[News] The Energy crisis

[Paulie Gualtieri]

Just moved my dual fuel with BG for a two year fix - works out +£15 from what I am paying now.

Unsurprisingly they’ve been inundated!

 

[WATFORD zero]

It hasn’t happened. Argument about whether we think it might or might not happen tends to divide along pro or anti membership lines and is ultimately pointless. You think it’s likely because someone has said it and it conforms to your view. Someone else thinks the opposite. And there we have the thread that cannot be named (particularly now I know mention of it triggers a script ).

And yet you can't leave it

6 years ago you could have claimed some sort of pro or anti fantasy and that it was about what people 'thought' might or might not happen.

It's now completely clear, documented and factual, happening, getting worse daily and having huge effects which require urgent solutions. But just at this point, you are refusing to have anymore to do with it (other than try and pretend it's not and just a matter of opinion)

 

[peterward]

I wonder if any of this will change the fracking debate? We sit on top of a mass of natural gas. I'm fortuate I can absorb the price increases, but many in the "red wall" areas will get hammered by this.

Previously with low gas/electric prices the oppositions voice to fracking was the loudest.

But for all those who were in favour, no doubt the present circumstances will make make that debate a bit closer?

It could certainly be framed by advocates as the way to slash rapidy rising household bills and to help strugging families etc, I wonder if this issue will rear its ugly head again?

 

[Neville's Breakfast]

And yet you can't leave it

6 years ago you could have claimed some sort of pro or anti fantasy and that it was about what people 'thought' might or might not happen.

it's now completely clear, documented and factual and having huge effects which require urgent solutions. And just at this point, you are refusing to have anymore to do with it

Yes, I can leave it and have. I have pointed out the global structural issues in power and gas markets. I have just replied to someone who is giving weight to one person’s view on the likelihood of the EU withholding gas supplies by pointing out that one person’s view is not fact and is the calibre of debate to be found on your favourite thread. It adds nothing to the thread we are on. Clear enough ?

 

[Berty23]

Yes, I can leave it and have. I have pointed out the global structural issues in power and gas markets. I have just replied to someone who is giving weight to one person’s view on the likelihood of the EU withholding gas supplies by pointing out that one person’s view is not fact and is the calibre of debate to be found on your favourite thread. It adds nothing to the thread we are on. Clear enough ?

It is about looking at the various different prices available and factors in play. On the balance of all the evidence we have so far how do you see the probabilities

1. Being outside the EU is a contributory factor to our gas being more expensive than the rest of Europe
2. Being outside the EU is not a contributory factor to our gas being more expensive than the rest of Europe.

If you think 2 then could you share the evidence you are using as the basis for this point of view. If you think 1 then you are arguing against your position.

It am genuinely interested in the evidence if you believe 2 because I have not been able to find any.

 

[CheeseRolls]

Day ahead prices have always been considerably more volatile than forward pricing. So much so that an entirely different type of mathematical modeling has to be used when pricing its derivatives. Day ahead prices are effectively a balancing auction and heavily influenced by the amount of demand coming into the grid on that day and the cost and type of electricity needed to satisfy that demand eg on a low demand day it may be possible to satisfy it mainly with renewables which are the cheapest source but finite. Day ahead prices can and have been negative. On a high demand day in a situation like now where massive excess gas demand has a knock on effect in creating a switch to coal we see coal fired capacity having a more significant role in satisfying demand and this is a lot more expensive because of the need to buy carbon permits. The forward electricity market by contrast reflects quantity of financial market hedging, forecast long term demand and the generating capacity intended to satisfy that demand. It is usually a lot less volatile. This year though forward power prices have rocketed because of supply problems in the global gas market and insufficient gas storage in the EU to satisfy forecast demand. Add into this the rapid phasing out of coal and lack of enthusiasm for nuclear and the continent has problems. Germany in particular has a problem that will get bigger because of its success in moving from coal to renewables. Unfortunately the stark reality is it does not have enough generating capacity and since European power markets are led by the liquid German market this contributes to this years price spike.
The direct answer to your questions is to remember that electricity cannot be stored (unless in batteries). The forward market is not a separate source of supply so there is no trade off between day ahead and forward power. As to inflexible trading relationships I would dispute that these are relevant to the move up in forward power and this is what drives the wholesale and therefore the retail market.

Suppliers with idol coal powered stations have a choice do they not?

To commit to supplying the forward market or to wait for the volatility in the day market to push the price up.

There has been plenty of speculation that suppliers are favouring the latter, knowing that the global supply challenges and the peculiar position the UK market finds itself in, (due to poor capacity planing and poor commercial relationships with near markets), has created the perfect opportunity for coal powered electricity generators to continue to make large profits from what would otherwise be redundant technology.

 

[Neville's Breakfast]

Suppliers with idol coal powered stations have a choice do they not?

To commit to supplying the forward market or to wait for the volatility in the day market to push the price up.

There has been plenty of speculation that suppliers are favouring the latter, knowing that the global supply challenges and the peculiar position the UK market finds itself in, (due to poor capacity planing and poor commercial relationships with near markets), has created the perfect opportunity for coal powered electricity generators to continue to make large profits from what would otherwise be redundant technology.

It is not as straightforward as that. If a coal fired power station is idled it is not so easy to bring it back online. The UK is about to find this out when it mothballs our remaining capacity which luckily for the current situation has not as yet been closed down. Your point about poor planning is valid here but it is because of environmental commitments. For the same reason coal fired capacity is amongst the last to be called on by the grid because it is the most expensive. You cannot run a coal fired power station on the off chance that daily demand will be so high that its electricity will be sold ie the reverse of your thesis is true in that coal fired capacity can only survive if forward power prices are high enough for an integrated electricity company to enter into forward contracts with industrial buyers.

 

[Neville's Breakfast]

It is about looking at the various different prices available and factors in play. On the balance of all the evidence we have so far how do you see the probabilities

1. Being outside the EU is a contributory factor to our gas being more expensive than the rest of Europe
2. Being outside the EU is not a contributory factor to our gas being more expensive than the rest of Europe.

If you think 2 then could you share the evidence you are using as the basis for this point of view. If you think 1 then you are arguing against your position.

It am genuinely interested in the evidence if you believe 2 because I have not been able to find any.

I would just say that the structural power and gas challenges facing the UK and the EU are a lot more important than the constitution. Have a read of this article for much more significant challenges;

https://www.ft.com/content/7c31ca15-aa4f-4a32-bb90-ebc1341ed374

The only mention of EU membership is around the likelihood or not of them withholding supplies and that is entirely subjective.

 

[beorhthelm]

article above i believe without the paywall
https://eminetra.co.uk/why-europe-fears-gas-crisis-before-winter-demand-begins/700942/

another similar global view
https://www.cnbc.com/2021/09/13/eur...e-world-pay-more-to-get-warm-this-winter.html
https://fortune.com/2021/09/16/shor...ct-storm-is-roiling-the-worlds-energy-market/

another important point, Russia's oar in this
https://www.cleanenergywire.org/fac...d-stream-2-links-germany-russia-splits-europe


zoom out for the whole picture

 

[dejavuatbtn]

Gas, electric and water should all be nationalised - this isn’t a political issue, it just makes sense.

 

[Berty23]

I would just say that the structural power and gas challenges facing the UK and the EU are a lot more important than the constitution. Have a read of this article for much more significant challenges;

https://www.ft.com/content/7c31ca15-aa4f-4a32-bb90-ebc1341ed374

The only mention of EU membership is around the likelihood or not of them withholding supplies and that is entirely subjective.

article above i believe without the paywall
https://eminetra.co.uk/why-europe-fears-gas-crisis-before-winter-demand-begins/700942/

another similar global view
https://www.cnbc.com/2021/09/13/eur...e-world-pay-more-to-get-warm-this-winter.html
https://fortune.com/2021/09/16/shor...ct-storm-is-roiling-the-worlds-energy-market/

another important point, Russia's oar in this
https://www.cleanenergywire.org/fac...d-stream-2-links-germany-russia-splits-europe


zoom out for the whole picture

Thanks. So these points back up what I said (if the first link is the same FT argument). The articles focus on Europe but then make the point about brexit meaning U.K. will face higher risk and therefore prices. We don’t have the storage coapacity because we have worked just in time for energy as we have for trade (which is also being hit).

So cheers for sharing articles agreeing with my earlier post saying brexit isn’t only factor but is obviously relevant.

I assume you both agree that brexit is a factor then. So far you have shared articles about why has price is higher for all of Europe but not explained why it is so much higher here apart from where they reference brexit.

Looks like we all agree it is a factor. That was not so hard was it.

 

[Neville's Breakfast]

Thanks. So these points back up what I said (if the first link is the same FT argument). The articles focus on Europe but then make the point about brexit meaning U.K. will face higher risk and therefore prices. We don’t have the storage coapacity because we have worked just in time for energy as we have for trade (which is also being hit).

So cheers for sharing articles agreeing with my earlier post saying brexit isn’t only factor but is obviously relevant.

I assume you both agree that brexit is a factor then. So far you have shared articles about why has price is higher for all of Europe but not explained why it is so much higher here apart from where they reference brexit.

Looks like we all agree it is a factor. That was not so hard was it.

Tell me which gas price you think is higher in the UK than in Europe and then I will be able to answer your question. Illustrate the differential with actual prices. At present I haven’t really engaged with your argument because I don’t really know what you are talking about.

 

[nicko31]

And yet you can't leave it

6 years ago you could have claimed some sort of pro or anti fantasy and that it was about what people 'thought' might or might not happen.

It's now completely clear, documented and factual, happening, getting worse daily and having huge effects which require urgent solutions. But just at this point, you are refusing to have anymore to do with it (other than try and pretend it's not and just a matter of opinion)

Leaving the EU Internal Energy Market comes with a price. Lets hope its a mild winter

 

[vegster]

Thanks. So these points back up what I said (if the first link is the same FT argument). The articles focus on Europe but then make the point about brexit meaning U.K. will face higher risk and therefore prices. We don’t have the storage coapacity because we have worked just in time for energy as we have for trade (which is also being hit).

So cheers for sharing articles agreeing with my earlier post saying brexit isn’t only factor but is obviously relevant.

I assume you both agree that brexit is a factor then. So far you have shared articles about why has price is higher for all of Europe but not explained why it is so much higher here apart from where they reference brexit.

Looks like we all agree it is a factor. That was not so hard was it.

Don't worry, the official government line is that we have a " resilient " gas supply system and no one will freeze this winter...

We'll be paying a fortune for it though and the government are powerless to influence the price and as usual have no coherent plan and virtually no reserves of Gas. Of course the ancillary problems of lack of Co2 supply will be looked at when we run out in a weeks time.

 

[A1X]

[tweet]1439961593488580613[/tweet]

Not sure if they’re trying to convince us or themselves

 

[beorhthelm]

Thanks. So these points back up what I said (if the first link is the same FT argument). The articles focus on Europe but then make the point about brexit meaning U.K. will face higher risk and therefore prices.

but none of them mentioned Brexit. one managed to squeeze in a covid angle.

ah i apologise, there is a point the first notes EU may prioritise supply over UK. fair point.

 

[studio150]

[tweet]1439961593488580613[/tweet]

Not sure if they’re trying to convince us or themselves

Given that Government assurance I'm buying candles and torch batteries in large quantities

 

[Berty23]

Tell me which gas price you think is higher in the UK than in Europe and then I will be able to answer your question. Illustrate the differential with actual prices. At present I haven’t really engaged with your argument because I don’t really know what you are talking about.

Here is the very simple explainer from an article listing all sorts of reasons in the new statesman.

Is Brexit to blame?

Boris Johnson and Michael Gove promised lower fuel bills for households once Britain left the EU. Gas prices in Europe are also at record highs, but countries in the EU’s internal energy market trade efficiently with each other using linked auctions that balance prices across the bloc. The UK, having decoupled its auctions from Europe, could in theory get cheaper energy than anywhere else – if energy was really cheap. But it isn’t, so the UK is more exposed to high prices.

https://www.newstatesman.com/politics/2021/09/gas-price-crisis-is-brexit-russia-or-covid-19-to-blame

As I have said all along. It is not just due to brexit. It is just another factor and it is daft to pretend otherwise.

 

[Berty23]

but none of them mentioned Brexit. one managed to squeeze in a covid angle.

ah i apologise, there is a point the first notes EU may prioritise supply over UK. fair point.

That is because they focus on larger picture increase across Europe rather than why it has hit us harder than others.

 

[beorhthelm]

That is because they focus on larger picture increase across Europe rather than why it has hit us harder than others.

higher proportion of gas in energy mix, dependency on short term delivery, lack of storage capacity.