Electricity Price Hikes: Renewables Too!

By John Swindells 05 Feb 2008 | Comment
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So there isn't a cartel operating in the UK energy market? Good Energy states on its Prices Page that its domestic electricity prices are rising by an average of 13.2%. It states that:

The cost to Good Energy of buying electricity on the wholesale markets has increased dramatically - the wholesale cost of electricity for 2008 has increased by 66% in comparison with 2007. This is largely due to insecurity in supply this winter, which is having the affect of buoying up future prices. For example, several nuclear power stations were powered down at short notice and have been offline for a sustained period of time affecting the whole market. (ref: British Energy - now part of EDF Energy) In addition, Good Energy is facing increases in its distribution and transmission costs (i.e. the wires we use to deliver power to your home).
and it continues:
Renewable energy prices are affected by the wholesale electricity market. Renewable electricity represents only 4.7% of the UK’s electricity supply at the moment and is traded on the same market as traditional electricity. This means its costs fluctuate in line with fossil fuel costs. As the renewable industry grows this will change as renewables will help to add security of supply to the UK’s power network, and could help reduce the fluctuation in UK prices.
Okay, so it's the wholesale trading market to blame. Let's see what British Energy have to say for themselves. In their First Half Results (07/08), it quotes a few interesting statistics (from the SEA Final Report):
  • [Page 7,9] Overall electricity production of 30.7TWh, sold at £0.038/kWh (£0.036/kWh in 2006).
  • [Page 13] Renewables electricity production was 0.6TWh in H1 2007, around the same as in 2006. The cost however fell from £24m in 2006 to £17m in 2007, making the wholesale unit price £0.04/kWh in 2006, and £0.028/kWh in 2007.
There are problems here. Firstly, These figures indicate that British Energy only has 1.95% of its energy coming from renewable sources, less than half of Good Energy's claimed 4.7%. Does this mean that British Energy produces very little of the country's renewable electricity, or has Good Energy got it wrong? Secondly, the unit cost of renewable electricity plunged between 2006 and 2007, making it much cheaper than the overall unit price. So how come the unit price to the Good Energy consumer (only buying renewables of course) has gone up?

I think that the only explanation is that British Energy operates a cartel which allows it to set prices arbitrarily, but who are the other major players in the electricity generation arena to support this cartel?

To make a complaint against your energy supplier, you need to use the energywatch: Make a complaint form. Make sure you have raised your complaint with your energy supplier first, though! Energywatch is the body santioned by OfGem, as explained on their consumer pages.

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