I'm unconvinced. If CfD were to guarantee the CfD price received by renewables builders, then at about 50% renewable supply, consumers should have ended up paying **about** 50% gas-defined high wholesale price-as-cleared mixed with **about** 50% of the average CfD price received by renewables, with the increasing renewable fraction over the past five years tending to depress wholesale prices toward the volume-weighted-average CfD price. Instead everyones' bills went sky-high in 2022 and stayed up. Something is wrong if the present market arrangements don't pass through the considerable renewable fraction at average-CfD price instead of at top-gas-generated price. This month we ought to have had a high enough renewable fraction to see prices on about 20 of the past 30 days in the low teens of pennies per kWh, after markup from average-CfD price.
How do present prices compare to what we (well I) might expect ?
"The market in 2019 has seen the wholesale cost of electricity fall by 25% year-on-year from 2018, dropping from £57.44/MWh on average to £42.86/MWh."
Now ok, lets base an estimate from seven years ago instead of from the lower price of six years ago. Target inflation according to treasury has been 2% every year, so that should inflate (optimisticly) from £57.44/MWh to £66.49/MWh. Renewable builders might have expected a CfD price consistent with average market prices (before Ukraine), and those had been enough to get projects financed and built. Suppose that got an average-CfD price of £66.49/MWh whenever there are renewables, without markup to top price, mixed with the sort of gas-defined wholesale price which we presently see. There are a lot of unfounded presumptions in there, which finance people got paid to estimate properly, and they'd have got different answers to me reckoning that an average CfD over the past five years ought to have offered £66.49/MWh. Insert better figures here if you have them. The higher the renewable fraction becomes, the more often the "wholesale costs" component of bills could have (and didn't, thanks to DENZ) go down to about 6.7p/kWh. The usual markup applied to wholesale electricity by biller desks ("suppliers") is x2.1, so that would see the renewable part of household retail bills at 14p/kWh at 2025 prices. That is, the increasing fraction of renewables in our supply ought to have decreased bills by more than we have seen over the recent years, towards 14p/kWh.
I'm not asking government to wave a magic wand and change the movement of money from biller desks ("suppliers") to renewable generators. CfD already written are to be honoured. I'm asking them to keep their greedy fingers off the CfD markup, by which all electricity magicly becomes expensive wholesale electricity to "suppliers" without that payment going to renewables. There must be some reason why most consumers don't get offered 14p/kWh while the sun shines with backstop a gas-defined price when not.
I'm on somebody else's pricing by the half-hour, which has the opposite problem of tracking the incumbant 2025 wholesale price which doesn't reflect what the renewable generators get. In January that went over 99p/kWh on the worst day, so I just didn't buy much electricity then. Today it went to less than 2p/kWh for a couple of hours, which again is wrong because that isn't what gets paid to the volume-weighted average of CfD to generators.
I reckon that the CfD system as designed may have been ok for the first 25% of generation to go renewable, but as presently implemented with biller desks ("suppliers") always paying something else, it is not going to suit the necessary transition from 50% renewable to much greater fraction renewable.
Last edited by wizzo227; 2 Days Ago at 17:53.
