Electricity Retailers Increase Prices

Most electricity retailers are increasing their prices this month and the blame is been put on wholesale prices. However, gas prices are no higher than 2005 levels. 

Figure 1: Gas prices since 2000

I have been keeping track of my own electricity bills since 2012. I wanted to see if the reduction in wholesale prices and gas prices have been passed on to the consumer. The result can be seen in Figure 2.

Figure 2 shows little correlation between gas prices and unit price of electricity

The result is clear. The large fall in gas prices has not been matched by a similar fall in the unit price of electricity.   There has been a reduction in gas prices of about 50%. The reduction in the unit price of electricity has been about 7%. If we compare the energy payments or the annual market value of the electricity wholesale market with the gas prices we do see a better correlation (Figure 3).

Figure 3 shows good correlation between Annual Energy Payments (in orange) and Gas Prices(in red)

This means that when the gas prices are low, generators receive lower prices from the market. But these savings in wholesale prices are not passed on to the consumer in any meaningful way.

The hidden force in these graphs is wind energy. It has increased every year since 2012 now making up about 23% of the electricity mix. While we are constantly told that wind energy reduces the wholesale price of electricity, there is no evidence in the actual data.   With this increase in wind energy, there has been a parallel increase in system costs - grid and transmission infrastructure, back up costs, new interconnectors, and high wind penetration feasibility programmes (known as DS3). 

All these costs make up the unit price of electricity. After that, the PSO Levy gets added on, another component that only ever increases (an increase has also been announced this month).

The Energy Regulator seems to be toothless in the face of an electricity sector with out of control costs, government interference and regulation. His name is now redundant, and increasingly appears more like something out of Orwell's novel 1984 where Government Departments like the Ministry for Truth do the opposite of their name.       

ESB call on energy regulator to cap subsidies to wind

Electric Ireland, the supply part of ESB Group, the largest electricity generation company in Ireland, has called on the Energy Regulator (CER) to cap and even reduce subsidies to wind energy. The letter was sent to the CER during consultations on the PSO Levy in July this year. 

Electric Ireland welcomes the proposed reduction in the overall PSO levy for 2015/16 period of c. 9% compared to the current period and notes the positive impact this will have on all electricity customers. However the proposed PSO levy of €304.8m will continue to be a significant burden for all electricity customers and adds considerably to the overall price of electricity. 

Electric Ireland also notes that over 50% of the proposed PSO levy (€173.9m) relates to Renewables and suggests that every effort be made in future years to cap, and ideally reduce, this amount. The wind market in Ireland is at this point a mature and well established market and we believe it does not warrant any further subsidy beyond current commitments. The hardpressed energy customer cannot sustain further subsidisation through the PSO and we would urge policy makers to ensure no additional subsidies are created beyond existing PSO commitments.  

It is difficult to see how the Government can justify increases to subsidies to wind generators, although Energy Minister Alex White seems committed to fulfilling every wish of the wind industry.

Energy Regulator confirms that wind energy will result in additional costs

This blog has consistently made the point that wind has and will result in more costs in the generation of electricity, because when you mix large amounts of non-dispatch with dispatch generation, the dispatch no longer runs as smoothly as before, meaning that the costs of running your dispatch goes up.

The Energy Regulator confirmed this in an Oireachtas Committee a couple of weeks ago :

Wind has been least-cost in the past, but that does not necessarily mean it will be least-cost in the future. More and more wind on the system adds extra costs. It is a question of the law of diminishing returns. To bring in more and more wind, we have extra network costs. We need more flexibility from the generators. The wind does not always blow. When the wind is not blowing, we need to have extra capacity there to keep the lights on. The cost of that increases with the levels of wind. Some of the microgeneration technologies, such as solar technology, start to become more competitive in such circumstances. They also have falling capital costs. We constantly need to look at this in a cost framework. While we have security of supply requirements and we need to consider the environment, cost is a major feature of our overall duty.

https://www.kildarestreet.com/committees/?id=2015-02-18a.1291&s=wind+farm#g1411 

It is good to see the Regulator now focusing on cost, because it certainly is going to become an issue into the future.