Why are green energy bills affected by fossil fuel prices and the energy crisis?
People have been asking us this question a lot more lately, and we can completely understand why. It seems counterintuitive that the cost of clean green energy should be going up just because the cost of polluting brown energy has.
Our founder Dale Vince has addressed this in his recent podcast – here are two of the main reasons why we’re in the place we’re in.
Covering the cost of policy failure
We’ve recently been hit with additional costs of nearly £7 million by the government and the energy regulator, Ofgem. This is effectively another tax, this time to pay for the cost of the policy failure which has led to the demise of nearly 30 energy suppliers, and four million customers being stranded, since this energy crisis began.
The government’s response has been to land the cost of that failure – some £2 billion so far – on surviving, well-run energy companies, and make them, and their customers, pay for that failure. Ecotricity’s share of this cost is nearly £7 million.
The Balancing Market
Another way green energy costs are affected in this crisis comes down to something called the balancing market, and its role in our national energy supply.
Every energy company, whether deep green or fossil fuel brown, has to take part in the balancing market – even if it that company is properly hedged, like Ecotricity.
In this system, each day is divided into half hour chunks, and every energy company has to balance its supply with its demand within these half hours – every half hour of every day. It is impossible to predict with complete accuracy exactly how much energy will be used every half hour, and there are penalty costs to cover for any gap that there is between supply and demand. These balancing costs have also been reaching record highs under the energy crisis.
The way things are right now, green energy costs can’t escape the overall energy market costs. Even though renewables are a significant part of Britain’s electricity mix, we’re still being hit by the same market costs as fossil fuels, and the costs of policy failure.
This situation is madness – and the government can and should be doing so much more to lift the burden off customers, and fix the energy crisis. For example, a windfall tax on the North Sea oil and gas companies could make a huge difference.
What can we do about it?
Ramping up investment in more renewable energy generation is the only meaningful way to escape the stranglehold of the fossil fuel market and make a genuine difference in the fight against the climate crisis.
As a deep green energy supplier, we use our profits to build new sources of green energy – we call it “bills into mills”. This is the way to become energy independent and price independent – by making all the energy we need in Britain from the wind and sun, and sustainable, carbon neutralised green gas from grass.
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