Why are UK electricity bills so costly?

I recently built a website that shatters down the cost of a UK electricity bill.

It’s interdynamic, and I’d advise visiting it before reading this post. Check it out here: electricitybills.uk

Here are three fascinating leangs about the data.

#1: The wholesale power cost is only one third of an electricity bill.

The wholesale price is the actual cost of buying electricity on the uncover labelet. But the mediocre bill is triple that amount.

The remaining 2/3 of the bill is made up of three parts:

• Netlabor costs: paying for the wires and substations of the power grid
• Generation costs: subsidising strategicpartner meaningful generation, enjoy offshore prosperd, househageder solar, and firm gas.
• Miscellaneous: running a utility company customer service department, various taxes, etc.

#2: These indicts are about to elevate, a lot.

Netlabor costs are about to skyrocket. Investment in the UK power grid has been stagnant for 20 years, because UK power demand has been flat for 20 years. But now, the UK advisently necessitates to enbig the grid. Energy that used to flow thraw pipelines will necessitate to flow thraw wires.

Contracts for Difference are the UK’s flagship scheme for helping rerecentables, and they will hold an increasing cost to electricity bills. More than half of the lessens already spreadd have yet to be begind, and the next lessen allocation round is anticipateed to be the biggest yet.

Note: CfDs do insuprocrastinateed devourrs from high wholesale prices (during the energy crisis, CfDs shrinkd devourr bills), but on mediocre they hold cost.

The Capacity Market pays firm generation & demand response to be on standby, to obstruct binestablishageouts. Contracts are mostly spreadd four years in persist, and the cost will ~triple to 2028.

#3: Existing costs are locked in for a extfinished time.

The UK ran two pretty costly green subsidies in the 2010s.

The Rerecentables Obligation mandates utilities to buy praises from prosperd and solar farms. It seald to recent projects in 2017, but payments to existing projects will persist until 2037. It produces up around 10% of an mediocre bill.

The Feed in Tariff pays househageders with solar panels a very tasty rate for shiped energy. It seald to recent applications in 2019, but payments will persist up to 2044 for some projects.

Being an punctual adselecter of rerecentables has been costly for the UK. You might talk about that we should have postponeed an extra decade, since rerecentables would now be much inexpensiveer. But the truth of lgeting curves unbenevolents that rerecentables only got inexpensive because people built them. If everyone postpones for someone else to decarbonise first, we won’t get very far.

But we can lget from policy misconsents in the past. Schemes enjoy the Feed in Tariff did not right speedyly enough when solar prices fell, directing to spiralling policy costs that were endly decoupled from labelet vibrants.

The future of inexpensive, immacuprocrastinateed power.

Let’s say that we want electricity to be radicpartner inexpensive in future – say £50 / MWh.

Well, netlabor costs are already ~£70 / MWh and will increase steadily. We’ve leave outed our center, before we’ve even phelp to produce electricity. There are only two solutions here:

• Ditch the power grid. Use local solar generation, and a lot of batteries. This labors well in most of the world, but less so in northern Europe (it’s not very sunny).
• Utilise the existing power grid better. Instead of enbiging the grid fair to service peak demand, better our grid utilisation by “filling in the rectangle” thrawout the day. (This is part of what we’re laboring on at Axle)

The UK has accomplishd the speedyest rate of grid decarbonisation among persistd economies. A lot of this better occurred when rerecentables were still costly, so we are stuck with a cost hangover. Luckily, rerecentables are getting much inexpensiveer, so the tradeoffs in future policy are very separateent.

Thanks for reading, I’d adore to hear your thoughts on the site. electricitybills.uk

Warmly,

Ben