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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Because electricity is a commodity. It is bought and sold like anything else with a global market. How it is produced is irrelevant.
Energy produced by wind/solar/hydro is a substitute good relative to energy produced by oil.
When the price increases for a good, it’s causes increased demand for the substitutes, as consumers flock to alternatives. All other things being equal, this increase in demand for the substitute good causes the price of the substitute good to increase.
In this case, the price for oil is going up, which drives people/corporations to pursue substitutes (wind/solar/hydro), and this increase in demand increases the equilibrium price.
Here’s another example with AA batteries. Say Duracell has an issue with its manufacturer and it cannot churn out the same number of batteries as it normally would. Supply for batteries goes down, and Duracell increases the price to maintain current profit margins. Perfectly rational customers would run initially to Energizer, assuming the price is lower. Energizer sees this increase in demand for its batteries, and realizes they can increase the price and still sell the same number of batteries, thus increasing profit. The substitute good here is Energizer batteries, as they are LITERALLY interchangeable.
Hope this helps.
Here’s a few of ELI5 points to ponder
1. Earth is constantly “bombarded” with immense amount of solar energy / radiations. This is used to provide the fundamental “life forces” so as to speak. These life forces in turn create a complex web of eco-systems and highly interconnected forces, using “solid liquids and gases” of our planets.
2. You just cannot “tap into” one energy source without disrupting something else somewhere. If you thing wind energy is renewable, where are the materials to create those massive windmills coming from? What about the massive factories where these windmills are produced? Where are the thick electricity cables to connect this energy coming from? The people who are driving this “renewable energy”, where is their energy / consumption coming from?
3. Nature is the most efficient system of energy conversion. If you spend a few days in a forest, you’ll realize this. It produces no waste, recycles everything. A deer will graze only that amount of grass that it needs. A lion will kill a deer only when he’s hungry – after which it’ll go into its rest mode.
Enter humans! And everything goes haywire. Its because we have enough for our needs, but not for our greed. You think electric cars are eco friendly? Where is the massive amount of electricity to charge the batteries coming from? Where is the massive amount of lithium coming from? its being mined in exactly the same sad way as coal.
If you’re talking about octopus then you’ll quite often be using energy derived from fossil fuel but they offset this with green energy and other environment contributions.
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