Of interest is that none of the points in the "What could be done to reduce bills?" section increase the the availability of gas. The tax cuts, support packages, price freezes, etc. will result in more money chasing the same amount of energy.
That would have brought ESG numbers down, we wouldn’t want that. This feels like an early 1970s Soviet economic mis-investment story (when they had to import grains from the US even though they had some of the best agricultural land on the planet), curious how it will all end up.
This seems to be a really basic economic point that isn’t in the mainstream dialogue anywhere. Subsidizing demand is simply bartering up the price and hoping the UK can outspend everyone else to get hold of the same finite quantity of gas.
The problem is that other countries are already subsidising their demand. If the UK doesn't follow suit, prices will quickly rise beyond consumers' abilities to pay. But if everyone uses this logic, prices will just keep spiralling out of control with no end.
I guess the UK does have some domestic gas production, so could ban exports of that and institute price controls severe rationing.
Reducing the usage of gas is exactly as effective as magically creating that same amount of gas, but cheaper and more scalable, and puts the money spent in the pocket of someone not selling fossil fuels.
All the thing suggested by this blog do that (insulation, more renewables, efficiency).
They also mention some government things which don't help, but that's not what they are recommending.
For people not familiar: we have an energy 'price cap' which is kind of just a profit cap. The regulator considers wholesale prices when setting it (among other things). It was never intended to shield consumers and businesses from wholesale price movements.
It makes a nice headline during this crisis, so the media is going crazy talking about it. Much of the public is complaining that it keeps going up and up as they don't understand the cap's origin nor intention.
It's annoying that the mass media refuses to publish the actual unit rates and instead obsess about "average bills" (which, among other things, hides the reality of extremely high bills this coming winter)
I find the whole energy sector a complete mystery in the UK. The same electricity comes out the sockets whether you are with British Gas or Octopus. As far as I can tell the wholesale rates are fixed and the amount charged to a customer is capped. It's not a functioning market at all. The only differentiating factors are how little overhead they can introduce in handing customers (with the advent of the internet and smart meters this is obviously low) and how well they do at avoiding loss through people who fail to pay.
Wholesale rates aren't fixed. I think you may be referring to where the government has invested a significant amount into a power station and so agrees a strike price/contract for difference setup for an agreed number of years, which were often woefully unfair to the taxpayer. Though, current prices even start to make Hinkley Point look like a good deal.
The wholesale rates are not in fact fixed, there's a wholesale electricity market. It runs in half hour blocks, there are estimates of what's available to be dispatched, and what use is expected, and the market seeks a price which will be acceptable to enough of the cheapest dispatchable producers to get approximately the desired energy, then that's what everybody is paid for the energy - it's a bit like a Dutch Auction.
As well as the short term energy market, "suppliers" like Octopus also hedge by purchasing contracts to supply electricity far in advance. In fact the bulk of electricity is purchased this way, which makes that half-hour short term market look more volatile than the reality of energy trading. It also means that to be a serious player you need a lot of capital to make your purchases earlier and with better data than your competitors.
The existence of numerous consumer suppliers is, indeed, pointless, it's just Tory orthodoxy which causes these to exist, you obviously don't need the suppliers since they just basically shuffle paperwork. But there really are wholesale prices, and so there really is a wholesale energy market, even if there was a single government consumer supply company, it would be buying energy from the market, at the market price. Unless you want the government to also own all the power generators, and all the other countries we are buying energy from, which I think those countries might not agree to.
I don't think that this issue is getting anywhere near the amount of attention that it needs.
We're rapidly approaching the point at which the only thing that's going to work is rationing.
I'd propose that we have marginal rates like income tax e.g. first X units for a household are 30p/kWh, second X units are 100p/kWh, third X units are 200p/kWh, with the aim of heavily penalising usage above what is necessary for basic needs. The bands need to be set based on analysing how much gas we can physically secure and deals need to be struck at a governmental level.
Basically, wartime footing to keep homes and factories running.
That might not even be enough, but the alternatives are worse; some mix of the following:
- people disengage with the system (e.g. ignore the bills, riot)
- millions of people end up unable to cook food or heat their home
- disposable income _disappears_. not goes down, but does not exist or goes negative for 80%+ of the population
The projections for early next year are that an average home will have to pay 7000 a year for energy, up from around 1000-1500 previously. It's not a matter of cutting back on luxuries, most households literally don't have that, and cutting energy use to 1/5th of their previous is impossible.
For businesses it's even worse, there's no cap, some places are facing 10x increases in energy costs e.g. just stop trading, your business model is unviable until/unless costs come down.
The sad thing is that it doesn't have to be that way. The world is literally pursuing a path of intentional scarcity. I'm all for conservation, but the brutal truth is any vibrant economy depends on access to cheap, affordable energy.
The renewables are apparently not ready yet. They can't produce them fast enough, and they take an inordinate amount of material. Corporations have advanced marketing fables, recieved huge public grants all on the delusion that it is a simple switch. It's not.
I agree with the comment as written, but I think the author means "cut the green crap" and I mean "stop subsidizing fossil fuels and roll out cheap renewables/insulation/etc."
More precisely, the government has cost the people who would've built those privately funded renewable energy projects billions. The way the UK energy market and pretty much every other energy market globally is structured, every provider receives the price of the most expensive energy source needed to satisfy demand, which would be gas generation in the current market. There's no easy way to "fix" the market so that this doesn't happen; unlike gas, renewables have basically no incremental cost to pump out power to the grid when they have capacity, so they submit zero or even negative bids and are entirely funded by the difference between that and the actual market power price.
The same is not true of government-subsidised projects in the UK like offshore wind. Those are guaranteed a fixed price by the government, and receive payments to make up the shortfall or pay back the excess under what's called a "contract for difference". The contracted prices of current offshore wind projects are... well below the current market price of electricity, let's put it that way. (Not every country does things this way. As an article that made it to HN the other day pointed out, Germany guaranteed a minimum and let suppliers keep the excess which was an expensive mistake: https://news.ycombinator.com/item?id=32556113) Offshore wind also fits better into an overall strategy of switching to renewable energy, since it has a much better capacity factor and is actually useful in the winter unlike solar.
The UKs largest solar farm is proposed to be built about 2 miles from my home [0]. Local opposition is almost absolute, I doubt it will be built.
It’s so frustrating, I agree with the criticisms of building them on agricultural land, but we are in a situation where we need that power now. The government should be pushing though emergency measures allowing these projects to be built. But then planning on pushing for further projects to utilise industrial roofs and car parks.
It's ridiculous that we're in this state of affairs. People using the power of the state to restrict what others can do on their own private property because "it's ugly".
There are real reasons to block development, like industrial waste or noise, but this is ridiculous. Even housing NIMBYs can come up with more convincing reasons like pressure on local services or traffic.
This kind of interference with property rights should be impossible. The UK's planning system is unfit for purpose and is far too local. Locality always means that locals will block anything they can due to being change-averse, ignoring reason or morality.
Looking ugly is not a trivial concern. It is one of many pollution sources that devalue quality of life. Whether its particulate emissions, light/noise pollution or just windmills that destroy the scenery of a seascape, its still pollution that has a lasting effect.
The answer is decentralized solar (dont depend on the gov) and Nuclear utility from the state. Its the only way to mantain western (high intensity) living standards and power an all EV world.
Those replacements obviously take a long time though. Corporations have peddled the idea all this would be easy. Goverments complied by mandating closures and driving up the price too soon. None of this is even ready to go.
Nuclear utility from the state like in France, where half the reactors are down which is one of the main reason for soaring electricity prices in Europe?
This proposal does exactly that, targeting the excessive users, people with large houses for example. But leaves people who have lower incomes in a much safer position economically.
It could even be extended so you are only eligible for the lower initial unit most if you have suitably insulated your house, using the government grants that are currently available.
They are - renewables investment is at an all time high. But it takes time to build and bring online and investment in storage hasn’t kept pace with investment in generation.
Thats coz when we max out renewables 40% of electricity still comes from gas. Theres literally zero point in storage until renewable generation starts edging towards 100% at least sometimes.
Investment has started though - there's coire glas, which is taking about 5 years to build. 5 more of them and we could go 99% renewable on solar and wind alone.
A substantial proportion of renewable capacity is already lost to curtailment in the UK, and supposedly this could be reduced by storage. This happens well before renewable generation hits 100% even some of the time for various reasons (transmission capacity bottlenecks, the need for a certain amount of dispatchable power to ensure grid stability, and so on).
Because most of those alternatives are just economic Wunderwaffen. It’s going to be a very bad landing for the common people in the West, not sure if it will also bring systemic change, but something will have to give. I just hope we’re not at the 1932 metaphorical moment.
That is a great analogy. Our technologies will improve, but it is madness to voluntarily depend on future advances that might or might not happen and might or might not be practical. We need Liberty ships (cheap, effective, reliable energy production units, however imperfect), not just sit here doing nothing because we’ll somehow figure out energy storage later, or we’ve read a pop sci article touting a new technology that’s unlikely to ever be practical.
We also need to realise that we need a total effort, not military but similar in scale to what we did during WWII. We need to build now all we can that is low-carbon, because half-arsing it won’t be enough. We also need to reduce consumption as much as possible. Keeping something close to a current western way of life will be hard enough, but things like humongous cars, SUVs and pickup trucks are madness. Even Teslas are very problematic and detrimental overall. So is living in the desert, and mass migrations even within countries need to be planned to avoid utter chaos.
There are renewables and nuclear, the artificial market in the UK fixes the wholesale price for electricity generated by them to the price for electricity generated by gas.
My understanding of the big off shore wind farms is the government funds them at a set strike price of £x per MWh, subsidises anything below and keeps anything above?
Though I understand the reasoning behind your proposal, it has to be noted that it's massively unfair towards lower incomes. Simply because these are the people who either don't have the money to reduce the energy usage of their homes, or are renting and there is little incentive for landlords to make that investment.
Depends on the dictionary you're re using and where you look, in a Dutch dictionary a 'vest' can be a knitted button-down sleeved sweater ('een kort gebreid jasje met mouwen').
E.g. FIRE. It's not unfair that those who retire early don't continue to get a salary.
It's not even unfair (on its own) that those who are irresponsible with credit cards to go on trips, instead of investing in their future (e.g. staying home and learning), later have lower income.
Definitely, here in the Netherlands a law has recently been passed that mandates that all rented houses should have a minimum energy efficiency rating of D. IMO it should have been a C rating, but at least its something.
In Austria D isn't really much. Those are basically uninsulated buildings from the 50's. That's a really low bar and I don't know what building can be worse than D. A garden shed maybe? Making D mandatory by law seems like pointless political posturing. But then again I don't know buildings in the Netherlands.
It's an European standard, so maybe the criteria are different in Australia? My current apartment has an E rating and it has double paned windows everywhere, floor + ceiling insulation and I have neighbours on all side including above and below, meaning not much energy is transferred to outside.
Edit: just noticed I misread Austria as Australia (lol), point still stands though, a D rating is not that bad.
I'm not sure how the Austrian system works or what homes are like there or in the Netherlands, but a lot of older homes in the UK can apparently only reach a D even after all the standard insulation retrofits are done. This is especially a problem in areas of the UK that are poorer already.
>This is a massive market failure that needs to be addressed
The entire real-estate market in the west (both buying and renting) is an intentional failure (but economic success for the owners) designed to be a zero sum game to squeeze newcomers and prop up existing landlords, asset owners, and banking profits on the backs of those trying to enter the market. And then western governments wonder why millennials and younger stopped having kids. Because you priced them out of home ownership, that's why.
Good luck getting the governments to break this vicious cycle and stop making real-estate an investment vehicle designed for huge returns, and good luck getting existing property owners in voting for policies which will lead to a devaluation of their homes.
I feel like if this trend keeps growing, sooner or later, eating the rich will be the only solution.
It's a proposal that is exactly taking people with lower incomes into account.
What, short of abolishing capitalism altogether, would be "fair"?
More money will always be able to buy more than less money. And the comment you're replying to would HEAVILY subsidize people for their needs, while discouraging everyone's wants.
I live in Texas - an energy rich state (ignoring our problems in February 2021) in an energy rich country, and we already have the sort of tiering you describe from our local provider, so I'm surprised that isn't already going on.
ah yes, the landslide referendum staffed by soldiers who shoot you if you write stay in Ukraine on a poll that has options of join Russia or join Russia.
The poll of what were largely ethnic Russians that Kyiv declared illegal to run under any circumstances whose results were corroborated almost exactly one year later by Western pollsters.
The poll where Russian soldiers pointed guns at crimeans in polling stations happened only in people's imaginations.
I, for one, am looking forward to dying of cold this winter on the principle of rejecting a democratic vote in Eastern Europe while we lavish support on such good and free countries as Saudi Arabia that only invade their neighbor in a good way.
If europe is destroyed this winter because of riots or total economy collapse, ukrainians won’t have anyone anymore to back them up. It may be an horrible dilemma but buying russian gaz while still maintaining embargo on anything else may still be the best sustainable solution to fight russia in the long run.
I doubt Russia will be supplying anybody in the West this Winter. Too much “maintenance” to do.
But it makes sense from their point of view. The only reason to export to the West is to swap for real goods and services from the West. Since the West isn’t selling anything to Russia there’s little economic reason for Russia to sell anything to the West.
Russia has its own floating rate currency. It has no need of our promises.
I don’t believe the narrative that russia is doing just fine. A country with the economy the size of Italy can’t survive being cut of all their major commercial partners and sources of income all of the sudden, while at the same time being blacklisted from all international economical institution. It just isn’t possible.
They most likely do all they can to pretend like everything’s ok, hoping the situation will settle before everything explodes.
Russia is very different from Italy, they have local production of almost all goods. I think you're right that a western country that was cut off like Russia would have failed as you predict. That Russia hasn't should tell you that your understanding of their situation is wrong. I think we'll really see that this winter.
Soviet Union existed not long ago and was pretty much self sustaining even without China. With China being the world producer of everything and being friends with Russia they won’t have any problems getting anything they need.
I explained why it isn't their source of income. They have their own currency with a floating exchange rate. Therefore what you think is their 'source of income' isn't. The FX system means that a Russian exporters 'source of income' (that which they use to pay their staff and suppliers) is the expenditure of the Russian importer, or the generosity of the Russian government sector - primarily the Bank of Russia. [0]
In local currency terms it is the Bank of Russia buying the gas, not the EU. That maintains the rouble monetary circulation in Russia, countering the drain to Rouble net savings and taxation.
This comment conveniently ignores the worlds sole superpower? The US will be more or less fine this winter, and likely sees a crisis like this as an awfully cheap way to get rid of one of its only real military competitors.
I think there's room for a lot of possible outcomes worse than zero fuel from Russia and also better than total economic collapse of Europe.
I mean, Europe's got something like 7 times the economy of Russia. And two European countries also have nukes and are on the UN permanent security council. If the sanctions against Russia weren't enough to stop the war, this winter is unlikely to be bad enough to stop Europen support of Ukraine.
Conversely, if Russia finds that it can wield its fuel as a weapon capable of destroying Europe by either riots or total economic collapse, then Europe automatically has an existential threat that only ends when Russia can no longer play that card.
And America will do what serves American interests, not necessarily what serves European interests, and they're not threatened by Russia cutting off its gas exports.
That doesn't mean their interests are the same as mine.
I'm not ukrainian, or russian, whatever the outcome of the conflict won't really affect my country unless we go out of our way to involve ourselves in it.
If staying out of it results in cheaper gas at the pump for me, then that's what we should do.
> The EU sanctions don't include energy
> Russia reduced the amount of gas it delivers to Europe.
There are sanctions preventing Nord Stream 2 pipeline to be used. Sanctions also obstruct maintenance and normal operation of Nord Stream 1 pipeline, which had caused the reduction.
One could argue that Russia is not being too consumer-oriented and is overly pedantic in legal maters, but this is hardly surprising at the current level of relations.
It's too late for this. The world is already fragmented and even in Russian gas were allowed, Russia would start reducing supplies and divert then to Asia and Africa.
Mark my words: this is the end of western hegemony.
Especially since brics is taking off, they are launching their own currency and tons of countries want to join it.
Or this one: we stop pussy footing around, get our fingers dirty in the war and start bombing the shit out of Russia, with the clear promise that we stop the moment they agree to a peace deal that leaves Ukraine with their country, and the west in control of the oil fields. We will continue to maintain them and we will pay Russia for the gas, minus a percentage fee to help rebuild Ukraine, but there will be no more gas blackmail.
Russia can't defeat Ukraine with Nato weapons. Once the gloves are of they can either take the deal with the international coalition now and get all the money for no work, or become even more of a joke and take the deal later anyway.
No nukes need fly, because we are not an existential threat and Russia cannot do much in a conventional war.
> Or this one: we stop pussy footing around, get our fingers dirty in the war and start bombing the shit out of Russia
Don't expect that this will end up being as nice and comfy as bombing other 3rd world countries, which is the only military expertise that NATO had had for decades.
A few hypersonic Kinzhals with tactical nuclear warheads would surely be a refreshing response to NATO's typical "hit-and-run" tactics.
Just as you don't expect an immediate all out nuclear armageddon as a response to your attempts to "bomb shit out of Russia", there won't be an "armageddon" response when Russia retaliates wiping a few crucial military installations from with the face of the Earth.
Nah, going all out with a civilisation-ending scenario would be the last resort, when everything is lost, and every other possible and dislikable option had been exhausted.
Up until then it will be a nice long and bloody escalation. Tactical nukes, chemical and bio-weapons provocations, assassinations, terrorist attacks, mass mobilisation and conscription -- all the fun stuff akin to what had been done to the Arab world, but on a much grander scale and incomparably higher stakes.
I'd doubt even the US would able to sit this one out. Can't imagine their shock from an actual real war, given what kind of tragedies were mere child's play things like 9/11 or Pearl Harbor.
Indeed, and that's where the current strategy comes from: bleed Russia in a slow, humane way. Russia already can't escalate using conventional means, simply because they no longer have the people nor hardware required to do so.
Except of course Ukrainians are paying for it with their lives, sacrificing themselves for the safety of the rest of the world.
Maybe, but the first X units should be 0p/kWh, then the next X units 30p/kWh etc. Everyone gets their basic needs covered and the heavy users pay extra.
Special rates for those that use electricity to power medical devices.
Why not just give low income people a voucher / tax deduction equivalent to basic heating / power needs?
That way you don't subsidize people like me, who honestly don't need it.
Otherwise if nothing else you're incentivizing people into using their freebie electricity instead of gas for heating, if they've run out of freebie gas but not electricity.
Capitalism isn't perfect, but pricing goods according to supply and demand is kinda the thing the market does best, and if you think you'll do better you should think again. Nothing is perfect, but interfering with this part of capitalism is pretty much guaranteed to have unintended consequences.
I don't disagree, but I think it is more complex than a simple tiering system. For example, where I live we have no mains gas, so heating is typically oil. Trying to be environmentally minded I've installed heat pumps to do the hot water and space heating. Add in an electric car as well.
Taking this approach would punish us for trying to move away from direct fossil fuel consumption (I'm aware that much electricity still comes form fossil fuels).
So there is a lot of nuance in the proposal - allowances for electric cars, heat pumps (which the government is actively encouraging), mains gas, etc. Do each of these affect the basic needs?
An alternative that crossed my mind was to change the unit price based on house hold income. Higher income households would pay a higher rate per kWh, which I think would be considered progressive. Can't see the Tories ever going for that though.
We could have been spamming solar and wind all over the place for the last year using required emergency war powers. How many hectares of grouse moor do we have? How many litres of gas have we burnt this summer when we could have been using solar for free instead?
Instead we've been prattling about waiting for a few old people to decide who will be the next PM, both of whom have promised not to expand renewable elecricity production, and thus to increase gas usage.
Your proposal of marginal rates relies on people understanding what a kWh is and being able to measure it themselves. Only about half of houses have smart meters, and when people get a £3k bill at the end of the month they will simply not pay it, which will mean mass moving of people onto pay as you go (push of a button to do that with smart meters).
Better to charge the £2/kWh but give every meter a £3000 lump sum (or £300 a month or whatever).
That said, I'm on a fix at 20p until October 2023, and I'm on oil heating which is currently about 90p/litre or 9p/kWh. Was about to go for a heat pump (literally the only reason I didn't do it was because the company that quoted it couldn't be bothered to phone me back last week), but instead I've just paid what seems a ridiciulous price for oil (90p/litre) and will use the capital to fund (or part-fund) solar+storage.
Why don't we call this what it is: planned, intentional deindustrialization. The elites intend on sending us all back to the Stone Age. Do you think they will be suffering with no energy? Of course not; in fact, they will be the only ones allowed to use it.
That would benefit me, because I outsource much of my energy use, e.g I almost never bake, I just buy the bread in the store. I also live in an apartment that shares walls with neighbors, so we share heat.
I am also typing this on a macbook air, which has a powersupply smaller than some fast chargers for android phones.
I think the heat and the macbook is fair enough, as I am actually using less energy than others this way, but how would your system account for buying prepared food vs making on your own?
Tomjen makes a compelling intelligent comment epitome of western intelligence in this Russia Ukraine war. All the poor people should just switch to MacBook air and buy baked goods from bakery.
The UK could nationalise its gas production, ban exports, increase production and artificially set low prices, bringing the average unit price way back down.
How long it could sustain this, or whether it would be regarded as state sponsored piracy, is debatable.
But Tory idiots in power. Probably won't address it until after WW3 kicks off.
The real issue is how the environmental cost is a real trade off now. The last few decades Europe has been closing coal mines, banned fracking, encouraged renewables over more secure but damaging sources. With Russian gas this wasn't such a big deal until it is. I think its probably a good thing overall to have the new higher prices as its just reality.
One potential solution is to send troops to Libya, to sort that country out and help it export gas. I used to be horrified at thoughts like that but maybe it makes sense for everyone? Is it just something America does?
IMO this is exactly what we should be doing. It would be a great "excuse" to re-open friendly relations with Iran, even if the Americans wouldn't like it.
Friendly relations with Iran, lol.
A country completely destroyed by US with their regime change and replaced with autocratic mullahs that are far far worse for humanity, intelligence or any civilization.
Russia or Russians don't want to destroy the west unlike Iran mullahs or Saudi royals
Right. If you want to perform a regime change, look at its historical track record in countries like... Libya, the invasion of which was called the worst mistake of his presidency by Obama.
You make it sound like the more Africans you kill, the more warmer Europe gets, which is nonsense. Last time I checked, wars only destroy.
Civilized discourse with warmongers is impossible. If you want regime change in some country thousands of miles away, go do it yourself. I am not going to send myself or my kids to die for your hubris.
No really. There is a civil war already. Helping out a legitimate government is a good thing, if you can find one. Just ignoring it and hoping for the best isn't a great strategy either.
And now that "legitimate government" is collaborating with a foreign invasion, and owes a huge debt to the foreigners who put it in power for the explicit purpose of exploiting the country's natural resources.
Maybe I was wrong and the civil war is over, it probably doesn't need invasion but would benefit from a strong European partner to help develop the country. Libya should be a rich country. Ideally it would develop to the benefit of its citizens and Europeans who are looking for gas suppliers.
This stupidity is how we got into this mess in the first place.
Conservative/fossil fuel interests lied to us about renewables and insulation and pollution because they were getting a cut of the fossil fuel money.
We saw this coming decades ago (scandanavia went heat pump after the oil crisis, US President told people they needed to do the same)
This very article points out that we did it again the last time. Conservatives/fossil fuel interests use every high fossil fuel price event to lie to us and lock in more fossil fuel usage.
I did similar math with similar outcome for northern California. If the grid gets unreasonably expensive, there are alternatives. I installed a bunch of solar panels because it was cheap and easy and effective.
Ugh, diesel, what an awful thought! People running noisy generators and diesel thefts etc (heating gas theft is rife in Ireland, where heating gas is common).
Lex Fridman’s podcast had an ex-CIA agent on it recently and he mentioned how bcs of issues like this in Europe the war in Ukraine has to end by the fall. His words were “NATO needs Russian sanctions lifted”. He implied the war will be over by the fall (in his assessment).
Didn’t listen to the podcast, but that seems right. The world’s oil producers have everyone by the shorthairs, and it will be undeniable in a few month’s time. I think Russia will get away with whatever they please because of this. It’ll be interesting to see what the narrative looks like this time next year.
Russia has been biding their time, occasionally showing that they are willing to turn off the tap.
They clearly want to save the weapon for winter though. When temperatures drop, Russia will sadly have the entirety of Europe by the balls. It is simply unthinkable that the population will be willing to stomach blackouts or not being able to heat their homes.
I don't see a way out but the unfortunate outcome that Ukraine will be sacrificed.
Considering even people here on HN foresaw that exact outcome within days/weeks of the initial invasion, the current situation stinks of some extreme incompetence within NATO.
I genuinely don't understand what was the plan. Maybe they were hoping that Putin will fall before then? That'd be very shortsighted and a fundamental misunderstanding of the regime.
I agree. Maybe they believed the reports that Putin was dying? Maybe they counted on guerrilla fighters forcing Putin to give up?
Maybe they just knew that after building russia up as the "big bad" for the last long while (or maybe that was just the US), it would be political suicide for whichever politician first suggested capitulation. Probably still is political suicide. The prisoners dilemma at its finest.
The profit is going Russia who supplies the majority of Europe's gas. There's nothing to seize since they can turn off the tap and Europe will literally freeze.
Basically, Europe is buying less than half the usual supply of gas at 6x the price right now :(
Norway made three times as much this year from gas sales.
It's a market, and the thing that is causing the price spikes is Russia cutting off their supply.
They'll still profit from the higher prices on the reduced supply, but so will everyone else who sells on the market at the market price. Basically war profiteering.
Economics is a science. If you try to push one way on the market price you will get problems on the other side, this is the same way you can't get past the laws of thermodynamics) . The cost of reducing people's profits (or cost is what we are talking about) will be shortages because people will still be willing to pay for more electricity at a higher price, they just won't be able to find it because it was sold at a lower price.
I explicitly dont want to reduce the price of gas. Because high prices make people use less and switch to alternatives, which is what is required when you are short on something.
But siezing the windfall profits is also basic economics orthodoxy.
> The Nobel prize-winning economist Joseph Stiglitz has called for a windfall profits tax, arguing the idea is a “no-brainer” that has been taken off the table due to the influence of big companies
Not sure what I could buy that will heat my home (waiting times on solar panels are measured in months and wind turbines in years), and cash itself doesn't burn that well.
But I also don't see this as being that big a deal. Even if we had to turn off fuel for 2/3rds of the homes, people will just go to a home that can be heated and stay warm together. We'll survive and probably make new friends doing it even if we'd complain the whole time.
Or people learn to heat themselves up instead of the whole room, which uses less than 10% of the energy. We're an inventive species and in Europe we certainly have the means, we just need the motivation.
CIA favouring invasions of other countries and corporate profits over anything that vaguely smells like socialism and helps ordinary people sounds historically consistent at least.
What does this imply exactly? Europe acquiesces to Russia in totality, thus ending the war? What is Russia's completed goal in their current incursion?
Ukraine split in two : one pro-russia in the east, another pro-west in the west.
Half a loss for the russian that showed the world their military wasn’t as good as they thought. Half a loss for the EU that showed their economical weakness as they couldn’t make a medium country’s economy explode even if they did all they had in their power. And globally a huge win for the US.
Honestly, i hope this serves as a warning for the EU citizen: we have very average people taking decisions in the EU governance.
> Half a loss for the EU that showed their economical weakness as they couldn’t make a medium country’s economy explode even if they did all they had in their power.
That’s the logic we’ve followed. However we rushed like little kids, making the same mistake putin did with ukraine: we thought by putting enough pressure, russia would explode in a few weeks.
It seems obvious now that the people in charge in EU lacked serious strategical skills. We followed our emotions, did a lot of communication, we made ourselves look good, but ultimately we could end up with the worst of all options: ukraine split in two, and an economical disaster for the whole EU.
Only the US will exit from the crisis with a fantastic improvement (like every time europe starts an internal war).
> ukraine split in two, and an economical disaster for the whole EU.
Well no, the worst option was going to happen, Russia takes over Ukraine, then takes over Transnistra/Modova, solidifies its hold over Belarus, then why not take over Eastern Europe again. Splitting Ukraine and having expensive gas and a recession isn't so bad. Of course taking back Crimea is what we should be aiming for.
The uk is one of those strange countries where property prices go up despite rampant inflation (thus reduced budgets), increasing interest rates and increasing energy bills. But i still hope that somehow there will he a blip. Anyway good look! I am looking at mk (post code not necessarily the city), small villages and towns ideally around the new rail. We might even end up as neighbours!
How? There’s a family budget. You subtract increasing costs for food, clothing, public transport, and whats left gets used for a mortgage. So unless pay goes up you cant afford a mortgage. Traditionally the government and banks would make loans cheaper. But the interest rate is also going up. The british government is talking about multi generational loans but to me thats just crazy. We really need to solve it by making housing more affordable.
Real estate is an asset. The price of assets increases when there's inflation. I'm not so sure you pay for things in the order listed. You probably can do without new clothes longer than you can go without shelter.
Honestly the conservatives are such an awful party in their current form.
Short sighted cost cutting and focussing on ideological issues like Brexit while doling out lucrative contracts to connected parties during a pandemic.
So horrible that in the current leadership contest there’s not much either candidate can say that’s positive about their last 12 years in government.
Isn't it strange how both sides of the political divide have no problem assuming the ineptitudes of their opponents derive from bad motives? By definition Liz Truss's "tax cuts will grow the economy" plan is the definition of long term thinking. You might disagree or think it's wrong but it's not short termism.
We need long term solutions for sure. But right now we need very urgently a short term solution to bridge over the majority of the population who won't be able to heat and power their homes this winter.
What we need is clear and efficient crisis response and all the Tory government has shown so far is a colossal ineptitude and blatant corruption coupled with near sociopathic disregard for the wellbeing of most people.
Yep - they’ll say anything to get in and once they do they’ll do whatever they feel like. Promises are cheap, more so those without details.
She could get herself elected, deliver a tax cut worth £1 in absolute terms to every tax payer and claim she delivered under difficult circumstances.
Rishi at least isn’t lying about the challenges but honesty doesn’t work so well during elections as he’s sadly learning. But crocodile tears from me for his plight.
Tax cuts are needed - not least because the taxation burden is the heaviest it’s been in decades. But low taxes won’t solve the energy crisis we have right now - she’s going with the right solution to the wrong problem.
How do I know this? Well the majority of the population pay less than £7k in taxes per annum. And that’s where energy is expected to be within a year. So even if all those people were paying no tax at all (and this is an extreme and unrealistic scenario that’s not viable), it wouldn’t offset the cost of household bills.
Not to mention that businesses aren’t protected by the caps so the cost of everything else will go up
10% to 20% only in europe. However, because of the super bizarre pricing mechanism of the electricity market in Europe, the market price is automatically set to the most expensive one in cases of spikes (aka: the ones producing electricity out of gaz).
This was certainly created with good intentions, but the result today is that even in countries with nuclear-dominated electricity (such as france), electricity prices will soar tremendously.
I must admit, i’m super curious to understand why nobody has pushed forward the idea of breaking down that pricing mechanism. My sincere hope is that there’s a good technical reason i’m not aware of.
If they asked an economist, they'd say that the system is fine (you still don't want people using lots of gas and electricity made from gas when in a gas crisis) and you should just transfer the money to the people.
Right wing governments really don't like that idea. See their reaction to COVID, they really heavily depend on the idea that the people with all the money 'earned it'.
Pretty sure the pricing mechanism was cooked up by economists to encourage investment into renewables who will be making stonking profits right now.
Unlike gas plants...
Yes, lots of people seem really sure about a lot things they are wrong about.
It's always the renewables isnt it. They kill birds and give you ear cancer and don't even really work. Not like those superb fossil fuels that have no drawbacks at all.
Who wants to listen to experts when you can just create a crisis by ignoring them and then blame it on the experts you didn't listen to.
> The historic methodology for economic dispatch was developed to manage fossil fuel burning power plants, relying on calculations involving the input/output characteristics of power stations.
The difference, of course, is that electricity is a commodity: every unit of electricity is essentally the same as every other unit, it's not really practical or useful to distinguish between them (they literally use the same wires), and buyers' need is satisfied by any of them. You'd be pissed off if you ordered caviar and got a scotch egg instead, but so long as the lights come on you don't think about where that particular electricity comes from. Other commodities apparently work in exactly the same way where the price is set by the highest seller, including bulk foods like wheat and rice. There's not really any obvious way to change it either; if there's someone willing to pay the higher price everyone obviously wants to sell to that buyer.
I like the system, but it doesn't stop it being accounting fiction. We made these rules up to ensure fair prices. We can rewrite the rules if we want.
Which seems relevant when people are talking about society collapsing and people freezing to death. And some people have strong financial incentives to not fix it.
I wonder how many consumers would be ready to have remote-relays next to their power meters. Let's say they buy wind energy. When there is no supply from wind or there is some problem they would not get power anymore. That would be workable model.
> market price is automatically set to the most expensive one
I think you need to read your economics text books again. Yes marginal costs can impact the marginal supply of electricity, but the price is set by basic supply and demand. In a shortage if there isn't any gas, gas powered stations are off, if isn't enough electricity to go around the prices goes up until people stop buying it.
i double checked before posting, and what you're saying doesn't reflect what i've read regarding electricity market.
FWIU, once the gaz station are active ( because of a surge in demand) the price is set to theirs for the whole electricity produced, not just the one they produce.
This threshold effect is very peculiar and is very different from other markets (i assume oil extraction cost are lot different depending on where they take place, but for electricity in our current situation the cost difference are so wide that it sure makes the whole system look a bit absurd)
No this is the same in every commodity market. Say a bag of apples is normally a pound. If lots of orchards get destroyed and the price goes up to £3 because lots of people have to buy apples, the price at all markets will be the higher price. But incremental supplier is important by increasing supply at the higher price. Eg if it costs £1 to ship a bag of apples from Italy (and it costs £1 there), then the new price will be more like £2 as a new supplier can bring more apples.
Right now there are new incremental suppliers waiting to deliver electricity so demand destruction is the only thing to stop the price going to infinity.
well, i don't know where you live, but apples prices are widely different in supermarket depending on where they come from... And the difference comes in great part from the cost it took to produce them (labor, regulations, transportation, etc).
I think there must be some kind of maximum gap between the cheapest and the most expensive price in order for the market to work. Especially in something as essential as energy.
The decision to combine all kinds of electricity under a single market is arbitrary. it was of course made for convenience for the consumer, i suppose. I'm clearly not an expert, so i can't pinpoint exactly what makes the current situation weird. Maybe it's the fact that energy production is a strategical matter often determined at a country level, and so having all the benefit of the "best" strategy lost to the customer, simply because other countries didn't make the correct choice, seem a bit wrong.
Or maybe it's the fact that we chose to not make a distinction between local price and foreign price ? ie: have a local price for when the electricity produced is consumed in the same country ?
What I find deeply disturbing about this is how fast the 'cuz of Ukraine war' narrative has taken hold in the UK, even among intelligent colleagues of mine.
The UKs (complete lack of) leadership is going to send the country into an economic meltdown larger than any in living memory unless something seriously drastic is done by January.
I am already on rice and beans or porridge for every meal. If nothing is done I will literally be reading by candlelight under 5 layers this winter.
All countries in Europe are experiencing the same thing. This is not an issue unique to the UK so blaming it on your leadership is giving them too much credit.
That other countries are also in trouble doesn't excuse the UK government one bit.
I don't live in other countries in Europe. It's sad that they also have issues. However, I primarily don't want people in the UK to freeze to death because of an incompetent government.
> All countries in Europe are experiencing the same thing.
That's not quite true. Only a few countries are facing a 100% (or 'more') wipe-out of disposable income for the majority of the population.
The UK is only really affected by Russian gas in it's impact on the global market. We can do fine without. Yet we are among the worst affected in terms of billing consumers.
Other governments are doing more in terms of alleviating household spending, policy change and enforcing windfall taxes.
Now's the time where there should be a war time effort to build renewable energy in this country (and in Europe) but the government sits around and does nothing. The incoming prime minister even suggests scrapping the green levy on energy bills, and is attacking solar panels suggesting that we shouldn't build them and instead use the land to farm food.
There should be a scrapping of planning permission for the building of small solar farms and small wind turbines. They should be approving new wind farms at record rates. Instead it takes them years and years to approve this shit, and the NIMBYs get away with blocking it.
2 more years of this by the way. The state of this country...
The use of perfectly good farmland for solar panels is wasteful. Have you not heard of the current Netherlands protests about the same, which is likely to cause food shortages in the years to come?
I'd rather instead nuclear power plants since they're a fraction of the size compared to solar, or solar panels on top of existing buildings, or more wind turbines since they're more space-efficient and can alternatively be placed offshore.
Nick Clegg has to feel pretty stupid right now - here he is back in 2010 (when he was part of a coalition government) opposing investment in Nuclear Power since it wouldn't be online until the unimaginably distant year of 2022: https://twitter.com/mlanetrain/status/1556381583585804291
I mean that's what climate activists have been saying for decades as well and continue to say today. Last I checked, we're not supposed to be carbon neutral until 2050 anyhow, and my money isn't on us making that goal in the first place so imo we should take any gains we can get, but apparently it's hard to do the sensible thing without being forced into it
Would be a good start to change how electricity prices are calculated in Europe. The whole system is broken. The price is set by the highest costing source. In this case gas plants. Nuclear plants that are paid off are producing near free energy but it’s sold at the same price like gas. Wind and solar are also sold at the same price like gas. Even if only 10 % comes from gas plants (just an example) it all costs the same. It’s insane.
And cap the EU CO2 emission trading system. Speculators are pushing up those prices making everything worse.
Basically to enable recouping investments in primarily wind/solar since they have no real ongoing input costs. The article explains it well, but doesn't paint a good picture until those future storage technologies are here.
Renewables bid low, because that accurately reflects their costs, which the bidding system is design to reveal, like an auction.
The only problem is that gas is scarce and really expensive. And people seem allergic to any solution which isn't to subsidize the cost of gas, driving up demand.
It is designed to extract credible bids from energy suppliers and minimize costs.
The wider range of prices is the new thing, but the cheaper sources getting paid at the marginal price was always the intention. It stops people inflating their bid, which renewables could do if they wanted to queue jump, they'd just be risking that they are the most expensive renewable and they don't get picked, and get paid zero.
It incentives the lowest cost producers (as long as it's regulated properly, see the Australian experience with gas cartels abusing the system).
The price cap should be on the energy producers (wholesale) as well as the retailers.
This is just naked profiteering at the energy producer stage for those that aren't using natural gas as their sole energy source.
It isn't costing any more to produce electricity from nuclear, coal, hydro and renewable sources and yet these are being priced at the same rate as gas [0].
So, for example, British Gas (BG) and EDF are profiteering massively since they use no, or very little, natural gas.
All energy companies in the UK are required to publish their energy source mix. Here for example are the six largest producers[0]. There are many more smaller producers and associated retail suppliers that use them and many are focused on 'green' sources:
So these six represent by far the majority. In fact adding up these market shares comes to 108.86%! That is because these companies supply both electricity and gas, sometimes separately, so one customer may get electricity from supplier A and natural gas from supplier B. That customer would be counted twice.
(a) British Gas is a trading name of Centrica which was formed when the original British Gas plc was split in a de-merger in 1997.
Renewables and natural gas are two ways of producing the same product - electricity (let's ignore heating/cooking with gas for a second). The supply of energy is cut, demand remains the same, prices rise - this shouldn't be a surprise to anyone.
Prices aren't determined by costs and never have been. Prices are only determined by supply and demand. Not saying it's right, but you're framing this as some kind of unexpected phenomenon when this is obviously how things work.
More regulation is needed to stop people dying in the cold (obviously) but let's not forget why price signals are useful: the possibility for naked profiteering should act as a huge incentive for renewable generators to invest! But in reality, the UK government is going to start cracking down on wind and solar, which is insane. Residents of areas with planned renewable projects also have a habit of blocking them for inane reasons.
If owning a wind farm is a license to print money, we should LET PEOPLE BUILD THEM!
But in this case "... Prices aren't determined by costs and never have been. Prices are only determined by supply and demand. ..." is patently incorrect!
OFGEM (Office of Gas and Electricity Markets) [0] imposes retail price caps based on what it considers 'fair' for the retailers, and this came about specifically because retailers were charging standard-variable-rate and pay-by-meter customers excessively as well as having far too many 'offers' that confused customers.
There's nothing to stop the government amending the legislation with a 1-clause Bill that gives OFGEM the power to impose a cap on the energy producers.
I agree about building wind farms. I'm on a farm where a neighbour wanted to install a single turbine for local generation but it was refused - due to NIMBYs in villages 2 miles away complained it would "spoil their view" despite the fact most of them are out at work all day and probably only see that view for 2 minutes a day, if that!
Yeah, you're right that prices are also affected by regulation.
I should've been more precise - the price the suppliers want to charge is only set by supply and demand. They'll charge whatever the market can bear. If the cap is lower than that, they'll charge the cap. That's an inescapable feature of markets.
If Ofgem caps the prices for producers, the reaction of the producers will obviously be to limit production. They'd prefer to produce when profits are high. The next step would be for the government to mandate production, and this is another stopgap measure on the way to admitting energy markets don't work when one of the largest global energy producers are actively fighting an economic war against us.
My point is just that we shouldn't be at all surprised when markets don't work when one of the largest actors is behaving in an economically irrational way. We shouldn't be surprised when countries will abolish any kind of energy market and set supply and demand centrally by controlling producers and rationing.
Merit order prices for electricity are set by the price of the most expensive source, ehich is currently gas.
There's good reasons for this in normal times. But at the moment various non-gas suppliers are getting windfall profits because of random world events.
Generally you dont want to micromanage things because it makes businesses nervous, but if Margaret Thatcher can do windfall taxes, so can the next PM.
At the very least we should stop subsidizing the fossil fuels.
I’m thinking that turning off my smart meter and manually supplying meter readings is a good plan. In the month(s) before the prices are due to increase, give a higher reading so those units are charged at the lower price.
It won’t help with the standing charge though, which for me is typically the majority of the bill.
Britain made its choices in the last decade with Brexit and voting for Boris. If they had voted for Cornyn and Labour then they would have been on a path of massive investment in renewables and this perfect storm would easily be weathered.
While I believe that is true, I think you'll have a tough time convincing the public at large of it. I've honestly seen people saying "imagine how much worse it would have been under Corbyn..." or somehow deciding that he was to blame for all of this ("if he wasn't leader of Labour they might have won in 2019..." etc).
In the UK fuel poverty is defined as any household that spends more than 10% of their take home on energy.
This means that within about a year March 2022 to April 2023 the line will shifted for a single earner earning below minimum wage to a single earner in the 97th-98th+ percentiles.
If the cap reaches £7K a single earner household on £140,000 with a 5% pension contributions and a student loan (England and Wales) would be considered in fuel poverty.
Excluding pension contributions and students loans drops the required figure to be in fuel poverty to anyone who’s earning £110,000 or less.
The median disposable (take home) household income in the UK is £31,400 with the October price cap of £3500 more than 50% of households would be in fuel poverty already.
In January and April this will likely jump to 99% of households unless drastic measures will be taken.
237 comments
[ 2.2 ms ] story [ 298 ms ] threadIt's been argued for years that it should happen as a short term fix for energy security, but didn't. And now we are here.
Sad, but unsurprising.
But we are paying market rates for it, which puts lots of profits in the hands of fossil fuel companies that came out of normal people's pockets.
Returning it to them is the economically efficient answer.
We have a Gas crisis - like the Oil crisis of the 1970s.
To get more gas we’d have to outbid other nations, and to do that we’d need to strengthen Sterling.
Which we could do by reducing other imports - particularly Chinese ones (leveraging their dirty peg to the dollar).
All we can do is reduce demand for gas or move the problem to some other nation via the floating exchange rate.
There are no good solutions for this winter.
I guess the UK does have some domestic gas production, so could ban exports of that and institute price controls severe rationing.
All the thing suggested by this blog do that (insulation, more renewables, efficiency).
They also mention some government things which don't help, but that's not what they are recommending.
It makes a nice headline during this crisis, so the media is going crazy talking about it. Much of the public is complaining that it keeps going up and up as they don't understand the cap's origin nor intention.
It's annoying that the mass media refuses to publish the actual unit rates and instead obsess about "average bills" (which, among other things, hides the reality of extremely high bills this coming winter)
As well as the short term energy market, "suppliers" like Octopus also hedge by purchasing contracts to supply electricity far in advance. In fact the bulk of electricity is purchased this way, which makes that half-hour short term market look more volatile than the reality of energy trading. It also means that to be a serious player you need a lot of capital to make your purchases earlier and with better data than your competitors.
The existence of numerous consumer suppliers is, indeed, pointless, it's just Tory orthodoxy which causes these to exist, you obviously don't need the suppliers since they just basically shuffle paperwork. But there really are wholesale prices, and so there really is a wholesale energy market, even if there was a single government consumer supply company, it would be buying energy from the market, at the market price. Unless you want the government to also own all the power generators, and all the other countries we are buying energy from, which I think those countries might not agree to.
We're rapidly approaching the point at which the only thing that's going to work is rationing.
I'd propose that we have marginal rates like income tax e.g. first X units for a household are 30p/kWh, second X units are 100p/kWh, third X units are 200p/kWh, with the aim of heavily penalising usage above what is necessary for basic needs. The bands need to be set based on analysing how much gas we can physically secure and deals need to be struck at a governmental level.
Basically, wartime footing to keep homes and factories running.
That might not even be enough, but the alternatives are worse; some mix of the following:
- people disengage with the system (e.g. ignore the bills, riot)
- millions of people end up unable to cook food or heat their home
- disposable income _disappears_. not goes down, but does not exist or goes negative for 80%+ of the population
The projections for early next year are that an average home will have to pay 7000 a year for energy, up from around 1000-1500 previously. It's not a matter of cutting back on luxuries, most households literally don't have that, and cutting energy use to 1/5th of their previous is impossible.
For businesses it's even worse, there's no cap, some places are facing 10x increases in energy costs e.g. just stop trading, your business model is unviable until/unless costs come down.
The UK government has cost us billions by denying permission for privately funded renewable energy projects simply on the basis that they look ugly!
https://www.carbonbrief.org/analysis-cutting-the-green-crap-...
https://www.theguardian.com/environment/2022/aug/25/solar-fa...
I am saying that it's the opposite, our complacency in switching to renewables has caused this situation
The issue I have with that article is that it doesn't say how many were accepted.
It could just be that overall there were more applications to build, with rejections rising proportionately.
The same is not true of government-subsidised projects in the UK like offshore wind. Those are guaranteed a fixed price by the government, and receive payments to make up the shortfall or pay back the excess under what's called a "contract for difference". The contracted prices of current offshore wind projects are... well below the current market price of electricity, let's put it that way. (Not every country does things this way. As an article that made it to HN the other day pointed out, Germany guaranteed a minimum and let suppliers keep the excess which was an expensive mistake: https://news.ycombinator.com/item?id=32556113) Offshore wind also fits better into an overall strategy of switching to renewable energy, since it has a much better capacity factor and is actually useful in the winter unlike solar.
It’s so frustrating, I agree with the criticisms of building them on agricultural land, but we are in a situation where we need that power now. The government should be pushing though emergency measures allowing these projects to be built. But then planning on pushing for further projects to utilise industrial roofs and car parks.
0: https://www.mallardpasssolar.co.uk/
There are real reasons to block development, like industrial waste or noise, but this is ridiculous. Even housing NIMBYs can come up with more convincing reasons like pressure on local services or traffic.
This kind of interference with property rights should be impossible. The UK's planning system is unfit for purpose and is far too local. Locality always means that locals will block anything they can due to being change-averse, ignoring reason or morality.
Also, England rejected plan for tidal lagoon power plant in Wales https://en.wikipedia.org/wiki/Tidal_Lagoon_Swansea_Bay
So important that it's worth it for thousands of pensioners and poor people to freeze to death this winter?
It could even be extended so you are only eligible for the lower initial unit most if you have suitably insulated your house, using the government grants that are currently available.
Investment has started though - there's coire glas, which is taking about 5 years to build. 5 more of them and we could go 99% renewable on solar and wind alone.
That is a great analogy. Our technologies will improve, but it is madness to voluntarily depend on future advances that might or might not happen and might or might not be practical. We need Liberty ships (cheap, effective, reliable energy production units, however imperfect), not just sit here doing nothing because we’ll somehow figure out energy storage later, or we’ve read a pop sci article touting a new technology that’s unlikely to ever be practical.
We also need to realise that we need a total effort, not military but similar in scale to what we did during WWII. We need to build now all we can that is low-carbon, because half-arsing it won’t be enough. We also need to reduce consumption as much as possible. Keeping something close to a current western way of life will be hard enough, but things like humongous cars, SUVs and pickup trucks are madness. Even Teslas are very problematic and detrimental overall. So is living in the desert, and mass migrations even within countries need to be planned to avoid utter chaos.
Energy production is just the sharp tip.
So it helps, a bit.
E.g. FIRE. It's not unfair that those who retire early don't continue to get a salary.
It's not even unfair (on its own) that those who are irresponsible with credit cards to go on trips, instead of investing in their future (e.g. staying home and learning), later have lower income.
That's not unfair.
This is a massive market failure that needs to be addressed
Edit: just noticed I misread Austria as Australia (lol), point still stands though, a D rating is not that bad.
The entire real-estate market in the west (both buying and renting) is an intentional failure (but economic success for the owners) designed to be a zero sum game to squeeze newcomers and prop up existing landlords, asset owners, and banking profits on the backs of those trying to enter the market. And then western governments wonder why millennials and younger stopped having kids. Because you priced them out of home ownership, that's why.
Good luck getting the governments to break this vicious cycle and stop making real-estate an investment vehicle designed for huge returns, and good luck getting existing property owners in voting for policies which will lead to a devaluation of their homes.
I feel like if this trend keeps growing, sooner or later, eating the rich will be the only solution.
That would essentially be no change from now.
What, short of abolishing capitalism altogether, would be "fair"?
More money will always be able to buy more than less money. And the comment you're replying to would HEAVILY subsidize people for their needs, while discouraging everyone's wants.
Or, get this, we stop shooting ourselves in the foot, and allow businesses to purchase russian energy again.
So US currently engaged in Syria , Iraq and Libya is also slavery?
Im not sure any of those are akin to slavery. Choosing #2 as a hill we shall die on is particularly galling.
The poll where Russian soldiers pointed guns at crimeans in polling stations happened only in people's imaginations.
I, for one, am looking forward to dying of cold this winter on the principle of rejecting a democratic vote in Eastern Europe while we lavish support on such good and free countries as Saudi Arabia that only invade their neighbor in a good way.
This is the hill the western hegemony dies then let it be. The fbi is tracking all anti-nato comments so just be careful
But it makes sense from their point of view. The only reason to export to the West is to swap for real goods and services from the West. Since the West isn’t selling anything to Russia there’s little economic reason for Russia to sell anything to the West.
Russia has its own floating rate currency. It has no need of our promises.
"Size" of economy is not a real metrics.
You can have a huge-ass economy based on providing high-margin services, but it would be worthless if it is not sustainable.
On the other hand, take Russia that does not really do much of global market high-margin services economy, but has sustainable enough industries.
As for problems getting anything, they cant even source potatoes for something as basic as fries.
I explained why it isn't their source of income. They have their own currency with a floating exchange rate. Therefore what you think is their 'source of income' isn't. The FX system means that a Russian exporters 'source of income' (that which they use to pay their staff and suppliers) is the expenditure of the Russian importer, or the generosity of the Russian government sector - primarily the Bank of Russia. [0]
In local currency terms it is the Bank of Russia buying the gas, not the EU. That maintains the rouble monetary circulation in Russia, countering the drain to Rouble net savings and taxation.
[0]: https://new-wayland.com/blog/how-russian-gas-is-paid-for/
I mean, Europe's got something like 7 times the economy of Russia. And two European countries also have nukes and are on the UN permanent security council. If the sanctions against Russia weren't enough to stop the war, this winter is unlikely to be bad enough to stop Europen support of Ukraine.
Conversely, if Russia finds that it can wield its fuel as a weapon capable of destroying Europe by either riots or total economic collapse, then Europe automatically has an existential threat that only ends when Russia can no longer play that card.
And America will do what serves American interests, not necessarily what serves European interests, and they're not threatened by Russia cutting off its gas exports.
That doesn't mean their interests are the same as mine.
I'm not ukrainian, or russian, whatever the outcome of the conflict won't really affect my country unless we go out of our way to involve ourselves in it.
If staying out of it results in cheaper gas at the pump for me, then that's what we should do.
Come on now...
There are sanctions preventing Nord Stream 2 pipeline to be used. Sanctions also obstruct maintenance and normal operation of Nord Stream 1 pipeline, which had caused the reduction.
One could argue that Russia is not being too consumer-oriented and is overly pedantic in legal maters, but this is hardly surprising at the current level of relations.
Mark my words: this is the end of western hegemony.
Especially since brics is taking off, they are launching their own currency and tons of countries want to join it.
Bojo was a complete bozo to amp up the war.
Elect a clown, expect a circus
That's only true on elastic consumption.
Russia can't defeat Ukraine with Nato weapons. Once the gloves are of they can either take the deal with the international coalition now and get all the money for no work, or become even more of a joke and take the deal later anyway.
No nukes need fly, because we are not an existential threat and Russia cannot do much in a conventional war.
Don't expect that this will end up being as nice and comfy as bombing other 3rd world countries, which is the only military expertise that NATO had had for decades.
A few hypersonic Kinzhals with tactical nuclear warheads would surely be a refreshing response to NATO's typical "hit-and-run" tactics.
That would leave Putin with no power. So no, that is not going to happen.
As for how competent Russia is, we have seen that. They are not.
Says who?
Just as you don't expect an immediate all out nuclear armageddon as a response to your attempts to "bomb shit out of Russia", there won't be an "armageddon" response when Russia retaliates wiping a few crucial military installations from with the face of the Earth.
Nah, going all out with a civilisation-ending scenario would be the last resort, when everything is lost, and every other possible and dislikable option had been exhausted.
Up until then it will be a nice long and bloody escalation. Tactical nukes, chemical and bio-weapons provocations, assassinations, terrorist attacks, mass mobilisation and conscription -- all the fun stuff akin to what had been done to the Arab world, but on a much grander scale and incomparably higher stakes.
I'd doubt even the US would able to sit this one out. Can't imagine their shock from an actual real war, given what kind of tragedies were mere child's play things like 9/11 or Pearl Harbor.
Except of course Ukrainians are paying for it with their lives, sacrificing themselves for the safety of the rest of the world.
You meant that they are conscripted/mobilized and sent for slaughter for the safety of establishment's political interests?
Special rates for those that use electricity to power medical devices.
That way you don't subsidize people like me, who honestly don't need it.
Otherwise if nothing else you're incentivizing people into using their freebie electricity instead of gas for heating, if they've run out of freebie gas but not electricity.
Capitalism isn't perfect, but pricing goods according to supply and demand is kinda the thing the market does best, and if you think you'll do better you should think again. Nothing is perfect, but interfering with this part of capitalism is pretty much guaranteed to have unintended consequences.
Taking this approach would punish us for trying to move away from direct fossil fuel consumption (I'm aware that much electricity still comes form fossil fuels).
So there is a lot of nuance in the proposal - allowances for electric cars, heat pumps (which the government is actively encouraging), mains gas, etc. Do each of these affect the basic needs?
An alternative that crossed my mind was to change the unit price based on house hold income. Higher income households would pay a higher rate per kWh, which I think would be considered progressive. Can't see the Tories ever going for that though.
And the reason for the SC doubling is to compensate energy providers for taking on the customers of energy providers that went bust.
Instead we've been prattling about waiting for a few old people to decide who will be the next PM, both of whom have promised not to expand renewable elecricity production, and thus to increase gas usage.
Your proposal of marginal rates relies on people understanding what a kWh is and being able to measure it themselves. Only about half of houses have smart meters, and when people get a £3k bill at the end of the month they will simply not pay it, which will mean mass moving of people onto pay as you go (push of a button to do that with smart meters).
Better to charge the £2/kWh but give every meter a £3000 lump sum (or £300 a month or whatever).
That said, I'm on a fix at 20p until October 2023, and I'm on oil heating which is currently about 90p/litre or 9p/kWh. Was about to go for a heat pump (literally the only reason I didn't do it was because the company that quoted it couldn't be bothered to phone me back last week), but instead I've just paid what seems a ridiciulous price for oil (90p/litre) and will use the capital to fund (or part-fund) solar+storage.
Believe otherwise at your own peril, folks.
I am also typing this on a macbook air, which has a powersupply smaller than some fast chargers for android phones.
I think the heat and the macbook is fair enough, as I am actually using less energy than others this way, but how would your system account for buying prepared food vs making on your own?
(13) missed calls from Mensa.
How long it could sustain this, or whether it would be regarded as state sponsored piracy, is debatable.
But Tory idiots in power. Probably won't address it until after WW3 kicks off.
One potential solution is to send troops to Libya, to sort that country out and help it export gas. I used to be horrified at thoughts like that but maybe it makes sense for everyone? Is it just something America does?
Russia or Russians don't want to destroy the west unlike Iran mullahs or Saudi royals
No.
You make it sound like the more Africans you kill, the more warmer Europe gets, which is nonsense. Last time I checked, wars only destroy.
Civilized discourse with warmongers is impossible. If you want regime change in some country thousands of miles away, go do it yourself. I am not going to send myself or my kids to die for your hubris.
Will it still be seen as "legitimate"?
Conservative/fossil fuel interests lied to us about renewables and insulation and pollution because they were getting a cut of the fossil fuel money.
We saw this coming decades ago (scandanavia went heat pump after the oil crisis, US President told people they needed to do the same)
This very article points out that we did it again the last time. Conservatives/fossil fuel interests use every high fossil fuel price event to lie to us and lock in more fossil fuel usage.
They clearly want to save the weapon for winter though. When temperatures drop, Russia will sadly have the entirety of Europe by the balls. It is simply unthinkable that the population will be willing to stomach blackouts or not being able to heat their homes.
I don't see a way out but the unfortunate outcome that Ukraine will be sacrificed.
Maybe they just knew that after building russia up as the "big bad" for the last long while (or maybe that was just the US), it would be political suicide for whichever politician first suggested capitulation. Probably still is political suicide. The prisoners dilemma at its finest.
Basically, Europe is buying less than half the usual supply of gas at 6x the price right now :(
It's a market, and the thing that is causing the price spikes is Russia cutting off their supply.
They'll still profit from the higher prices on the reduced supply, but so will everyone else who sells on the market at the market price. Basically war profiteering.
But siezing the windfall profits is also basic economics orthodoxy.
https://theguardian.com/australia-news/2022/jul/19/nobel-pri...
> The Nobel prize-winning economist Joseph Stiglitz has called for a windfall profits tax, arguing the idea is a “no-brainer” that has been taken off the table due to the influence of big companies
But I also don't see this as being that big a deal. Even if we had to turn off fuel for 2/3rds of the homes, people will just go to a home that can be heated and stay warm together. We'll survive and probably make new friends doing it even if we'd complain the whole time.
Or people learn to heat themselves up instead of the whole room, which uses less than 10% of the energy. We're an inventive species and in Europe we certainly have the means, we just need the motivation.
Half a loss for the russian that showed the world their military wasn’t as good as they thought. Half a loss for the EU that showed their economical weakness as they couldn’t make a medium country’s economy explode even if they did all they had in their power. And globally a huge win for the US.
Honestly, i hope this serves as a warning for the EU citizen: we have very average people taking decisions in the EU governance.
This goes also for the US.
It seems obvious now that the people in charge in EU lacked serious strategical skills. We followed our emotions, did a lot of communication, we made ourselves look good, but ultimately we could end up with the worst of all options: ukraine split in two, and an economical disaster for the whole EU.
Only the US will exit from the crisis with a fantastic improvement (like every time europe starts an internal war).
Well no, the worst option was going to happen, Russia takes over Ukraine, then takes over Transnistra/Modova, solidifies its hold over Belarus, then why not take over Eastern Europe again. Splitting Ukraine and having expensive gas and a recession isn't so bad. Of course taking back Crimea is what we should be aiming for.
My fear is the gov will do everything they can to prop it up, like in covid, possibly leading it to rise yet again.
https://www.bbc.com/news/science-environment-62652133
"They say the plant, near the border with Finland, is burning an estimated $10m (£8.4m) worth of gas every day.
Experts say the gas would previously have been exported to Germany."
> Germany's ambassador to the UK told BBC News that Russia was burning the gas because "they couldn't sell it elsewhere".
> Scientists are concerned about the large volumes of carbon dioxide and soot it is creating, which could exacerbate the melting of Arctic ice.
Apparently if Germany burns it to produce energy no carbon dioxide is produced.
So the carbon dioxide doubles.
Short sighted cost cutting and focussing on ideological issues like Brexit while doling out lucrative contracts to connected parties during a pandemic.
So horrible that in the current leadership contest there’s not much either candidate can say that’s positive about their last 12 years in government.
What we need is clear and efficient crisis response and all the Tory government has shown so far is a colossal ineptitude and blatant corruption coupled with near sociopathic disregard for the wellbeing of most people.
It involved no thinking beyond "will it help me be elected prime minister over the next two weeks?"
She could get herself elected, deliver a tax cut worth £1 in absolute terms to every tax payer and claim she delivered under difficult circumstances.
Rishi at least isn’t lying about the challenges but honesty doesn’t work so well during elections as he’s sadly learning. But crocodile tears from me for his plight.
This is true of most top-tier politicians. Are you a child?
How do I know this? Well the majority of the population pay less than £7k in taxes per annum. And that’s where energy is expected to be within a year. So even if all those people were paying no tax at all (and this is an extreme and unrealistic scenario that’s not viable), it wouldn’t offset the cost of household bills.
Not to mention that businesses aren’t protected by the caps so the cost of everything else will go up
This was certainly created with good intentions, but the result today is that even in countries with nuclear-dominated electricity (such as france), electricity prices will soar tremendously.
Imagine every bit of food you ate cost the same as the most expensive. The caviar goes up, and suddenly no one can afford to eat.
Why don't we use less caviar and/or also suspend the stupid rule about food price?
Owners of food businesses getting paid caviar prices for delivering scotch eggs. No, let's wait till some people die, because I'm getting rich.
Right wing governments really don't like that idea. See their reaction to COVID, they really heavily depend on the idea that the people with all the money 'earned it'.
Much easier to blame renewables.
It's always the renewables isnt it. They kill birds and give you ear cancer and don't even really work. Not like those superb fossil fuels that have no drawbacks at all.
Who wants to listen to experts when you can just create a crisis by ignoring them and then blame it on the experts you didn't listen to.
https://en.m.wikipedia.org/wiki/Merit_order
> The historic methodology for economic dispatch was developed to manage fossil fuel burning power plants, relying on calculations involving the input/output characteristics of power stations.
Which seems relevant when people are talking about society collapsing and people freezing to death. And some people have strong financial incentives to not fix it.
I think you need to read your economics text books again. Yes marginal costs can impact the marginal supply of electricity, but the price is set by basic supply and demand. In a shortage if there isn't any gas, gas powered stations are off, if isn't enough electricity to go around the prices goes up until people stop buying it.
FWIU, once the gaz station are active ( because of a surge in demand) the price is set to theirs for the whole electricity produced, not just the one they produce.
This threshold effect is very peculiar and is very different from other markets (i assume oil extraction cost are lot different depending on where they take place, but for electricity in our current situation the cost difference are so wide that it sure makes the whole system look a bit absurd)
Right now there are new incremental suppliers waiting to deliver electricity so demand destruction is the only thing to stop the price going to infinity.
The decision to combine all kinds of electricity under a single market is arbitrary. it was of course made for convenience for the consumer, i suppose. I'm clearly not an expert, so i can't pinpoint exactly what makes the current situation weird. Maybe it's the fact that energy production is a strategical matter often determined at a country level, and so having all the benefit of the "best" strategy lost to the customer, simply because other countries didn't make the correct choice, seem a bit wrong.
Or maybe it's the fact that we chose to not make a distinction between local price and foreign price ? ie: have a local price for when the electricity produced is consumed in the same country ?
The UKs (complete lack of) leadership is going to send the country into an economic meltdown larger than any in living memory unless something seriously drastic is done by January.
I am already on rice and beans or porridge for every meal. If nothing is done I will literally be reading by candlelight under 5 layers this winter.
I don't live in other countries in Europe. It's sad that they also have issues. However, I primarily don't want people in the UK to freeze to death because of an incompetent government.
That's not quite true. Only a few countries are facing a 100% (or 'more') wipe-out of disposable income for the majority of the population.
The UK is only really affected by Russian gas in it's impact on the global market. We can do fine without. Yet we are among the worst affected in terms of billing consumers.
Other governments are doing more in terms of alleviating household spending, policy change and enforcing windfall taxes.
There should be a scrapping of planning permission for the building of small solar farms and small wind turbines. They should be approving new wind farms at record rates. Instead it takes them years and years to approve this shit, and the NIMBYs get away with blocking it.
2 more years of this by the way. The state of this country...
I'd rather instead nuclear power plants since they're a fraction of the size compared to solar, or solar panels on top of existing buildings, or more wind turbines since they're more space-efficient and can alternatively be placed offshore.
And cap the EU CO2 emission trading system. Speculators are pushing up those prices making everything worse.
These prices are at least 50 % policy failure.
Basically to enable recouping investments in primarily wind/solar since they have no real ongoing input costs. The article explains it well, but doesn't paint a good picture until those future storage technologies are here.
Renewables bid low, because that accurately reflects their costs, which the bidding system is design to reveal, like an auction.
The only problem is that gas is scarce and really expensive. And people seem allergic to any solution which isn't to subsidize the cost of gas, driving up demand.
It's designed to repay investment into non fossil fuel power supply that don't have those variable input costs.
The wider range of prices is the new thing, but the cheaper sources getting paid at the marginal price was always the intention. It stops people inflating their bid, which renewables could do if they wanted to queue jump, they'd just be risking that they are the most expensive renewable and they don't get picked, and get paid zero.
It incentives the lowest cost producers (as long as it's regulated properly, see the Australian experience with gas cartels abusing the system).
Its there to make emissions expensive and reduce companies consumption. Its a very good system that looks like its working as intended.
This is just naked profiteering at the energy producer stage for those that aren't using natural gas as their sole energy source.
It isn't costing any more to produce electricity from nuclear, coal, hydro and renewable sources and yet these are being priced at the same rate as gas [0].
So, for example, British Gas (BG) and EDF are profiteering massively since they use no, or very little, natural gas.
All energy companies in the UK are required to publish their energy source mix. Here for example are the six largest producers[0]. There are many more smaller producers and associated retail suppliers that use them and many are focused on 'green' sources:
So these six represent by far the majority. In fact adding up these market shares comes to 108.86%! That is because these companies supply both electricity and gas, sometimes separately, so one customer may get electricity from supplier A and natural gas from supplier B. That customer would be counted twice.(a) British Gas is a trading name of Centrica which was formed when the original British Gas plc was split in a de-merger in 1997.
(b) OVO bought SSE in 2020.
[0] https://www.energycompanynumbers.co.uk/who-are-the-big-six-e...
[1] https://www.edfenergy.com/fuel-mix
[2] https://www.britishgasplus.co.uk/fuel-mix
[3] https://www.eonenergy.com/About-eon/Fuel-Mix
[4] https://npowerbusinesssolutions.com/company/fuel-mix
[5] https://www.scottishpower.co.uk/about-us/performance/fuel-mi...
[6] https://sse.co.uk/v3/assets/blt09078e271abddd45/blt04622618e...
[7] https://www.theenergyshop.com/energy-suppliers
Prices aren't determined by costs and never have been. Prices are only determined by supply and demand. Not saying it's right, but you're framing this as some kind of unexpected phenomenon when this is obviously how things work.
More regulation is needed to stop people dying in the cold (obviously) but let's not forget why price signals are useful: the possibility for naked profiteering should act as a huge incentive for renewable generators to invest! But in reality, the UK government is going to start cracking down on wind and solar, which is insane. Residents of areas with planned renewable projects also have a habit of blocking them for inane reasons.
If owning a wind farm is a license to print money, we should LET PEOPLE BUILD THEM!
OFGEM (Office of Gas and Electricity Markets) [0] imposes retail price caps based on what it considers 'fair' for the retailers, and this came about specifically because retailers were charging standard-variable-rate and pay-by-meter customers excessively as well as having far too many 'offers' that confused customers.
There's nothing to stop the government amending the legislation with a 1-clause Bill that gives OFGEM the power to impose a cap on the energy producers.
I agree about building wind farms. I'm on a farm where a neighbour wanted to install a single turbine for local generation but it was refused - due to NIMBYs in villages 2 miles away complained it would "spoil their view" despite the fact most of them are out at work all day and probably only see that view for 2 minutes a day, if that!
[0] https://www.ofgem.gov.uk/about-us/our-role-and-responsibilit...
I should've been more precise - the price the suppliers want to charge is only set by supply and demand. They'll charge whatever the market can bear. If the cap is lower than that, they'll charge the cap. That's an inescapable feature of markets.
If Ofgem caps the prices for producers, the reaction of the producers will obviously be to limit production. They'd prefer to produce when profits are high. The next step would be for the government to mandate production, and this is another stopgap measure on the way to admitting energy markets don't work when one of the largest global energy producers are actively fighting an economic war against us.
My point is just that we shouldn't be at all surprised when markets don't work when one of the largest actors is behaving in an economically irrational way. We shouldn't be surprised when countries will abolish any kind of energy market and set supply and demand centrally by controlling producers and rationing.
There's good reasons for this in normal times. But at the moment various non-gas suppliers are getting windfall profits because of random world events.
Generally you dont want to micromanage things because it makes businesses nervous, but if Margaret Thatcher can do windfall taxes, so can the next PM.
At the very least we should stop subsidizing the fossil fuels.
Source?
Those statements hopefully amount to nothing, but they are extremely worrying.
fake austerity brought about by the top 1% taking everything for themselves. same old bs.
It won’t help with the standing charge though, which for me is typically the majority of the bill.
Be careful who you vote for.
This means that within about a year March 2022 to April 2023 the line will shifted for a single earner earning below minimum wage to a single earner in the 97th-98th+ percentiles.
If the cap reaches £7K a single earner household on £140,000 with a 5% pension contributions and a student loan (England and Wales) would be considered in fuel poverty.
Excluding pension contributions and students loans drops the required figure to be in fuel poverty to anyone who’s earning £110,000 or less.
The median disposable (take home) household income in the UK is £31,400 with the October price cap of £3500 more than 50% of households would be in fuel poverty already.
In January and April this will likely jump to 99% of households unless drastic measures will be taken.
Day ahead electricity prices for EU - https://news.ycombinator.com/item?id=32618438 - Aug 2022 (160 comments)