Renewable Energy Foundation

A new report on the variability in electricity market prices linked to increasing reliance on solar and wind generation by Professor Gordon Hughes, School of Economics, University of Edinburgh is published today by the Renewable Energy Foundation.

Market prices for electricity have always fluctuated because of within-day and across-season variations in demand for electricity. However, from 2010 to 2024 the monthly variability in market electricity prices doubled. This increase was directly linked to the decline in the amount of market, i.e. non-subsidised, generation due to the growth in the amount of subsidised renewable generation.

Since the current UK government is committed to accelerating the switch to reliance upon subsidised renewable generation, the inevitable consequence will be a further increase in the variability of market prices. This change will destabilize the wholesale market and undermine the basis on which retail electricity prices are regulated.

In the past, monopoly electricity utilities were expected to absorb variations in the cost of meeting electricity, charging fixed prices to retail and business customers. This was no longer possible after the industry was split up. Electricity suppliers do not have the resources to protect retail customers from medium term changes in the level of market electricity prices.

To address widespread discontent over the impact of variable energy pricing, the government imposed regulated price caps by which electricity tariffs were adjusted every 6 months and now every 3 months. Electricity suppliers are expected to insure (hedge) the prices at which they buy electricity within each 3-month period. That only works if the cost of insurance is not too high, which depends on the monthly variability of electricity prices.

Experience in other European countries suggest that a fixed price cap is unlikely to be viable in the longer term if the government’s renewable generation targets are met. Two kinds of retail tariff may dominate in future, though both depend on the availability of smart meters. These tariffs are:

• Multiperiod tariffs – these are usually linked to a monthly market price index with different multipliers for, often, off-peak, standard, and peak hours.
• Dynamic tariffs – these are based on hourly or half-hourly market price with a fixed multiplier or add-ons to cover levies, transport and other costs. The tariff is usually capped to reduce the impact of extreme market prices.

What is presented as “protecting” retail customers from variations in market electricity prices seems designed to hide the extent to which retail prices have become divorced from market prices. Increased variability of market prices is likely to stimulate and even force a shift away from price caps to explicit acknowledgement of market price variability.

Attachments:

Variability in Electricity Market Prices

The attached document is REF's response to the consultation by the Ministry of Housing, Communities and Local Government on the Proposed reforms to the National Planning Policy Framework and other changes to the planning system.

Attachments:

REF consultation response to NPPF 2024

The attached document is REF's response to the Ofgem December 2023 consultation on the Transmission Constraint Licence Condition guidance. 

Attachments:

REF Response to Ofgem TCLC 2023 Consultation

A new report on the costs of utility scale solar generation by Professor Gordon Hughes, School of Economics, University of Edinburgh is published today by the Renewable Energy Foundation.

The Economics of Utility-Scale Solar Generation
Summary

Two new reports on the costs of wind power in the UK and Denmark by Professor Gordon Hughes, School of Economics, University of Edinburgh are published today by the Renewable Energy Foundation.

Wind Power Costs in the United Kingdom and

The Performance of Wind Power in Denmark

The text accompanying the talk "Wind Power Economics – Rhetoric and Reality" given by Professor Hughes to launch these reports is also available on the REF website.

REF has responded to a consultation carried out by the Scottish Parliament's Economy, Energy and Fair Work Committee (EEFW).  The Committee is holding a three-part energy inquiry, linking an overview carried out by the Royal Society of Edinburgh (RSE) on Scotland’s Energy Future with consideration of electric vehicle (EV) infrastructure, and locally owned energy. The submission by REF is as follows:
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Attachments:

REF submission to EEFW.pdf

REF has responded to the Ofgem consultation on the future of the Transmission Constraint Licence Condition as follows:

1. The Renewable Energy Foundation (REF) is a UK charity that publishes data and analysis on the renewable energy sector. The costs of payments to on- and off-shore wind farms to reduce output during periods of constraints are included in the published data. Since 2010 we have repeatedly expressed our concerns that wind farm constraint payments are an excessive and unfair burden on consumer bills.

2. Although this consultation concerns both import and export constraints, we note that export constraints’ costs exceed those of import constraints by nearly 9 times , and that the majority of the export constraints’ costs arise from the two locations designated by National Grid as Cheviot and Scotland. This problem has clearly arisen because of the large scale deployment of onshore wind farms in Scotland prior to construction of infrastructure capable of exporting the excess generation from these locations. In this response we have concentrated on the impacts of the TCLC on the Scottish onshore wind fleet.

3. In order to respond to this consultation we have analysed two sets of bid price data: the wind farm bid prices accepted by the system operator since 2010 as well as all the bid prices submitted by wind farm operators but not necessarily accepted by the system operator.
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Attachments:

REF Ofgem 2016 Consultation Appendices

REF Ofgem 2016 Full Consultation Response

REF submitted a response to the consultation carried out by the Institute of Acoustics (IoA) on Amplitude Modulation (AM) noise of wind turbines. We made a number of general remarks on the consultation process and further comments on the detailed questions raised by the IoA.
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Attachments:

REF response to IoA AM Consultation Questionnaire

The UK government expects that renewable electricity will contribute about half of the renewable energy required in 2020 by the EU Renewable Energy Directive of 2009. This amounts, DECC estimates, to about 110 TWh.

Analysis of DECC’s own Renewable Energy Planning Database (REPD) suggests that there is already 35 GW of capacity consented, and now either operational, or under or awaiting construction. This is sufficient to meet the target with a 5% margin.

However, there is a further 18 GW of capacity in the planning system, which would deliver a target overshoot of about 50%, and exceed the Treasury’s cap on subsidy spending.
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Attachments:

Progress Towards the 2020 Renewable Electricity Target

In a study using real wind farm noise data exhibiting significant Amplitude Modulation (AM) we have been able to test the efficacy of the AM noise condition proposed by RenewableUK. The summary of the findings are : 

1.1. The proposed RUK AM condition would not be breached by recorded wind farm noise data with high levels of AM measured at Askam, a site widely recognised to be producing severe AM problems, and at Swaffham, from data where the AM is clear and significant in magnitude. By comparison, data from both the Askam and Swaffham sites would be in breach of the Den Brook AM condition.

1.2. We conclude from these facts that the RUK AM condition is manifestly inferior to the Den Brook condition and does not offer to wind farm neighbours any realistic or significant protection against AM disturbance. 
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Attachments:

REF Info Note on RUK AM Condition