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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Renewables not including nuclear were about 10% of national grid output over the last week.
A: All of us on renewable energy tariff are getting renewable only, I think it’s unlikely.
B: if non renewable price goes up then all prices go up as suppliers will purchase renewable.
C: bill is made up of wholesale cost, a renewables tax (around 25% of bill I think), tax, markup, so actual costs of power aren’t the sole component.
You pay for a specific type of energy. However you using more energy still means an increase in fossil fule use (or whatever the “worst” type of power is in your regional/national electricity supply at that moment). A wind or solar powered generator will not produce more energy beacause you turn on your stove or TV, they will produce the same amount. However a coal or oil based power plant usually only produces to meet the demand in the grid, as such they will increase production to meet your demand.
It is nice to pay for renweable as you know your money will go to someone who produces energy in that way, it is however very easy to make the assumption that your electricity use will have a very small environmental impact, which simply isnt true, it is the same as for anyone else.
Unfortunately, “made from 100% renewable” is more often than not a trick. The accounting book might be able to say so in a broad way, but you’d get power outages if that was true.
Your energy provider buys green energy and is forced to make a mix at some point.
It is a bit like a state or region saying its energy production is 100% solar and wind; it may be true, but if it only represents 20% of the consumption, and the other part is imported from the next state that just burns coal and gas …
In any case, wood / coal is also a renewable. This is the trick Germany uses to say they left nuclear energy being them (they buy French electricity made with nuclear power plant instead) and use renewables.
I am pretty sure if you read your contract carefully, it will say something along the lines of “100% renewable whenever we can only” .
Because your electricity isn’t 100% renewable.
Rego certificates (the UK system which tracks what is and isn’t renewable) are a failed system.
So what we’re learning here today is that energy is fungible? And even if you’re claiming to only pull energy from renewables, that drawing your scope so narrow doesn’t mean we’re not actually pulling from the same total global mix of all sources, including dirty fossil fuels? Shocking, if true!
Let’s say an apple and a pear normally cost 1 dollar, each. Now, let’s imagine an apple’s price becomes 2 dollar. People will naturally move from buying apples to pears, as they are more affordable. So, the demand for pear grows, while the number of available pears stays limited to what is produced. So, the price naturally goes up, too, as people need to eat fruit and are willing to pay more for pears, as apples became expensive.
Everyone talking about how it isn’t 100% renewable isn’t necessarily wrong, but that’s not what’s happening.
Say i buy a car for $5000. Then i go to sell it later and one person offers me $6,000 and another offers me $10,000, I’m taking the $10,000. What the car cost me is irrelevant. I’m taking the most money I can get for it, I’m not stupid.
Going back to energy, the cost of something is determined by supply and demand. It’s determined by what people are willing to pay for it, it’s not determined by the cost to produce. Businesses sell their products for the highest price they can, not based on their cost.
Electricity generated from renewable sources is a substitute for that generated from non-renewable sources.
So as the price of electricity generated from non-renewables goes up, that generated from renewables becomes more and more affordable as a substitute. That results in increased demand, and supply can’t ramp up instantly (i.e. building and deploying wind turbines, solar sites, etc) to meet that demand, so the producers put their prices up to a) discourage further growth in demand, b) generate capital for growing supply, and c) yes, cashing in whilst the price is high.
In the long run, a new equilibrium will be found: likely one where non-renewables are less in demand, and renewables are more in demand but that demand is adequately met by available supply most of the time.
Basically: Once the electricity is made, it’s sold at the market rate, when it’s inside the wires, it no longer matters what made it, just that it can power the kettle.
Only you, the customer, cares that it was made renewably.
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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