The real reason energy bills only ever go up

By Phil Oakley Oct 23, 2012

Phil Oakley

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Britain’s energy market isn’t working.

Last week we had the usual round of utility bashing by the press as British Gas announced that customer bills would go up in November by 6%. Most of its competitors have followed, or will follow, suit.

Competition was supposed to lead to more choice and better prices for customers. We certainly have more choice. Where once we bought our energy from the local electricity board and British Gas, there are now six big energy firms and a handful of small suppliers.

But has competition made us better off? When you’re paying your energy bill, it certainly doesn’t feel like it. But that’s not all the fault of the big bad utility companies. Britain’s energy problems have far deeper causes than just ‘profiteering’ by energy firms.

Here’s why.

Are utility companies really ripping us off?

One key reason why competition hasn’t dragged down prices for British energy consumers is that no single company seems to be able to buy cheaper electricity and gas to supply to us consistently. EDF’s nuclear power stations can produce cheap electricity for now, but whether it can buy gas cheaper than any of its rivals is doubtful.

This is why talk of switching suppliers to save lots of money is largely nonsense. Yes, maybe if you are on the most expensive tariff and you haven’t bothered looking for cheaper deals in the past, you can save money. If that’s you, it’s worth your while going on to a comparison site and seeing if you could save by switching.

On the other hand, if you buy gas and electricity from the same supplier, pay by monthly direct debit and submit your meter readings online, there’s not a lot of difference between the big suppliers. Take a look at the table below.

Dual FuelYear
Oct-08Oct-09Oct-10Oct-11Oct-12
Customer bill £1,215 £1,145 £1,105 £1,335 £1,310
Wholesale costs £680 £575 £490 £605 £620
VAT and other costs £390 £410 £450 £510 £515
Gross margin £145 £160 £170 £220 £175
Operating costs £125 £130 £130 £130 £130
Total indicative net margin for the next 12 months £20 £30 £40 £90 £40
Rolling net margin -£25 £25 £45 £40 £45

Source: Ofgem

This chart comes from Ofgem, the energy industry regulator. It keeps a monthly watch on how much money it thinks the energy suppliers are currently making. Based on an average household dual fuel bill of £1,310, they are making an average of £45 per customer in profit - a margin of 3.4%. This is hardly evidence of profiteering. After the latest increases, profits are expected to go up to £65 - but it’s hard to say that we are being fleeced.

So why do our bills keep going up, if it’s not down to suppliers running a cartel? To answer that question, you have to look into how Britain’s energy market actually works.

How short termism creates flawed energy policies

The bad news for all of us is that unless something radical changes, our energy bills look set to keep rising in the years ahead. This is regardless of what conditions are imposed on utility companies by headline-seeking governments.

One reason for this is the rising wholesale cost of gas. Our supplies of cheap North Sea gas are running out. We now import half of our gas needs. By 2020, this will rise to around 80%. And growing demand for gas is driving up prices - British Gas says it’s paying around 13% more for wholesale gas compared with last year.

Now you’ll probably have heard all about the ‘shale gas bonanza’ in the US. The trouble is, gas is not yet a global market. It’s not easy to transport around the world. So while gas is dirt cheap in the States, that has so far had little impact on the price we pay over here. This is changing, as my colleague James McKeigue discussed in this week’s MoneyWeek magazine cover story. But it’s unlikely to solve our problems in the near term.

The fact is that most of the problems with our energy market lie closer to home. Probably the biggest sources of our difficulties are short-termism, and underinvestment in power stations and infrastructure.

For example, we have far less gas storage space in the UK than Germany or France. If we could store more gas, we could buy it in summer when it’s usually cheaper, and buy less in winter.

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As for power stations, Ofgem thinks that the amount of spare capacity in the system could fall from 14% today to around 4% in 2015. So not only are we paying more for power, there’s also a risk that the lights might go out more often.

Meanwhile, many coal-fired UK power stations decided not to spend lots of money making their electricity cleaner to meet EU rules. As a result, they can only run for a restricted number of hours until 2015. Unfortunately, those hours are being used up more quickly than expected, because it’s quite profitable to make electricity from coal right now (because coal is relatively cheap). This means most will close by 2015, which will reduce the supply of electricity, driving up the price further.

Where we are investing, we are building the wrong type of power generation. We’ve been flinging up wind farms in the hope of getting 15% of our electricity from renewable sources by 2020. But wind power is both expensive and unreliable. An offshore wind farm might generate power 40% of the time. Modern nuclear and gas stations can run 80-90% of the time.

If you take into account the cost of back-up power to support wind farms, they cost more to build than nuclear or gas plants. And this will be reflected in our bills. Consultants Mott-McDonald estimate that an offshore wind farm will need power prices of £180 per megawatt hour (MWh) in 2017 to cover its costs and provide a return to investors. A gas station would need £100 and nuclear £70. Current peak time electricity prices are around £61 per MWh – so you can see which way prices for consumers are going.

So why not build more gas or nuclear? The trouble is, power prices are not high enough to incentivise utility companies to build new gas and nuclear power stations. Nuclear could give us a long-term, secure supply of electricity but the government will not explicitly guarantee the prices that give the companies a satisfactory return on investment. However, it is happy to do this for wind farms.

Instead, the government is trying to raise prices by the back door by introducing a minimum price for power generators to emit carbon dioxide from April 2013. It hopes this will make it more expensive for coal and gas stations to produce electricity, pushing up the price. Whether prices rise enough to encourage new power stations to be built remains to be seen though.

But the bottom line though is that you and I are going to have to pay for this new investment via much higher bills.

So while I won’t discourage you from switching providers (particularly if you’ve never done it before), it’s not going to make a life-changing difference to the amount of money you pay. The only sure way to cut your energy costs is to use less. This means making your home more energy efficient. The Energy Saving Trust website has some useful tips on how to do this.

Of course, the other way to offset your rising energy costs is to invest in the energy sector, and make some money from the companies that are trying to solve some of these problems. As I mentioned earlier, we’ve looked at the best bets in shale gas in the latest issue of MoneyWeek. If you’re not already a subscriber, get your first three issues free here. 

• This article is taken from the free investment email Money Morning. Sign up to Money Morning here .

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Comments (44)

Published in Investing in oil, gas and energy | More articles by Phil Oakley

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  • 1. Marquis Cha Cha

    (23 October 2012, 10:59AM)  Complain about this comment

    Although our energy market definitely needs improving, it's interesting that our unit costs seem to be lower than most of Europe.
    http://www.energy.eu/

    I have heard our homes are a lot less energy efficient, so what we save in unit costs, we lose on extra usage.

  • 2. mathew p

    (23 October 2012, 11:03AM)  Complain about this comment

    It doesn't look good for the uk, economically, politically and energy-wise....whats left?

  • 3. WhyonEarthNuclear?

    (23 October 2012, 11:08AM)  Complain about this comment

    This article was written on the back of comments about shorttermism. Nuclear power is the ultimate of taking short term decisions. Firstly, I don;t believe the 80-90% utilization rate - when did most nuclear power stations ever achieve that? ..... and the real long term penalty is the very long tail managing waste - 1/4millon years?

  • 4. JLS Weston

    (23 October 2012, 11:15AM)  Complain about this comment

    The real scandal with British energy and electricity generation is how inefficient it is.

    Britain has a system of large, distant, power stations - which generate electricity, send it large distances, lose a large percentage along the way, and worse of all, send all their heat as a waste product up the huge cooling towers you will see if you pass any power station. The result - efficiences of around 30%.

    By contrast Holland and Sweden have smaller, local, combined heat and power stations, where 'waste' heat is actually used to heat houses, not sent into the sky. The result? Efficiencies of just over 90%.

    If any other business operated at 30% and sent 60% of its product up a chimney as waste, they'd they'd be out of business overnight. For the power companies it should be a win win. More money from customers, and better carbon figures to boot.

    But it requires new thinking and investment - the two commodities that seem to be in the shortest supply in British industry...

  • 5. David Craig

    (23 October 2012, 11:26AM)  Complain about this comment

    Your figures come from the unreliable and ineffective Ofgem. Half our energy companies are foreign-owned as they make 3-4 times as much profit in the UK than in their properly regulated home markets. Spanish Iberdrola recently took £800m from Scottish Power to give to its US subsidiary to meet its US investment commitments. You can find the truth about energy company profiteering onmy blog http://www.snouts-in-the-trough.com/archives/3341

  • 6. LERENARD

    (23 October 2012, 12:28PM)  Complain about this comment

    Energy prices are part of 'rip off ' Britain, where for some reason we get charged more for goods and services than on the continent. EDF for example is a major generator of electricity through nuclear power, thanks to major post war investment by the french state. France now generates 80% of its energy consumption through nuclear power, which guarantees cheap supplies for the french, but not for british consumers it would seem in our expensive ‘free for all’ market: Ofgem offers token protection if any. Energy supply is a vital service which should be provided on a not for profit basis to ensure it is affordable for all citizens including the most vulnerable: The private sector is failing in this regard and the problem will only get worse with the ‘laissez faire’ attitude of recent governments who simply blame the rest of the world for their inaction.

  • 7. Jo

    (23 October 2012, 01:03PM)  Complain about this comment

    Shale gas extraction and nuclear - very short term thinking considering the cost to the environment for years to come.
    Might as well go back to everyone using smokeless coal.

    Wind farms are also dangerous and not environmentally viable.

    Solar with heat pumps is the best way forward if this would be constantly improved upon. Also puts the responsibility very locally on each household as in comment 4.

    I would like to see magnetism better exploited - any inventors on here?

  • 8. ricardo

    (23 October 2012, 01:33PM)  Complain about this comment

    #4. "Britain has a system of large, distant, power stations - which generate electricity, send it large distances, lose a large percentage along the way..."

    Excuse me but, that is so much... nonsense.

  • 9. GFL

    (23 October 2012, 01:47PM)  Complain about this comment

    Surely the first step is to make our systems more efficient; scientists have been banging on about nanotechnology for years now, but nothing seems to come to market.

    It’s difficult to believe how little progress has been made over the last 30-40 years in terms of energy usage; even the techniques we use to store energy have not moved on.

    I’ve been told the value of all proven oil on this planet is worth in excess of $200 trillion; maybe this has got something to do with it?

  • 10. Bobby

    (23 October 2012, 02:51PM)  Complain about this comment

    Phil,
    You mention cost of nuclear as £70/MWh, however this is production cost I assume and does not consider decommisioning which no doubt will be borne by the tax payer as current nuclear stations are. Just look at Hinkley Point for example, sat there not producing a single unit of electricty but costing the tax payer 10's of £millions as nobody knows what to do with the waste. Advantage of wind is the cost you mention includes all costs including decommisioning. Ultimatley more nuclear will no doubt be required, but its important a balanced generation system to include wind, gas, nuclear and other generating options is adopted. Unfortunately if people wnat their lights to come on when they get home from work everyone is going to have to pay for this...

  • 11. Phil Oakley

    (23 October 2012, 03:39PM)  Complain about this comment

    Bobby,

    There is a charge for nuclear decommissioning in the £70/ Mwh. Whether it is enough to meet the cost,who knows?

    Also modern nuclear stations are assumed to last 60 years. Offshore wind is assumed to last 20 years. The capital cost of nuclear is therefore spread over a much longer time period than a wind turbine.

    I agree with your points on balanced generation options and higher bills.

    Phil

  • 12. Nick

    (23 October 2012, 05:07PM)  Complain about this comment

    I once knew a 'tree hugger' who moulded her own brickettes for use on an open fire using, erm...her own natural waste as the fuel source. Result? Smelly, cold house and no friends.

    My solution to the UK energy problems: drop carbon targets immediately, start digging coal mines we've only got 300+ years supply beneath our feet. And start fracking for Great Britain . Oh, and renationalise the energy companies. No more 'treasure island' economics. Simples.

  • 13. Peter

    (23 October 2012, 05:38PM)  Complain about this comment

    Thanks for the explanation. The letter from BG says gas and electric will go up by 6% but because of the way they are reducing tier 1 and increasing tier 2 my costs will go up by almost 10%. Having done all the insulation, double glazing, efficient boiler work, thermostat reduction I can we have reduced usage as much as we can without just turning out the lights and going abroad. The article above seems to mean that BG's offer of a Fix & Fall tariff is not worth the marketing material it is printed on.

  • 14. Agnostic

    (23 October 2012, 08:50PM)  Complain about this comment

    I notice you give the price of offshore wind but not onshore. I assume this is because you prefer to promote new nuclear, which EDF, etc say requires a price of £140/MW to justify. Your £70/MW is simply BS. No private operators, including the chinese, are lining up to build new nuclear at that rate.
    Whereas onshore wind is operating now at £90/MW. Go figure.

    Here's the choice; clean renewable power currently at £90/MW and steadily declining, or gas and nuclear, potentially causing either climate change or radioactive pollution. On a cost/benefit analysis with due regard to the risks involved, I think lots more onshore wind at £90/MW (and declining).

    As for your figure of 40% for offshore wind, I think you are confusing capacity factor (annual generation/100% of total generation capacity) with time spent generating. An easy mistake to make if you are entirely ignorant of the subject on which you write.

  • 15. Agnostic

    (23 October 2012, 09:01PM)  Complain about this comment

    BTW, the common misperception that wind turbines are inefficient is BS. They are highly efficient at converting something that is completely free and renewable into electricity. The intermittency of generation can be overcome with pumped storage, demand management and smart grids.

    And for those of you who think the lights are less likely to go out if we had a nationalised energy industry, as soon as it was done, the unions would have us back to the 3 day week,power station strikes, miners strike, etc. Aren't memories short!!!

  • 16. Agnostic

    (23 October 2012, 09:17PM)  Complain about this comment

    If you want energy at the cheapest rate then burn coal and damn the consequences. It's the same argument as for using DDT as the cheapest pesticide. Or dumping raw sewage in the nearest river (it's a lot cheaper than treating it).

    It's just that human beings are capable of considering consequences, restraining immediate gratification in favour of more beneficial long terms outcomes.

    Incidentally, the premise of this article is rising prices. Wind power will reduce prices over the next 20 years. The wind doesn't get more expensive, and capital costs are fixed now at the time of construction. The only power sources that will get more expensive over time are the hydrocarbons (and doubtless nuclear de-commissioning and storage costs).

  • 17. Glider Pilot

    (23 October 2012, 09:18PM)  Complain about this comment

    What happened to the excitment over nuclear fusion? ITER is delayed too

  • 18. Phil Oakley

    (23 October 2012, 11:12PM)  Complain about this comment

    Agnostic

    The £70 MWh is Mott McDonald's figure not mine. I'm not sure it is BS as you claim. Last month, Ian Merchant, the CEO of SSE PLC wrote in The Telegraph that EDF was using technology at a new plant in France that equated to around £80. With learning benefits he believed this could come down to £65.

    I stand corrected on the capacity point. Offshore wind can probably generate up to 40% of its capacity but can generate electricity about 70% of the time.

    I accept your points on onshore wind costs. But how many MW of onshore wind do you need to get the same electricity output as a gas or nuclear station?

  • 19. Agnostic

    (24 October 2012, 07:42AM)  Complain about this comment

    Phil, Ian Marchant pulled SSE out of nuclear in favour of expanding renewables. He also let it be known that EDF was looking for £140/MW guaranteed as the starting price for new nuclear (equivalent to offshore wind).

    Your question about capacities is irrelevant, every form of generation has different capacity factors, availability profiles, planned and unplanned outages, etc. It's a bit like asking what's heavier, a tonne of feathers or a tonne of lead?

    How about this, how much longer do you have to store the toxic waste from a nuclear plant than from a wind turbine? Or, how many tonnes of CO2 does a gas plant generate compared to the equivalent generation from renewables?

    You don't seem to 'get' any of the environmental points around the energy choice, only the near term financial points are considered.

  • 20. Phil Oakley

    (24 October 2012, 09:14AM)  Complain about this comment

    Agnostic,

    I would like all electricity generation to be clean if possible. But people need to know how much their electricity is going to cost. This is a website about money matters after all.

    SSE builds renewables because it gets a very high, subsidised electricity price in return. It would probably build nuclear plants if they were subsidised.

    Does it really cost £90 Mwh to produce from onshore wind? If I look at the studies of power generation costs on the DECC website, it raises the issue of all the other extra costs that are needed for these plants to be viable. These look like they add up to another £50-60 per Mwh. So is the true cost nearer £150 per Mwh? People need to know this. If this is true then onshore wind looks very expensive indeed.

    We need to balance our respect for the environment with the need to keep the lights on at a reasonable price. In my opinion, you cannot simply flood the countryside with wind turbines. You need gas and nuclear too.



  • 21. Agnostic

    (24 October 2012, 09:55AM)  Complain about this comment

    Phil, windfarms above 5MW qualify for 0.9 of a ROC. That is the subsidy that commercial onshore wind currently receives (as opposed to domestic scale Feed in Tariff scale projects which are more heavily subsidised for perhaps social reasons). Through a process called degression, the ROC subsidy will decrease steadily until 2017 when a new system of Contracts for Difference (CfD's).

    So, a wind operator is paid about £45/MW for energy sold on tbe market and receives about £45/MW in ROC and CCL (Climate Change Levy). Total about £90/MW. Sorry to disappoint you, but the facts just don't match the prejudice.

    The current level of subsidy is what is considered to be necessary to drive the roll-out at the targeted scale and pace. Onshore wind could operate well below the current level of returns, probably as low as £70/MW but the roll-out would be slower.

  • 22. Barkingmad

    (24 October 2012, 10:06AM)  Complain about this comment

    The problem with the costs of power generation for renewables like wind and solar only account for the generation they actually produce and not for the generation that is needed to back them up or expensive 'storage' solutions. We need reliable 24x7 generation - not something that is expensive and generates perhaps 30-40% of the time and even then is variable.

  • 23. Barkingmad

    (24 October 2012, 10:06AM)  Complain about this comment

    Variable generation caused grid instability problems (even more cost to try and solve). Perhaps the government should build and run these nuclear power plants if private companies seem unwilling - at least everyone pays and everyone used the electricity whereas now solar subsidies go to companies and richer individuals (but paid for by poorer people or people who cannot afford solar or have a suitable roof etc.) and many of these other schemes are run by foreign companies.

  • 24. Barkingmad

    (24 October 2012, 10:11AM)  Complain about this comment

    I'm not usually one for having things nationalised but seems more and more reasons for the government (i.e. all of us) to build / run large power stations. Power is a strategic asset - I do not want to have to rely on importing it and I'm not keen on it being owned by foreign companies (often with very close 'state' links) - paranoid or just being realistic?

    If the government may have to provide loans or guarantee certain price or subsidies to get private companies to build - well maybe they should cut them (and their shareholders / profits) out of the equation?

  • 25. Agnostic

    (24 October 2012, 10:12AM)  Complain about this comment

    Phil, if you want to tell people how much their electricity us going to cost, it might be worth knowing the facts. But given that your purpose is to educate, and your beef is rising energy costs, shouldn't you support renewables? Their cost of generation is fixed now, at the time of installation. Do you know what the cost if gas will be in 3, 5, 10 years from now? Do you know what the price of uranium will be, and what the cost of radioactive waste storage will be in 10, 30, 2,500 years?

    And of course in your analysis we must disregard long term environmental factors. To avoid spoiling the view!

  • 26. Barkingmad

    (24 October 2012, 10:19AM)  Complain about this comment

    "The intermittency of generation can be overcome with pumped storage, demand management and smart grids."

    Which all adds to the cost. A generation method that is very expensive to start with - then build a second system to store the energy that is excess (as you still need reliable generation to provide the base load) and then use that to fill in the (frequent) gaps when it is not windy enough or too much and you end up with a super expensive and complex system.

    Demand management sounds lovely in theory (and not saying it's a bad idea) but think overall we would see more benefit from encouraging grid and usage efficiency with energy.

  • 27. Barkingmad

    (24 October 2012, 10:23AM)  Complain about this comment

    "Their cost of generation is fixed now..."

    Well yes to a point - but there is still maintenance and they have a limited lifespan (probably around 20 years).

    It's a bit like buying a £60k electric car now because in 10-20 years the fuel may be cheaper rather than just buying a £20k car.

    You also have to factor in the cost of grid enhancements / storage systems that may not be required with other generation methods.

  • 28. Agnostic

    (24 October 2012, 11:21AM)  Complain about this comment

    Barking, the cost of maintenance is fixed by long term maintenance contracts with the manufacturers. Its that certainty that attracts capital to renewables in preference to new nuclear.

    BTW, I like your solution to being unable to attract rich private investors into new nuclear, whatever other crackpot idea you have, etc....nationalise the industry and make poor and middle classes pay through the tax system instead.

    Still not a word about the environmental costs of non-renewables....?

  • 29. Barkingmad

    (24 October 2012, 11:36AM)  Complain about this comment

    "BTW, I like your solution to being unable to attract rich private investors into new nuclear"

    ... the problem is private companies almost certainly have to pay more for the 'money' and also want to make a profit / pay shareholders profits - so unless you can argue they must be able to build / run a nuclear power station significantly cheaper than the government their costs will be higher. Over such a long lifespan (perhaps 60 years for a nuclear power plant) the extra finance costs and 'profits' will be very significant.

    But for me a lot of it is that power is so strategically important - if we are forced to import fuel / electricity these things could be turned off and you are more exposed to prices. No method of energy production is perfect but at least nuclear is low carbon, generates near 24x7 etc.

  • 30. Barkingmad

    (24 October 2012, 11:41AM)  Complain about this comment

    Before people go negative on nuclear - of course it has it's issues - but you should research and consider something that is largely overlooked - 'deaths per terrawatt hour generated' and factor that in!

    I agree nuclear power has the potential for big accidents but it's very much like an air / train travel - cars will kill more people per million miles travelled but barely makes the news - certainly to a train crash (albeit rare).

  • 31. Agnostic

    (24 October 2012, 01:14PM)  Complain about this comment

    As radioactive waste will be around for thousands of years, it's a bit early to make that call.

  • 32. Barkingmad

    (24 October 2012, 02:02PM)  Complain about this comment

    "As radioactive waste will be around for thousands of years"

    So you are happy for many, many people to *definitely* die today vs the possibility that people could die in the future from radioactivity. The fact is the deaths per TWh is important and clearly shows it being far safer in actual deaths caused. Also if you believe in global warming it's even more important we transition off carbon fuels.

    We should be looking for ways to develop nuclear - make it safer, deal with the waste (or at least ways it can be stored as safely as possible).

  • 33. Agnostic

    (24 October 2012, 02:27PM)  Complain about this comment

    I'd rather no one died early as a result of our energy choices, now or in the future. That's why I'm in favour of renewables. No one dies now or in the future.

    It's particularly baby boomer to want cheap energy now and damn the consequences for everyone else.

  • 34. Barkingmad

    (24 October 2012, 03:16PM)  Complain about this comment

    "I'd rather no one died early as a result of our energy choices, now or in the future. That's why I'm in favour of renewables. No one dies now or in the future. "

    Except that's completely untrue. Hydroelectric is renewable yet the Banqiao Dam killed an estimated 171,000 people - exclude that and it's still 0.10 per TWh (2.5x more that of nuclear). Wind is 0.15 per TWh (almost 4x more than nuclear), solar is 0.44 per TWh (11x more than nuclear).

    This issue is not even about 'cheap' energy in financial terms.

  • 35. Barkingmad

    (24 October 2012, 03:23PM)  Complain about this comment

    Another thing to consider is how many people die as a result of expensive electricity / energy? There will be a number of people who cannot afford sufficient heating and get sick / die as a result of 'expensive' energy - too many subsidies / expensive generation will just make that worse.

  • 36. mike meadowcroft

    (24 October 2012, 04:45PM)  Complain about this comment

    We normally transport our primary fuel to a generating site near where we require the electricity. When gas was found in the North Sea we did not site our power stations in this inhospitable environment.
    The maintenance problems for offshore wind turbines have been ignored together with the transmission costs.
    The future for our electrical supply is far worse than the politicions understand.

  • 37. Agnostic

    (24 October 2012, 06:51PM)  Complain about this comment

    Sorry, but your argument is farcical.

  • 38. Barkingmad

    (24 October 2012, 07:20PM)  Complain about this comment

    "Sorry, but your argument is farcical."

    You were not clear whose / which argument you were claiming is farcical.

    Are you claiming lives have not been lost from hydroelectric - see: http://en.wikipedia.org/wiki/Dam_failure

    Are you claiming that higher energy prices do not cost lives / risk health as people cut back (too much) or the government / councils do not light roads etc.? Are you claiming wind / solar power and their subsidies do not increase the cost of energy?

    Or that there are problems with offshore wind - i.e. it's better for a more consistent output but bad in terms of the cost / risk of building and maintaining them and far more expensive to hook into the grid.

  • 39. Barkingmad

    (24 October 2012, 07:28PM)  Complain about this comment

    The argument for wind / solar is an argument for higher energy costs and higher energy costs make us less competitive and in turn cost jobs. As they are so variable in output they have to be teamed with other systems (pumped storage etc.) and that just pushes the cost up further.

    The argument for higher energy costs is an environmental one mostly to reduce CO2 and particulates - I'm all for cutting back on coal (as it costs a huge number of lives) and don't like the idea of importing fuel so where does that leave us? These older power stations need replacing and do people who are very pro wind / solar consider what is the most it could generate - 25%, 35%, 45% - but what about the rest and how much will energy cost by then and how many jobs will it cost?

  • 40. Agnostic

    (24 October 2012, 08:10PM)  Complain about this comment

    Is that why all the nuclear power stations are clustered around London? Rather than sited at Dounreay/Windscale/etc?

    Do you think that no one has thought of how to maintain offshore wind turbines? Given the forty years of offshore oil and gas experience in the North Sea I think you'll find someone might have twigged. The paucity of entrepreneurialism and sheer ignorance displayed by most commentators on this subject is frankly depressing.

  • 41. Sykamore

    (25 October 2012, 09:40PM)  Complain about this comment

    Don't feel sorry for the energy companies apparent lack of profits - the table of ofgen data is estimated forward costs based on the data the energy companies provide, and bears no relation to the profits they actually make.

    With regard to wind energy, here is what RenewableUK have to say on the matter:
    Figures released by Ofgem in March show the true level of investment consumers are providing to build one of the UK’s fastest growing industries.

    The annual report on the Renewables Obligation from the energy regulator shows that the contribution of wind energy to household bills in the UK was a tiny £7.74 in 2010/11 which equates to less than 15p per week- 2p per day - far below figures touted by the industry’s critics.

  • 42. Sykamore

    (25 October 2012, 09:41PM)  Complain about this comment

    This investment is not only delivering clean energy that will benefit generations to come, but is also creating tens of thousands of much needed jobs and is attracting billions of pounds worth of private investment, directly benefitting families and communities across the length and breadth of the UK.

  • 43. Sykamore

    (25 October 2012, 09:41PM)  Complain about this comment

    “These figures show that wind energy is fantastic investment for the future prosperity of everyone in the UK. The industry is protecting consumers from huge hikes in energy bills at the same time as providing clean energy that will keep the lights on for generations to come. When you add to this the long-term employment and financial security it is creating for thousands of families across the country and the billions of pounds of investment it is bringing to the UK it must be one of the best investments we have ever made.” said Maria McCaffery, Chief Executive, RenewableUK
    “If we keep relying on expensive and polluting imports of fossil fuels such as gas to generate electricity, our bills will continue to go up - that's the conclusion reached by the Government's Committee on Climate Change, and that's what Ofgem found in its ground-breaking Project Discovery research. Wholesale gas prices went up by 40% last winter according to Ofgem”.

  • 44. Sykamore

    (25 October 2012, 09:42PM)  Complain about this comment

    As for Mott MacDonald’s figure of £180/MWh for offshore wind, the industry-led Offshore Wind Cost Reduction Task Force, set up by DECC and led by RenewableUK Chairman Andrew Jamieson, published a report in June showing that the cost of offshore will fall below £100/MWh by 2020 through economies of scale and sharing financial risk

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