There is so much confusion about electricity prices and renewable energy.

For me personally, with some knowledge of the sector, there seems to be competing versions of the truth, making it difficult to get a clear picture.

What is certain is that UK electricity costs are among the highest in the developed world. This presents a challenge for industry, as it means there is a significant built in cost before anyone decides to produce anything. If you listen to one side, they will blame the price of wholesale gas. They argue that as gas is the “peaking” supply with the gas power stations switched on last, it drives the higher price of electricity.

This always strikes be as an odd argument and I struggle to reconcile this with the fact that other countries use the same marginal pricing system (but with perhaps proportionally less gas), yet their electricity costs remain significantly lower.

The other side of the debate argues that wholesale gas accounts for only around 40% of the price, with the balance attributed to network costs, green levies, social policy costs, among other factors.

The fact that we can’t seem to arrive at one “truth” is actually quite disturbing, as it suggests that one side or another is driven by ideological factors. 

At the moment, what makes sense to me is that the cost of renewables is significantly higher than the general population realise. This is on the very simple analysis that before renewables, electricity costs were much cheaper than they are now. Additionally, it seems obvious that the intermittent nature of renewables and their low energy density (the area of land needed to produce a given MW), must mean increased network and distribution costs. On top of this, the nature of energy contracts and subsidies, including the “contracts for difference” arrangements, more often than not, results in a contractual strike price that requires additional funding through consumer bills.

Much is made of green energy's sustainability, but projects must also be worth building and economically sustainable for the companies involved. Even now, with record subsidies in the UK, it does seem that these large-scale projects may not be financially viable, as the cancellation of the final stage of the Hornsea project seems to suggest in the article below.

What's needed is an open conversation as to what the actual position is for renewable energy rather than it being driven by ideological factors. Independent experts are needed, now more than ever, to explain in simple terms what the cost drivers are and the practical effects of the UK reaching Net Zero at any given point.

https://bmmagazine.co.uk/in-business/orsted-shelves-major-uk-offshore-windfarm-project-in-blow-to-green-energy-goals/