By Paul Homewood
We looked at long term gas price trends the other day – if you missed it, it is here. Now let’s do the same with electricity:
OFGEM show the raw data, that is frequently used to pretend that wholesale electricity prices, usually based on gas, have risen substantially since pre-Ukraine crisis days:
https://www.ofgem.gov.uk/news-and-insight/data/data-portal/wholesale-market-indicators
But as we know, general inflation has also been running high in the last decade:
https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/chaw/mm23
When we strip out the effects of inflation, we get a very similar story to gas price trends- something that would be expected given the close relationship between the two.
Prices in the last year so so are running at similar levels to 2017 and 2018. Prices obviously fell sharply during lockdowns before spiking in 2021/22.
In short, wholesale prices are not exceptionally high by historical standards.
In actual monetary terms, retail electricity prices have roughly doubled since 2017 – note the prices in 2022 and 2023 were suppressed by government subsidies:
https://www.gov.uk/government/statistical-data-sets/annual-domestic-energy-price-statistics
DESNZ have helpfully though presented the same prices at real 2010 levels, using the GDP (market prices) deflator. Even after stripping out inflation, prices have risen from 12.89 to 21.69p/kWh, a rise of 68% since 2017.
https://www.gov.uk/government/statistical-data-sets/annual-domestic-energy-price-statistics
Clearly this increase has not been caused by any changes in wholesale prices. The prices are for domestic users, but presumably follow similar trends for other users.
In overall terms, the increase from 12.89p to 21.69p equates to around £24.6 billion – nearly £1000 for every household.
So, why have retail prices gone up when wholesale prices have not? We don’t have far to look:
About £16 billion is being added this year to your electricity bills to pay for subsidies to renewable energy. To that we can add another £3 billion to pay for grid balancing needed because of the intermittency of wind and solar.
Ten years ago, renewable subsidies ran at £3 billion a year.
It’s hardly rocket science, is it?
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Author: Paul Homewood
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