re a NATO member and benefitting massively from the actions of Russia. Perhaps they need reminding of this. Indeed instead I read commentary yesterday praising them.

[SteamyTea]

11 minutes ago, Ferdinand said:

a small cafe in Leicester

Seems quite a lot at the original 200 quid a week.

I assume they have gas as well, so can't understand why they would be buying in so much.

Got a 4.5 rating and on TripAdvisor, but only 6 reviews.

So one of their friends was not impressed.

Edited August 31, 2022 by SteamyTea

[Pocster]

Guys ! I have the solution!!

[SteamyTea]

11 minutes ago, pocster said:

Guys ! I have the solution

Was going to comment, but most on here don't get the irony of it all.

11 minutes ago, pocster said:

solution

Told you about waking up with your solution on your chest. Now stop it before you get caught.

[Pocster]

1 minute ago, SteamyTea said:

Was going to comment, but most on here don't get the irony of it all.

Told you about waking up with your solution on your chest. Now stop it before you get caught.

But you did comment. You have bread I assume ? . You can find a cat …

[SteamyTea]

1 minute ago, pocster said:

You can find a cat

Bedroom full of spare pussy, threw one out the window and it shut on my flower bed.

[Kelvin]

You have to feed the cat and deal with the waste. So you need a few more pictures. 

[Pocster]

Can relate 

[Ferdinand]

Very interesting and comprehensive article from Carbon Brief:

 

In this article, Carbon Brief sets out how and why UK household energy bills are due to reach historically unprecedented levels this winter, shows how the gas-fuelled increase in bills will push household energy costs towards £200bn and looks at the options to manage the crisis.

https://www.carbonbrief.org/analysis-why-uk-energy-bills-are-soaring-to-record-highs--and-how-to-cut-them/#reduce

[Kelvin]

Good report. Shows how little is actually being done or proposed and the impact better insulated homes could make and the contribution renewables is making 

Edited September 1, 2022 by Kelvin

[markc]

Interesting read, it will be interesting to see how members bills go over the winter against their construction and insulation levels etc. I live in a very old draughty ex railway property and love making stuff in my workshop (woodworking machines plus lathe, milling machine, welding equipment etc.) and so far my bills have been really good (or so I feel). 

[Pocster]

Here’s part of the problem 

 

https://www.independent.co.uk/tv/news/energy-electricity-kettle-boris-johnson-b2157594.html?fbclid=IwAR32h58lrG7KBOLqkKoGXMBD2MgoeaoPjX8ZMwqSVF1gmRydYeTTLTiTnAE