Tuesday, 14 September 2021

Time to switch off

 I really mean it too..

Check this story out - a very well written piece in Bloomberg that actually factually summarises all the relevant key points at hand. 

Due to no wind, there is a 10% gap in energy production in the UK this week. France has many of its nukes off-line, so we rely on back up coal and gas. Right at the point where global supply chain issues mean that prices are soaring.

And I mean soaring, one contract on Monday went for £1760, as opposed to the usual £50 per KwH. The average a mere £345 - just a seven-fold price increase for the week. 

Of course, the wind will blow again, but there is no way this episode does not lead to markedly higher consumer prices over the winter. Cold spells in winter now are going to cost the wholesalers even higher prices than this as supplies of gas are so tight. 

As such, time to make sure you turn of unused plugs around the house and look to limit consumption where you can. My rough guess is electricity prices will double over the winter at a minimum from where they are now and stay that way for a while. Worst case will be 3x or 4x the price in January.

Hello, is that inflation I see coming down the road at speed?

22 comments:

Nigel Sedgwick said...

When writing "£1760, as opposed to the usual £50 per KwH", should this not be per megawatt-hour (Mwh)? So different by a factor of 1,000.

And what might be causing the price rise: scarcity or inflation? Probably mostly scarcity, though a bit of both, but don't we need to know the balance. And do not wholesale electricity prices vary more sensibly with commitments made in advance? So who pays the extra (short notice purchase) prices? Is not at least some of that paid by the suppliers that are in default of their contracted delivery commitments? Thus, one hopes, that the future supply mix will (through market action) contain more of more reliable suppliers and less of less reliable suppliers.

Do these differences matter? Perhaps that depends whether one want's confidence in the author's message.

Keep safe and best regards

estwdjhn said...

Given that most people are on annual price fixes, doesn't this leave the suppliers pretty high and dry?

I mean the big six probably have to cash reserves to cover this, but NewCo Dodgy Energy Ltd and their ilk seem unlikely to survive an event of this scale.

Also shows what a bunch of morons the government are, that they have forced a market situation where all the coal stations have been demolished, right at the point where we might need them!

dearieme said...

Do I understand correctly that the madness started when Ed Miliband was the Energy minister?

I can see that the position wouldn't be put right under the Coalition, but the pig-headed stupidity of the Conservative governments is just another thing that's inexcusable.

It was Evelyn Waugh who complained that they never turned the clock back by even a single second.

Bill Quango MP said...

David Cameron only really came unstuck against Ed Miliband, when fuel prices rose very quickly.
Even though Ed Miliband was the enabler of those rises, he was able to go around pointing at things, saying how expensive they were.

It was a difficult few months for the Tories.

Something Mr Drew has noted before.

Ted Heath, who had the country behind him, to reduce the chaos of the 70s, lost support very quickly once the lights went out.

DJK said...

So much for the government's green policies which require people to switch to 'leccy cars and 'leccy heating.

Also, no surprise that the longstanding policy has been to do sweet fa about building future electricity capacity, on the bluffers' principle that foreigners can do all the hard work and we can just buy the end product through the interconnectors. Similar with doctors and nurses in the NHS. No need to actually train the numbers needed, just import them from Europe or the third world. Just this week we heard that plans to build a British alternative to the Galileo satellite navigation system will be dropped, as it's just too much trouble.

All of this abdication of responsibility is fine until the day it isn't and then we're all left with a big problem.

Anonymous said...

Talking about coming unstuck...

1mn job vacancies but 1mn still on furlough. Will they match up?

Doubt it and suddenly coming off furlough to high energy costs and cuts in UC, there's going to be a reckoning. Unless there is another lockdown with another furlough.

Don Cox said...

As of 4pm Tuesday, wind and solar a just useless.
https://gridwatch.co.uk/

Under whose government did we stop building new nuclear power stations ? Is this another Blair disaster ?

Don Cox

Elby the Beserk said...

dearieme said...
Do I understand correctly that the madness started when Ed Miliband was the Energy minister?

1:16 pm
=================================================

Indeed. His 2008 Climate Change (Destruction of the Economy) Act. Out together by an "expert" on climate from the WWF I think. And here we are today, with a PM even MORE stupid than Miliband Minor who seems intent on crashing the economy big time.

Go long on generators and diesel.

Figures - renewables provided less than one seventh of our needs last week, fossil fuels and nukes nearly three quarters.

FUBAR. A problem is also that all the parties of any size are as deranged as the Bojo Gang. We're *ucked.

E-K said...

I honestly believe that Boris Johnson is the worst Prime Minister we've ever had.

Nick Drew said...

Well, *ahem*, I tipped y'all off to this on 11 Jan last year (BTL here)

http://www.cityunslicker.co.uk/2021/01/bitcoin-gold-rush.html

& I hope you all got your price fixes in ...

estwdjhn asks above, "doesn't this leave the suppliers pretty high and dry?"

well, not the ones who themselves fixed their forward wholesale prices in advance: and if I saw it clearly enough in Jan, so did (most of) them. The Far East (gas price) was the canary in the coalmine here, and at various points through the year I've been updating you. Putin has wilfully exacerbated it (withholding gas supply to Europe), to get his Germany-bound Nord Stream 2 pipeline approved. There is a genuine element of economic warfare going on here.

Does Biden care? Not really, this is allowing his *coughs* shale producers to pick themselves up off the floor

but back to the forward price fixers: of course, in order to fix forward, you need to have sufficient credit rating to play in the forward markets. Which a large number of the micro-suppliers don't remotely have. They will be falling off the perch like raindrops on a wet day

will try to post on this later in the week (sorry for the lack of posts recently - got a transaction reaching critical)

iOpener said...

No, it's not inflation you see coming down the road, inflation is already here.

What you see is the four horsemen leading a crowd of the ghosts of dead people.

Charlie said...

"I hope you all got your price fixes in"

Indeed we did fix, with one of those "100% renewable energy" firms too. My lights magically stayed on even when no renewable energy was being generated, though! I do wonder how many suppliers have something in the small print of their fixed price contracts that allows prices to be magically un-fixed "during periods of market stress" or some other legalese.

I see that I currently pay 20p/kWh during the day, so there's a chance my energy supplier made a loss of £1.56 per kWh if they were buying in the spot market.

Another bunch of small energy suppliers to go pop? Time to buy the likes of Centrica?

Nick Drew said...

We don't do financial advice here ... but I notice SSE is on the block.

PushingTheBoundaries said...

The (chopping) block ND?

dearieme said...

"I honestly believe that Boris Johnson is the worst Prime Minister we've ever had"

You must be younger than I supposed.

jim said...

Well I suppose we got the early nuc power stations on the back of enthusiasm and a military need. Then HMG caught several severe colds with '50s and '60s tech and hid in the corner.

I remember proper CEGB engineers, tweed jackets leather patches and a briar pipe. A taste for good solid tech with a decent safety factor and never mind the cost. With lots and lots of coal and oil, none of that poncy gas.

Useless politicos? Too young to have taken much notice of Anthony Eden but from what I read our government has long had a dislike of long term planning. Preferring to steer the ship as the tide took us. The old Civil Service did do long term planning but sadly got its fingers burned. Then money and land use and where the towns are placed, all too difficult old boy.

The old Civil Service was thought too fuddy duddy and obstructive. A difficulty for every occasion. Snag is every occasion really does have a difficulty. So the Civil Service got sidelined and the SPADS have the helm and have failed to deal with the difficulties. The latest read old copies of Popular Mechanics and Forbes. An election strategy is easy compared with dealing with the real problems. Still Boris got rid of that one.

Very slowly but inexorably we have become surrounded by constraints and they really cannot be magicked away. The old nostrums - a better leader or a strong executive cutting the Gordian Knots - won't hack it. Replacing Boris would make no difference. The constraints keep coming beck like dragon's teeth. What we need is something a bit more like the old Civil Service but hired from INSEAD and MIT and a bit more 'no Minister'. Force parliament to take the difficult decisions and live with the flak - Ministers are a dime a dozen.

E-K said...

Dearieme

The difference being that Boris was gifted a stonking 80 seat majority to do the exact opposite of what he is doing.

Bins not collected - tick

Streets full of weeds and potholes - tick

Unions on general strike with secondary picketing - tick (AKA teachers and poor parents forced to stay at home. Civil servants at home eating biscuits not issuing licences etc too.)

Roads blocked and crime rampant by police on strike - tick (even complicit in road blockages by State actors *demonstrators* "need anything ? A pizza while you're sitting, perhaps ???")

The only thing that we haven't got is bodies piling high... which is funny, seeing as bodies piling high is what this is all meant to be about.

Whitty is a liar and a menace. He is about to inject kids with something that is six times more harmful to them than Covid to appease the teaching unions. Boris is also to spend a fortune on ventilation to the same end.

So yes.

The worst PM in our history and the Beast hasn't even arrived yet.

E-K said...

PS

Seasonal lockdowns. Are they to become a yearly event ?

Are we now to go for zero flu too ???

PPS I've been seeing the disappointed faces, the tapping of the watches as I arrive 25 minutes late... a sort of 'normal' is returning but there have been consequences for two years of WFH. One speed restriction after another as there is no money to repair the route. A 3 day week will not cover the basic costs either.

Quentin Vole said...

My energy supplier (PFP) has just gone bust, leaving me to the tender mercies of BG. Prolly a coincidence.

Don Cox said...

"Bins not collected - tick
Streets full of weeds and potholes - tick"

Not here in Middlesbrough. The bins have been emptied regularly all through the pandemic, and a nasty pothole in the next street was fixed a few weeks ago. A whirry-brushes machine comes around weekly to clear dead leaves from the gutters.

No doubt there are problems, and the hospitals are struggling, but in general things are working normally.

Don Cox

DJK said...

AEP --- always one for a good doom 'n gloom story --- covers this in the 'Graph today. As he says, this supply crunch may have the unfortunate effect of creating a political crisis right in the middle of COP26 in Glasgow.

said...

I had my price fix in in June, with Utility Point. They had the best kwh price quote available that wee kwhen I was renewing and even that was 33% higher that my then current tariff with them.