My UK energy provider says my electricity is produced with 100% renewables, so I presume water, wind, solar. So why am I affected by such big increases in electricity charges (price per kWh)?
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Power economics is a complicated subject (has odd supply-demand relationships because demand in particular varies over the course of the day, never mind over longer time frames; thank you college course “Economics of Energy” that I once took). Not really free market because the government intervenes a lot, because power companies are monopolies in a way and power is a societal need.
The big thing, apart from the government controls aspect, is that power is sold as a commodity, so without regard to how it is generated, it will go for the common price. The price is not dependent on HOW it is made, it depends more on how much the power is demanded. The profit side of things, on the generator side, does depend on how the power is made, and producers will not sell at a loss so prices will jump if costs jump (due to fuel price changes, say). The other producers whose generation capacity is not so sensitive to cost will not happily forego additional profits if there are there to be had. They are not in it to be nice, they are in it to make money. All of the power WILL get purchased, so no value to them in selling low. If they cannot get the price they want, they simply don’t produce as much, so the cost goes back up anyway.
There are contract provisions which govern cost adjustments that also come into play, so it is more complicated than I pretend in my previous description. Everybody is covering their own butts and make sure that they are not ending up on the short end of the stick. We just get whatever they decide they let us have.
I do not know how heavily regulated the utilities are in Britain. I live in Quebec, where Hydro is a state-owned monopoly and we tend to have pretty good electricity prices.
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