zlacker

>>RobinL+(OP)
One thing that I find hard to understand is how the electricity prices in the UK have gone up so dramatically (blaming gas prices) when a large amount of the electricity is not generated from gas. Is the price being artificially inflated?

>>nategu+e8
Author of the article here

Electricity prices in the UK (and most other places) are set by the marginal unit, which is the most expensive unit that needs to be turned on to meet demand. All other generation for that time period gets paid the same price. The marginal unit in the UK is usually gas, hence the sensitivity to gas prices

>>archyd+3a
My understanding is most wind was bought at a guarenteed price by the government at the time of construction, so a wind farm producing 1MWh gets paid say £40 regardless of the cost of electricity on the grid - even if marginal cost was £20/MWh

As users are then paying £90/MWh for gas, does the excess £50 go to the government or to the wind far owner?

>>ta545+2i
The government. The mechanism is called Contracts for Difference, and as the name implies they work by ensuring the difference between an agreed strike price and the actual price - in either direction is paid

However, notice two further considerations:

1. Such contracts eventually expire. Exactly when varies. But the wind farm is still there, just now the energy price all goes to the operator.

2. Older government subsidies were not CfD. Ten years ago if you built a wind farm you got a direct subsidy. The CfD schemes come into existence from about 2014. They're one of a small number of good ideas the Tories had. They're in line with Tory ideology, but they also actually make sense in the world that actually exists.