A switch from outdated wholesale pricing deals will require a government that can face down vested interests
Welcome news: a consensus is emerging around one way to attack energy costs – stop paying sky-high prices for electricity that is generated in the UK by firms whose costs are unaffected by soaring gas prices. We’re talking about nuclear power plants, windfarms, solar projects and biomass facilities, some of which are making fortunes thanks to the UK’s outdated wholesale energy pricing system.
The basic problem, revealed starkly by the crisis, is that electricity in the UK is tied to global gas prices. When the gas price spikes, as now, it has perverse consequences: a nuclear power station is paid as if its input costs had just risen fivefold, when they plainly haven’t. This “clearing price” setup was designed for another age – not one where nuclear and renewables together produce about 60% of electricity in the UK.
