Good morning Community,
I met Sir Helm in the past recording a podcast for one of the communities i managed in the past. Here's his latest podcast where he deep dives into why electricty costs are so high and what is the true cost of renewables.
We all know transition will not be cheap, but what are the right ways forward? What are our options?
Share your insights here.
Some key takeaways from the podcast:
Why Electricity Prices Are So High
- Gas Sets the Price: Even though renewables and nuclear are increasingly part of the energy mix, the wholesale electricity price is still driven by the marginal cost of gas during peak times
- Structural Pricing Flaws: The current market design doesn't reflect the falling costs of renewables. Instead, it allows expensive gas to dominate pricing, leading to inflated bills
- Policy Failures: Despite government intentions, UK energy prices remain among the highest globally, harming both consumers and industries like AI and data centres
Why Renewables Are Not Cheap (Systemically)
- Misleading Cost Comparisons: Claims that renewables are "nine times cheaper" ignore the full system costs-like intermittency, backup power, and grid infrastructure
- Subsidy Legacy: Past subsidies and policy costs are still being paid for, inflating current bills even though the actual generation costs of renewables have dropped
- Intermittency Challenge: Fast-tracking renewables without adequate firm power leads to reliability issues and higher overall system costs
Suggested Reforms
- Capacity-Based Pricing: Helm advocates for a model where each energy source is paid based on its actual cost plus a fair return, rather than market-driven marginal pricing
- Strategic Gas Reserve: To manage peak demand and price volatility, a reserve system could act as insurance rather than a constant price-setter
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Aya Pariy
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