Gas Prices

[BillyStubbsTears]

Fracking will scarcely scrape the skin of the problem.

Bizarre that we are allowing that but banning onshore wind and solar farms.

[ncRover]

Fracking will scarcely scrape the skin of the problem.

Bizarre that we are allowing that but banning onshore wind and solar farms.

Massive offshore wind project still ongoing off the coast of Hornsea where nobody lives. Wind and solar are important cogs in the machine I don’t doubt that.

What are your thoughts on nuclear BST?

[River Don]

The frackers are saying they can bring gas online in the space of 6months. If that is true then I don't think anything else can match it in terms of speed.

But the issues of earth tremors remain.and if they sell it on the international markets then Kwateng admits himself  it won't affect prices.

[BillyStubbsTears]

But it's tiny amounts RD.

It'll make some serious money for someone for sure, given the gas price. That's what's driving it, not an attempt to solve our national problem.

[BillyStubbsTears]

Fracking will scarcely scrape the skin of the problem.

Bizarre that we are allowing that but banning onshore wind and solar farms.

Massive offshore wind project still ongoing off the coast of Hornsea where nobody lives. Wind and solar are important cogs in the machine I don’t doubt that.

What are your thoughts on nuclear BST?

I'm not ideologically against nuclear power. It has a lot of advantages for base load. I must admit, I'm not up to speed with what the costs are relative to wind/solar and storage as base load.

[albie]

Fracking is nonsense on stilts in the overall energy debate.
Here is why:
https://www.carbonbrief.org/factcheck-why-fracking-is-not-the-answer-to-the-uks-energy-crisis/

The Truss announcement is a performative gesture, not a meaningful contribution to the discussion, which is really about how we move from fossil fuels to electricity from renewables.

[ncRover]

Yeah I’ll be honest, I can’t fully wrap my head around all this yet.

There are renewable sources of electricity generation but how can you get a renewable source of gas?

[River Don]

What is the fastest way we could bring affordable energy to the market?

[Branton Red]

You are right in terms of bald percentages. But that is, if I may say so, simplistic

What really matters is what someone is left having to pay out of their disposable income.

Someone in average earnings, paying the average amount for fuel will see their bill rise by £1000 over last year's figure (£2500 now as opposed to £1100 last year with £400 rebate). That's about 4% of average national gross salary.

Someone earning £100k per year a using double the average fuel will see their bill rise from £2200 to £5000, so a £2400 increase after the £400 rebate. 2.4% of their gross income.

But the real effect is on disposable salary. Someone on average pay is going to struggle to find a spare £1000. Someone on £100k shouldn't have to tighten their belt too much to find £2400.

For one, it means cuts to the bone. For the other, perhaps delaying the new car or a less lavish holiday. Or dipping into savings

And as I say, you cannot look at this in isolation. The NI cut will massively skew these numbers in favour of the wealthy.

If the money for that cut is available (and I don't actually think it is, without borrowing it against future public services cuts) then use it to increase the protection of the poorer half of the population.

Billy I've explained how the impact of the price cap is provably progressive in the context of this summer's prices. Simple maths but not simplistic.

You're talking about the increase in bills v last winter. Fair enough. But you make a fundamental error in failing to separate the impact of wholesale price rises and the impact of the price cap.

What is very, very regressive is the increase in energy prices. Last winter average bill of £1,277; this winter with no action approx £4,500. An increase of £3,223 for an average household (12.9% of avg salary); for our richer £100k double average energy user "only" 6.4% of salary.

The cap saves the average user £2,400 (9.6% of salary), but saves the richer double energy user £4,314 (only 4.3% of salary). Therefore the cap is provably progressive.

Yes it still leaves an overall regressive result*. Average user bill up £823 (3.3% of salary); double user bill up £2,132 (2.1% of salary) - but compare to above!

* Except for the very poorest households who (dependent on usage) are likely to save money on last winter's bills with the extra £650 benefit.

So you are wholly incorrect in stating the cap is 'very, very regressive'. It isn't - as I've proved it's progressive.

It can be argued the Government should have gone further and in a perfect world I'd agree but consider this cap as it is likely to cost a staggering c. £150bn - more than twice the Furlough scheme.

[River Don]

The cap right now is probably best because it is easy to apply and does not require a whole load of expensive bureaucrats to sort out.

[BillyStubbsTears]

Branton.
I think I misunderstood your point last night. My apologies. I was talking about the net effect of how much extra different wage/user groups would be paying compared to last year. I see that you are talking about how much they will now be paying compared to the counterfactual of no cap.

Happy to accept that by this definition, the cap is not regressive compared to the (non-starter) counterfactual of doing nothing.

However, I'm struggling to see how a policy that leaves the average household seeing an annual increase in their costs of 4% of salary, while a wealthy household sees an increase of half that can really be called "progressive".

To clear up my take, the policy we've chosen is very regressive compared to some easily implementable alternatives.

For example, we could easily have implemented a stepped cap. Keep the unit rate below some total annual usage at current rates or lower, and charge steeply higher rates on usage above that value. Choose the figures so that the overall cost to the Exchequer is the same, but the effect would be to  angle the benefit to the poorer. And incidentally, massively incentivise high users to economise. That would be both  genuinely progressive AND make overall economic sense.

[River Don]

Given the desperate situation, how can we bring affordable energy to the market?

[BillyStubbsTears]

RD.

I like the idea that pressure should be brought to bear on Norway to not make obscene profits at the expense of fellow NATO countries from a gas price hike caused by a fascist dictator.


In other words, suspend the market mechanism in a market that is dysfunctional.

[SydneyRover]

Yeah I’ll be honest, I can’t fully wrap my head around all this yet.

There are renewable sources of electricity generation but how can you get a renewable source of gas?

Change to electricity in most cases and use green hydrogen where this is not possible.

[albie]

Energy market reform and a progressive pricing structure are the fundamental changes that need to happen.
The difficulty is where this runs counter to vested interests and core ideology beliefs.

A good summary in the round from Prof. Michael Grubb here;
https://theconversation.com/liz-trusss-energy-plan-freezes-bills-but-leaves-dysfunctional-market-intact-190267

This may not be what the Tory right want to hear, so the question is how to sell these solutions to the skeptical.

[SydneyRover]

This is the important bit from the link Albie

''The reason is a pricing structure that is no longer fit for purpose. One would never guess from the current package that the most recent contracts for new renewable sources – including large volumes of offshore wind – cost less than a quarter of the wholesale price of generating electricity from fossil fuels. And they are by far the fastest growing contributors to electricity generation in the UK''

[ncRover]

It needs to be remembered that the conservatives have committed to net zero by 2050, so it’s recycling old political points in my opinion to talk about vested interests in fossil fuels. Although yes, those on the right of the party don’t believe in the net zero project.

If wind power was the perfect no.1 option for electricity generation then it would be more valuable and cost more would it not? Genuine question, I want it to work.

For years, environmentalists and the left have not advocated for nuclear. Perhaps had they done, we’d be in a better state by now.

I think everyone wants what is best for humanity, but has different ideas about how to get there / make it actually work.

Sydney - how would nationwide electricity as a heating source look?

[SydneyRover]

It needs to be remembered that the conservatives have committed to net zero by 2050, so it’s recycling old political points in my opinion to talk about vested interests in fossil fuels. Although yes, those on the right of the party don’t believe in the net zero project.

If wind power was the perfect no.1 option for electricity generation then it would be more valuable and cost more would it not? Genuine question, I want it to work.

Why would it cost more?

For years, environmentalists and the left have not advocated for nuclear. Perhaps had they done, we’d be in a better state by now.

I think everyone wants what is best for humanity, but has different ideas about how to get there / make it actually work.

Sydney - how would nationwide electricity as a heating source look?

It would look like reverse cycle a/c and heat pumps.

[BillyStubbsTears]

https://www.bbc.co.uk/news/business-62882964

Head of IFS says the support package is "poorly targeted". Precisely my point. We are pouring money into the pockets of wealthy people who could look after themselves.

There'll be a payback, when the cost to Govt has to be settled. Pound to a penny Truss and Kwarteng will want to do that by cutting public services.

[albie]

What is the fastest way we could bring affordable energy to the market?

RD,

Separate the electricity from renewables market from the legacy fossil and nuclear energy economy.

If you want electrification to take off, the unit cost of electricity needs to be lower than the unit cost of gas for the consumer.

The price signal is exactly the opposite at the moment.
It is incorrect because it does not reflect production costs, which are much lower (4x) from wind and solar, than from legacy sources.

Remove the link which ties leccy prices to wholesale gas prices, and allow these different markets to reach their own level.........gas will then fall away very quickly.

[BillyStubbsTears]

Report from Goldman Sachs today says they expect the price of gas to drop very quickly over the winter, unless the weather is very bad. They say the EU countries have done the job of reducing demand and increasing storage.

That'd be Putin's trump card chewed up and spat back in his face.

[BobG]

The price of gas futures, as reported by the BBC ceefax business pages, has dropped by 50% in the last 10 days. There is no information about exactly what gas futures are being reported but it's  hard to imagine that such a dramatic fall is not representative of at least trends elsewhere.

What I find absolutely fascinating about this is the total and utter absence of comment anywhere, not even a remark, about this collapse in prices. I've neither seen nor heard a single mention. Wierd.

BobG

[BillyStubbsTears]

An indication of how truly economically illiterate Tory MPs are.

https://mobile.twitter.com/DCBMEP/status/1569940703697936385

1) The price cap will NOT bring down inflation. The fact that the Govt is effectively buying half our energy for us doesn't change the fact that UK plc is paying the full amount for its energy. This dick confuses RPI for inflation. They are not the same thing.

2) Far bigger. The cap doesn't come into operation until next month! Today's RPI figures are for the 12 months to August just gone. The cap wasn't even announced until after that period.

Same old Tories on economics. There are those too thick to understand what they don't know. And the others assume YOU are too thick to understand what they are doing.

[albie]

Europe on the move with energy markets;
https://www.politico.eu/article/ursula-von-der-leyen-state-of-the-european-union-soteu-speech-ukraine-russia-gas-energy-war/

Big question about timing, and how quickly a consensus can be reached on reforming energy markets.

Truss take note.....very high risk in taking a different line for the UK, when energy partners in Europe decide to change tack.

[albie]

The price of gas futures, as reported by the BBC ceefax business pages, has dropped by 50% in the last 10 days. There is no information about exactly what gas futures are being reported but it's  hard to imagine that such a dramatic fall is not representative of at least trends elsewhere.

What I find absolutely fascinating about this is the total and utter absence of comment anywhere, not even a remark, about this collapse in prices. I've neither seen nor heard a single mention. Wierd.

BobG

Link to the BBC index of natural gas prices here;
https://www.bbc.co.uk/news/topics/cxwdwz5d8gxt/natural-gas

A further consideration is the weakness of the £ against the US Dollar going forwards.
This will have an impact on the viability of the Truss borrowing plan.

[mugnapper]

Here's a bizarre thing.
3 days ago, Bulb sent me an email advising me that because of the rising energy prices, my payment would be going up.
Nothing surprising there.
Today I got an email that my monthly payment would be REDUCING by £45!!

I'm  in credit by £400 but I was expecting a rise to circa £200 (from £142)

What's going on?? Anyone had something similar?

[BillyStubbsTears]

I've had a similar mail from Eon saying my next direct debit will be £66 less than my current one. I assume this is the 6 stage £400 govt rebate which I heard was going to come off bills rather than be paid directly to people.

[mugnapper]

Just read all the letter and you're correct BST. The new payment does include the Energy Support Payment.

[Filo]

I've had a similar mail from Eon saying my next direct debit will be £66 less than my current one. I assume this is the 6 stage £400 govt rebate which I heard was going to come off bills rather than be paid directly to people.

I think the bill should be reduced, not the direct debit, those that are hard up will spend the cash elsewhere, the bill should reduce and the direct debit should stay the same

[Ldr]

Correct Filo