not many people know
Paul Homewood
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As we all know, the UK has one of the highest electricity prices in the world.
It is widely believed that the rapid rise in natural gas prices in recent years has been driven by soaring natural gas prices. In fact, this is only a small part of the story.
I analyzed OFGEM's energy price cap operation and compared this season with January 2019, when the first cap was implemented.
| pounds per year | January 2019 | October 2024 | Increase |
| Electricity price ceiling | Chapter 683 | 1118 | Chapter 435 |
| direct fuel costs | 195 | 325 | 130 |
| Other expenses | Chapter 488 | Chapter 793 | 305 |
https://www.ofgem.gov.uk/energy-policy-and-regulation/policy-and-regulatory-programmes/energy-price-cap-default-tariff-policy/energy-price-cap-default-tariff- grade
Direct fuel costs reflect the full cost of generating electricity (i.e. not just fuel). ROC is not mentioned, but I believe these are included as well. Excludes all other green taxes such as contracts for difference and capacity market payments.
Direct fuel costs increased by 66%, not unlike the 78% increase in natural gas costs during the same period. But that's less than a third of total cap growth. Chief among them was an increase of £305 in other charges.
So what happened since 2019?
Here are some things to consider:
- CFD
- capacity market
- system balance
- Smart meter
- binding payment
- Grid upgrade
- Gas generation is inefficient due to intermittent operation
You got it!
The only change since 2019 is the rapid decarbonization of the grid.
Relevant
