Electricity rebate

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After all, it generally costs the producers no more to produce electricity when there is high demand than when there is low demand
My understanding is that the additional generation required to cover peak demand is much more expensive to run per KWh and so costs for power from them is much higher

Its generating capacity that is not needed all the time so it is not running making money 24/7, it may only run for a few hours in a day. The costs of the physical machinery and maintaining constant generating readiness is recovered on such short runtimes by charging more for the energy they produce.
 
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My understanding is that the additional generation required to cover peak demand is much more expensive to run per KWh and so costs for power from them is much higher .... Its generating capacity that is not needed all the time so it is not running making money 24/7, it may only run for a few hours in a day. The costs of the physical machinery and maintaining constant generating readiness is recovered on such short runtimes by charging more for the energy they produce.
I'm not sure I get that. In fact, are you sure that it's not 'back to front'?

... since there are appreciable essentially 'fixed' overheads of electricity generation, for a given company generating electricity in a given way, would not the cost per kW of generating electricity be greater when they were generating less than their full capacity (e.g. when demand was lower) - and, conversely, that the cost of generation per kW would be lowest when they were generating 'to full capacity' (e.g. when demanded was at it highest)?

...or am I missing something?

Kind Regards, John
 
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Probably that the present price to the customer is not related to the cost of production.
That is clearly true. As I recently wrote, they appear to be hiking their prices (hence profits) at time of peak demand in an attempt to persuade/bully people into shifting their usage to lower-demand times of day - as I said, totally unrelated to any increased cost of production at peak times. However, I was responding to a challenge to that suggestion of mine, namely ..
My understanding is that the additional generation required to cover peak demand is much more expensive to run per KWh and so costs for power from them is much higher
... which as I said, I find hard to believe is true, since (as I wrote) I would expect the opposite - i.e.. that the cost of generation {per kW or kWh} would be at its lowest when the generating capacity was being fully utilised.

Kind Regards, John
 
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That is clearly true. As I recently wrote, they appear to be hiking their prices (hence profits) at time of peak demand in an attempt to persuade/bully people into shifting their usage to lower-demand times of day - as I said, totally unrelated to any increased cost of production at peak times. However, I was responding to a challenge to that suggestion of mine, namely ..

... which as I said, I find hard to believe is true, since (as I wrote) I would expect the opposite - i.e.. that the cost of generation {per kW or kWh} would be at its lowest when the generating capacity was being fully utilised.

Kind Regards, John
No, these are peaker plants that only come online during high demand. They are expensive to run, otherwise they would be used all the time.
 
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Very quick reacting generation to cover sudden peaks comes from hydro (including pumped storage), but theres not much of that. Next fastest on tap is gas fired power stations.

An energy generating company needs to recover the cost of building that gas power station and cover the overheads. If that power station is only called on occasionally to generate power the price they are paid for the power they generate has to be higher to make it economicaly viable for the generating company to keep it available. A power station not generating power is making a monetary loss.

Its not just a matter of turning up the output on already running powerstations, theres complete powerstations being required to start up from cold just to cover the peak generation needs - its power from these thats very expensive, if their energy wasnt priced higher no company would bother running them.

EDIT: beaten to it above.
 
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No, these are peaker plants that only come online during high demand.
That's true, but it rather moves the goalposts, since I was talking about "for a given company generating electricity in a given way,". If demand becomes so high that all producers have exhausted their 'primary' generation capacity then, as you imply, one or more will have to 'fire up' additional generation facilities.
They are expensive to run, otherwise they would be used all the time.
I know far too little to be able to do any sums, but one wonders whether they have achieved the optimum compromise. If 'primary' generation capacity were greater, the undoubtedly somewhat greater cost of that 'primary generation' would presumably be at least partially offset by reduction (or elimination) of the additional costs associated with having to fire up 'additional resources' when primary ones were being used to full capacity?

Kind Regards, John
 
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Its not just a matter of turning up the output on already running powerstations, theres complete powerstations being required to start up from cold just to cover the peak generation needs - its power from these thats very expensive, if their energy wasnt priced higher no company would bother running them.
As I just wrote, I wonder to what extent they have 'got it right'?

If the capacity of the 'primary' generation systems were adequate that it could usually be 'turned up' enough to service high demands then, although that electricity would probably be a bit more expensive (e.g. probably bigger overheads associated with greater capacity, and greater cost/kW if not often used to full capacity), the need to (expensively) 'power up (indeed, to even 'have') additional complete power stations' would presumably be much reduced - so there's a swing and roundabouts situation, and I wonder how correctly balanced it currently actually is?

Kind Regards, John
 
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True, but that only works so long as the companies concerned do not have too many customers
Correct, but in reality it's not a problem, as there are inexplicably millions of customers who are apparently entirely happy with being with providers such as British Gas.
They are all the same ones who have never switched to a different energy supplier and have been on the most expensive tariffs for the last 20 years.
 
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As I just wrote, I wonder to what extent they have 'got it right'?
I'm sure the energy generating companies have some clued up teams of accountants working everything out... Whether or not their solution is the best for the consumer is anyones guess...
 
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If the capacity of the 'primary' generation systems were adequate that it could usually be 'turned up' enough to service high demands then, although that electricity would probably be a bit more expensive (e.g. probably bigger overheads associated with greater capacity, and greater cost/kW if not often used to full capacity), the need to (expensively) 'power up (indeed, to even 'have') additional complete power stations' would presumably be much reduced - so there's a swing and roundabouts situation, and I wonder how correctly balanced it currently actually is?
Someone should send the electricity generators a link to this thread, probably loads of stuff in here they've never even thought of. But seriously, if you could run a gas generator efficiently at a wide enough range of power outputs to follow demand cost-effectively, then that's what would be happening, given the dominance of gas in the generation mix.
 
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Correct, but in reality it's not a problem, as there are inexplicably millions of customers who are apparently entirely happy with being with providers such as British Gas.
I would say that it's a very confused/confusing, and potentially very misleading, mess.

If, overall, X% of electricity production is 'renewable', hence (100-X)% is non-'renewable', then (100-X)% what suppliers (together) pay producers for electricity (hence roughly the same percentage of what consumers pay to suppliers) will be for non-'renewable' electricity production - and that remains the case regardless of who a particular customer's supplier pays for electricity, and regardless of who that supplier pays for electricity

In other words, if a consumer chooses to pay a supplier who only pays 'renewable' producers, it would seem that that actually changes absolutely nothing (at least, nothing I can think of).

If so many consumers chose suppliers who only paid 'green producers' that they were, between them, paying for all the 'green' electricity available, then those suppliers would presumably have to stop accepting further customers, because there would be no more 'green' electricity to be paid for.
They are all the same ones who have never switched to a different energy supplier and have been on the most expensive tariffs for the last 20 years.
They may well be. However, on the other side of the coin, we have to remember that countless people switched to small suppliers who offered very attractive prices by rely on foolish gambles about the future of wholesale prices, and therefore ';went bust' - so that the customers had to be bailed out by other (more expensive) suppliers.

Kind Regards, John
 
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I'm sure the energy generating companies have some clued up teams of accountants working everything out... Whether or not their solution is the best for the consumer is anyones guess...
As you say, I'm sure that the companies (and not just accountants) have been trying hard to find an optimum approach - but, as we've both said, goodness knows whether they have got it (an inevitable compromise) anything like 'optimised'.

Kind Regards, John
 
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..... But seriously, if you could run a gas generator efficiently at a wide enough range of power outputs to follow demand cost-effectively, then that's what would be happening, given the dominance of gas in the generation mix.
Maybe. There are clearly 'swings and roundabouts' to be balanced, but I would not be as confident as you seem to be that we can assume that 'they' have got it right (in terms of the interests of consumers).

Apart from anything else, one has to remember that the UK electricity generation industry is effectively a 'single whole', hence effectively a monopoly - hence with little incentive to improve efficiency or cost-effectiveness or to minimise costs/prices. In essence, if people want energy, they have to pay on the basis of what the producers provide (no matter how inefficiently) - even government 'price caps', as we know them, can't do anything about electricity which is costing more to produce "than it could/should".

The swings and roundabouts can be illustrated by thinking of a domestic analogy. Consider two identical houses, used in identical ways. One has a heating system which is adequate even in the coldest of weathers. The other has a system which is not adequate at the coldest times, so has to be supplemented by firing up some additional different form of heating at those times.

For the first house, the capital cost will probably be greater, and the running costs perhaps also somewhat greater than the 'usual' running costs of the smaller heating system in the other house (because it is not being used at its full capacity). However, the second house has the additional capital outlay of acquiring the 'additional means of heating', and the heating provided by it (maybe something electric, supplementing gas primary heating) may be much more expensive. One therefore has to undertake careful calculations on the basis of a lot of facts and figures' before 'assuming' that the second house's approach is preferable.

Kind Regards, John
 

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