By Paul Homewood
We still keep being told that our sky high power prices are due to reliance on gas.
Silly Jilly wrote this in the Guardian a month ago:
One of Labour’s key election promises was to cut energy bills by £300 a year by 2030 while making Britain a “clean energy superpower”.
The job is already halfway complete: renewable energy made up more than half the UK’s electricity for the first time last year. So why does Britain continue to have one of the most expensive electricity markets in the world? Industrial users complain those costs are driving companies out of business and discouraging investment in the UK.
The reason behind Britain’s sky-high wholesale energy costs is simple, according to experts. It is down to Britain’s reliance on gas – the price of which was sent soaring by Russia’s invasion of Ukraine – in power plants and home heating.
“Great Britain’s dependency on gas imports has been the most important factor behind higher gas and power prices in the market,” Kate Mulvany, the principal consultant at the energy advisory company Cornwall Insight, said.
Prof Michael Grubb of the UCL Institute for Sustainable Resources said in a recent research paper that, although fossil fuels used to be cheaper than renewable energy sources, “that has turned on its head as gas prices shot up and the cost to produce renewables such as wind and solar power has plummeted”.
He said: “If we actually paid the average price of what our electricity now costs to produce, our bills would be substantially cheaper.”
It was accompanied by a deliberately deceptive graph, purportedly showing how wholesale price trends of electricity closely matched those of gas. The choice of the y-axis means that you could show anything you wanted. And, of course, wholesale prices only make up a minor part of retail prices.
There have been many attempts to unravel these Guardian lies, but here I present a very simple, unambiguous and undeniable analysis which totally shreds such claims.
- According to official data, in 2024 the UK used 179 TWh of natural gas for power generation.
- At the end of December 2024, the wholesale price of gas was 117 p/therm, or £39.93/MWh.
- The value of that gas was therefore £7147 million.
- Total electricity supply in 2024 was 303 TWh.
- The OFGEM price cap for April to June 2025 was 25.74 p/kWh, excl VAT, giving a retail value of £77992 million.
- In addition standing charges add approximately an extra £5 billion for domestic users, plus other users.
We can therefore see that the cost of natural gas only makes up about 8% of the total retail value of electricity.
We can analyse these same numbers using 2019 prices.
- The wholesale price of natural gas was typically around 50 p/therm, so the value of gas used in generation was about £3 billion a year; the rise in the price of gas since has therefore added about £4 billion to the cost of electricity.
- The OFGEM price cap in 2019 was 17 p/kWh, giving an annual value of £51 billion
- In addition, standing charges were approximately £2 billion in 2019, compared to the current £5 billion.
- The total retail value of the electricity market would therefore be about £56 billion at 2019 prices.
To summarise, the retail value of electricity has increased from £56 billion to £83 billion. Of this £27 billion increase, only £4 billion is due to gas.
The rest, in one way or another, can be described as “policy costs”. These include renewable subsidies, various system balancing costs, standby capacity and grid upgrades.
But they also include the structure of the marginal pricing mechanism employed, whereby all generators benefit from higher wholesale prices, on the back of higher gas prices.
The answer to all these problems lie with government.
What is certain is that the answer is not building more renewables.
via NOT A LOT OF PEOPLE KNOW THAT
June 1, 2025 at 08:12AM
Iowa Climate Science Education 