The UK is generating too much energy, and the surplus must be absorbed for the grid to function
It’s the Ed Miliband paradox: why does Britain have among the highest power prices in Europe when we have so much electricity that suppliers have to pay customers to use it?
It was a question repeated across the energy industry last week after power prices briefly turned negative, meaning customers and countries abroad were paid to use surplus electricity generated in Britain rather than having to pay for it.
It meant free energy for some consumers to use as they pleased – to charge their electric vehicles (EVs) or simply make a cup of tea – and saw Britain offloading the rest to the likes of France and Holland, not just free but with a chunky payment attached.
This might sound like an oddity, but it was far from the first time. So far this year, Britain has seen around 50 hours of negative prices. Last year, the amount totalled 150 hours – a sevenfold increase since 2021, according to Aurora Energy.
By 2028, UK prices could be below zero for 15% of the year – more than 1,300 hours, LCP Delta says.
The reason is that Britain is generating too much energy, resulting in a surplus that must be absorbed for the power system to function properly.
The obvious answer would seem to be switching them off. But in Britain, the system for connecting solar power and some wind means they are always on. Our nuclear stations are also difficult to ramp up and down.
Companies such as Octopus have turned the situation to their advantage. Its Agile tariff allows customers to take advantage of ‘plunge pricing’, with the company paying customers, by knocking money off their bills, to use electricity at quieter times of the week.
France, Belgium, Holland, Ireland and Norway also benefit, with the surplus sent abroad via the network of subsea cables linking the UK.
But the situation has prompted growing questions about Britain’s energy system. …
Tim Santonastaso of Argus Media says prices go negative when more power is generated than the grid can use or store.
The rush to Net Zero, he adds, will make the problem worse.
“The phenomenon is set to rise as long as Britain adds renewables faster than increases in demand or storage,” he says.
“The electrification that was meant to drive demand up has arrived slowly. EVs, heat pumps and data centres are well behind the optimistic forecasts of a decade ago, with heat pumps especially lagging.”
He doubts this will ever cut bills. They may even grow.
This is because the Government uses a multitude of subsidies to incentivise the construction of new wind, solar and nuclear plants, which are fixed to bills.
Almost all such levies are added to electricity bills, with analyses by the Office for Budget Responsibility showing the £11 billion total added last year will rise to £19 billion by 2030.
Network costs – for the wires that carry power – account for £200 of the average £900 domestic power bill, and these, too, are set to surge as grids are expanded.
Such costs, already comprising two thirds of domestic power bills, are additional to the cost of the actual power, so negative prices will do nothing to bring them down, says Kathryn Porter, founder of energy analytics firm Watt-Logic.
The Telegraph: continue reading
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