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The Cost Of Living Crisis

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14 hours ago, Barbe bleu said:

Yea, you answered it.   Pretty much the same as Steve n8458 did.

 

Does seem that the FiT did cause a feeding frenzy in installed capacity in 2014/15 that waned rapidly when the tariffs did. 

Looking back the original FiT looks looks ludicrously generous but I guess it had to be to get the ball rolling. I think the brakes had to be applied but they might have been pushed a little too hard too quickly. Still there might be a resurgence move the new bills start dropping into people's mailboxes. 

 

The 'feeding frenzy' was 2011, and for two reasons (maybe 2014/2015 was when electricity prices had risen sufficiently to make solar farms feasible financially).

Firstly as you say the original FIT tariff was quite generous although I wouldn't call it ludicrous. Like most technolgy, especially electrical/electronic, solar PV was pretty expensive at that point (2009/10) and the upfront costs of installation were very considerable (£15k+ for a 4kW domestic roof system) Also as you say the intention was to get the ball rolling, and rolling quickly - this was rightly seen as an important industry for the future in which the UK was lagging (bit like the lithium battery industry now) so the hope was to catch with our competitors and create a sustainable industry with a lot a new skilled jobs and build up economies of scale which would reduce the costs.

In all of that they succeeded, perhaps a little better than they expected because some of the financial institutions realised that despite the high upfront costs there was a pretty safe return over a long period (25 years) which led to the 'rent a roof' schemes whereby they installed panels free of charge on homes in return for the FIT income with the householder getting the free electricity.  It would have taken these guys 5 - 7 years to get back the cost of the systems but still leaving then a near 20yr guaranteed inflation linked revenue stream. So not everybody's cup of tea but still very attractive to pension funds and the like.

Anyway by the end of 2011 we had a significant thriving solar PV industry and the costs of the system were indeed coming down, so it would have been entirely sensible and appropriate to make some downward adjustments to the FIT tariff which retained the incentive but adjusted downwards to reflect the lower upfront costs - this was always intended to happen and embedded in the legislation which involved the FiT system.

But that wasn't what Cameron did - he announced that the tariff would be halved in April 2012 (one of many stupid and totally counter-productive 'austerity' measures). Turned out that as well as being stupid it was also illegal (both in its timing and lack of prior consultation) and the Government of the day lost a couple of cases in the High Court over it but that made no real difference - the government held a faux consultation, ignored all the evidence submitted, introduced a very minor delay and then went ahead exactly as planned. The industry was killed pretty much stone dead instantly because the FIT was no longer an incentive to either the pension funds or private individuals. The only people for whom it made any sense were farmers who had big energy bills i.e. dairy farmers, because although the FiT was much smaller for them than even the domestic system the saving in energy consumption was quite significant, but for many wind was always option anyway.

We spent a few months installing 50kW systems on barn roofs before giving up completely, some of the electricians moved onto other work but in our case 2,000+ people were made redundant - don't know whether anybody worked out a figure for the whole of the PV industry at that time but it must have been 30,000+ redundancies. As I said at the time, the industry returned to being a cottage industry which is what it remains. Some of my former colleagues have since done some very big and impressive rooftop installations on commercial and industrial buildings, but the volume is only a small fraction of where we could and should have been now were it not for Cameron's (and his successors') stupidity.

Unfortunately there is a fairly parallel situation with wind power - of course we have made some progress off-shore although still significantly less than we should have done, whilst on-shore wind (the cheapest by far method of generating electricity in the UK) has been choked off by successive Tory Governments and that even now, incredibly, shows no sign of changing.

 

 

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1 hour ago, Creative Midfielder said:

The 'feeding frenzy' was 2011, and for two reasons (maybe 2014/2015 was when electricity prices had risen sufficiently to make solar farms feasible financially).

Firstly as you say the original FIT tariff was quite generous although I wouldn't call it ludicrous. Like most technolgy, especially electrical/electronic, solar PV was pretty expensive at that point (2009/10) and the upfront costs of installation were very considerable (£15k+ for a 4kW domestic roof system) Also as you say the intention was to get the ball rolling, and rolling quickly - this was rightly seen as an important industry for the future in which the UK was lagging (bit like the lithium battery industry now) so the hope was to catch with our competitors and create a sustainable industry with a lot a new skilled jobs and build up economies of scale which would reduce the costs.

In all of that they succeeded, perhaps a little better than they expected because some of the financial institutions realised that despite the high upfront costs there was a pretty safe return over a long period (25 years) which led to the 'rent a roof' schemes whereby they installed panels free of charge on homes in return for the FIT income with the householder getting the free electricity.  It would have taken these guys 5 - 7 years to get back the cost of the systems but still leaving then a near 20yr guaranteed inflation linked revenue stream. So not everybody's cup of tea but still very attractive to pension funds and the like.

Anyway by the end of 2011 we had a significant thriving solar PV industry and the costs of the system were indeed coming down, so it would have been entirely sensible and appropriate to make some downward adjustments to the FIT tariff which retained the incentive but adjusted downwards to reflect the lower upfront costs - this was always intended to happen and embedded in the legislation which involved the FiT system.

But that wasn't what Cameron did - he announced that the tariff would be halved in April 2012 (one of many stupid and totally counter-productive 'austerity' measures). Turned out that as well as being stupid it was also illegal (both in its timing and lack of prior consultation) and the Government of the day lost a couple of cases in the High Court over it but that made no real difference - the government held a faux consultation, ignored all the evidence submitted, introduced a very minor delay and then went ahead exactly as planned. The industry was killed pretty much stone dead instantly because the FIT was no longer an incentive to either the pension funds or private individuals. 

 

Poi t or clarification, I put the  'feeding frenzy' at 2014/15 as that's when Wikipedia tells me capacity grew most.    There is some suggestion though that a lot of the smaller domestic installations were in year one (10/11) so this is when 'peak' participation' may have been reached.  I guess either could be said to be right.

I said 'Ludicrous' as the FIT paid 42p/kwh , even for energy used by the generator .   By way of comparison the price cap to be introduced is at 28p/kwh.    

My amateur assesent is that the FiT was appropriate  but was overly generous at its outset. A reduction was necessary but likely there was an over correction that has left is a little bit down on where we should be.   9

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22 hours ago, canarydan23 said:

What sort of indication did they give you about timescales? I've heard mention of 9 month backlogs.

8-10 weeks we were told.

Edited by Canary Wundaboy

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4 hours ago, Barbe bleu said:

My amateur assesent is that the FiT was appropriate  but was overly generous at its outset. A reduction was necessary but likely there was an over correction that has left is a little bit down on where we should be.   9

Well, I'm not sure that I'd agree it was overly generous at its outset, as I described it certainly achieved the objectives of providing the incentive, and extremely rapidly at that so I would rate that as a success. I think the other point to make is that although the costs of providing those incentives are often raised by the extreme wing of the Tory Party when discussing energy prices, in reality those costs are quite small compared to the subsidies and tax breaks that for a great many years have been given to the fossil fuel industry and of course the renewables incentives should never have been passed onto the energy consumers in the first place - they should have been funded directly by the Government just as (ideally instead of) the fossil fuel industry is.

Having said that, it is entirely possible that a little lower rate at the start could still have been successful although it would have certainly taken longer to gain real momentum - I'd guess that at, say 35p per kWh as opposed to 42p, it would have eventually been successful but taken several years longer to get there, as a slower initial take up would have significantly lengthened the time for the economies of scale to kick in which was the real turbo-charger to the industry.

Either way it could and should have been successful in laying a long term foundation for a growing industry and that is why I would take issue with your term 'over correction'. Just to be clear the slash/correction in FIT only applied to new installations, those of us who were fortunate/wise enough (😄) to install prior to March 2012 keep the original rate - it's essentially a legal contract so pretty difficult, even for the Government, to wriggle out of although I have wondered several times whether the current government would have a go. Perhaps the fact that the pension funds & other financial institutions rather than the homeowners would be the really big losers is sufficient deterrent 😄

As I said in my original post it was always envisaged and was enshrined in original enabling legislation that the FIT would be reviewed in the light of the market cost of the systems vs the level of the incentive and that would over time mean a reduction - again for clarity this was an entirely separate mechanism to the automatic inflation indexation which was also part of the deal and moved in the other direction (though quite slowly until recently!).

But the correction, or even over-correction, didn't happen - it just just an arbitrary slash in the rate which ignored both the cost and incentive principles and whose effect was to remove any genuine incentive. It happened almost without warning, and it killed the industry stone dead and it has never recovered from that.

I don't doubt your figures for 2014/2015 are correct because as I said that was when the economics of solar farms started to make sense - the FIT wasn't applicable to installations of that size so the economic case is a completely different one. So I'd be pretty certain that they account for virtually all that capacity with domestic and small commercial systems almost negligible. Again, that picture hasn't changed to the present day, especially as the FIT was abolished completely five years ago.

It may be that current electricity prices will give the domestic and small commercial markets a boost but I don't think it will be a big one - I'm the last person to downplay the importance of renewables but I'd strongly advise @Canary Wundaboy to look very closely at the realities of his five year payback. We have got used to paying for our energy on a monthly basis and the figures for a PV system are almost certainly quoted on an average annual production. But look at your consumption profile on a daily basis and on a seasonal basis and then compare that with a generation profile for a PV system which only operates for a limited number of hours per day and is highly seasonal (and not the seasons when most of us consume the most electricity). Having a battery attached to the PV would obviously help but still comes with a hefty price tag, so whilst I wouldn't wish to dissuade anyone from installing PV which will always be a winner over the long term, I would treat the five year claim with a pinch of salt.

Edited by Creative Midfielder
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Feeling quite relaxed about mid-long term energy supply now. Fusion does seem to be (finally) making genuine progress &, possibly even better, it has led to plasma drilling becoming viable, which means geothermal energy becoming widespread.

My only fear is politicians/NewWorldOrder kiboshing them.

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11 hours ago, ron obvious said:

Feeling quite relaxed about mid-long term energy supply now. Fusion does seem to be (finally) making genuine progress &, possibly even better, it has led to plasma drilling becoming viable, which means geothermal energy becoming widespread.

My only fear is politicians/NewWorldOrder kiboshing them.

Thankfully, I think we're past the point where much industry has the power to suppress the progress of alternative energy.

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3 hours ago, littleyellowbirdie said:

Thankfully, I think we're past the point where much industry has the power to suppress the progress of alternative energy.

That is a hopeful view and one I would feel hopeful about too. You could just imagine a whole new 'industrial revolution' taking place across the world as we seek ways of providing energy for the planet. Just have to hope we are somewhere near being in the vanguard of the alternative energy 'movement'.

Edited by sonyc
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4 minutes ago, sonyc said:

That is a hopeful view and one I would feel hopeful about too. You could just imagine a whole new 'industrial revolution' taking place across the world as we seek ways of providing energy for the planet. Just have to hope we are somewhere near being in the vanguard of the alternative energy 'movement'.

The issue with this vision is money! Hydrocarbon provides a massive resource in funds for too many big economies to be allowed, there’s going to be a lot of companies and countries employment issues to make that transition as quickly as it’s needed. Sad to think.

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31 minutes ago, sonyc said:

That is a hopeful view and one I would feel hopeful about too. You could just imagine a whole new 'industrial revolution' taking place across the world as we seek ways of providing energy for the planet. Just have to hope we are somewhere near being in the vanguard of the alternative energy 'movement'.

 

24 minutes ago, Indy said:

The issue with this vision is money! Hydrocarbon provides a massive resource in funds for too many big economies to be allowed, there’s going to be a lot of companies and countries employment issues to make that transition as quickly as it’s needed. Sad to think.

You only have to look as far as the USA where the Oil/Gas and even the coal industry are a cause célèbre for the Trump Republicans and the so called rust belt. "Trump Digs Coal"!

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17 hours ago, Daz Sparks said:

Does anyone have a concise explanation of the cap on energy that is being put forward by the government?

You'll still pay more. Martin Lewis is your man. But, basically unit costs are capped - the headline cap rates are for average usage, it is not an absolute cap, if you use more than an average household your bills will still be higher than the cap. I think that's the crux of it and the bit that seems to be lost - you could still pay £8-10,000k a year if you're running a hot tub, like a warm house and run hot baths every night while cooking in a double oven. 

The issue with the cap is that the retail energy cost over and above the capped rate is covered by taxpayers money in this thing announced by Liz Truss - the energy wholesalers still make their multi million £ profit. The UK tax payer is shouldered with the burden for years to come.

Liz Truss worked at Shell. Jacob Rees Mogg our new Secretary of State for Business, Energy and Industrial Strategy of United Kingdom is a fan of fossil fuels probably reflected by his investment portfolio. 

https://www.theguardian.com/global/2022/sep/07/rise-jacob-rees-mogg-fossil-fuel-fan-charge-cutting-uk-carbon-emissions

I very much feel like someone is taking the rise.

 

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12 minutes ago, Thumbbass said:

 

Liz Truss worked at Shell. 

 

But they have been windfall taxed have they not? If so, is this just  cheap hit?

The extraction companies have had additional taxes placed on them, the question really is whether a similar tax should be placed on generators as well.

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1 minute ago, Barbe bleu said:

But they have been windfall taxed have they not? If so, is this just  cheap hit?

The extraction companies have had additional taxes placed on them, the question really is whether a similar tax should be placed on generators as well.

Nope.

Liz Truss has stated she does not believe in windfall taxes. But to be fair she didn't believe in Brexit either so....

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11 minutes ago, Thumbbass said:

Nope.

Liz Truss has stated she does not believe in windfall taxes. But to be fair she didn't believe in Brexit either so....

So you think she'll remove it?

As a general rule I don't  like windfall taxes.   They are a disincentive to investment but in the right circumstances they have their place I guess.

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1 hour ago, Thumbbass said:

The issue with the cap is that the retail energy cost over and above the capped rate is covered by taxpayers money in this thing announced by Liz Truss - the energy wholesalers still make their multi million £ profit. The UK tax payer is shouldered with the burden for years to come.

The issue isn't the energy 'retailers' - many indeed went bust but the energy producers - the BPs and Shell etc.

They will make multi multi billion in unexpected profits well beyond their wildest dreams.

Yes they will suffer Sunak's original 'windfall' tax (that which they can't offset but it's the magnitude of that that needs now addressing in light of the new market prices. Even Thatcher had nothing against windfall taxes and used them!

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1 hour ago, Yellow Fever said:

The issue isn't the energy 'retailers' - many indeed went bust but the energy producers - the BPs and Shell etc.

They will make multi multi billion in unexpected profits well beyond their wildest dreams.

Yes they will suffer Sunak's original 'windfall' tax (that which they can't offset but it's the magnitude of that that needs now addressing in light of the new market prices. Even Thatcher had nothing against windfall taxes and used them!

You have misunderstood the point. The price cap is at the point of retail sale. The wholesale costs remain the same and the difference is paid by the tax payer.

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11 minutes ago, Thumbbass said:

You have misunderstood the point.  Don't think he has

The price cap is at the point of retail sale. The wholesale costs remain the same and the difference is paid by the tax payer.

That is exactly what they are saying at the moment which means that the tax payers are funding the enormous and excessive profits being made by the energy producers - they are the problem not the retail supply companies which as YF says are caught in the same bind as their customers, i.e. us.

Actually the producers aren't really the problem either (that is the dysfunctional energy market) but the energy producers are making massive unexpected and unearned profits from the situation which is why it seems blindingly obvious to almost everyone bar the idiot Truss that it is reasonable that they should give up a relatively small part of those massive profits to ease the burden on the taxpayer. After all these companies have had many years of tax breaks and subsidies to develop these oil and gas fields in the first place, doesn't seem unreasonable to take a bit back now they are making stratospheric profits beyond what anyone, including them, ever envisaged.

 

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39 minutes ago, Thumbbass said:

You have misunderstood the point. The price cap is at the point of retail sale. The wholesale costs remain the same and the difference is paid by the tax payer.

I can see what you are saying: the price cap protects the consumer. To protect the distributors and generators from the high wholesale prices that cannot be passed on the government is prepared to subsidise the difference (ie the difference between the capped retail price and the wholesale costs they fa e).

 The above to be funded in  part from the new windfalll tax on producers/extractors.

Seems sensible enough but it's not clear to me where that leaves companies  that are producers,  generators and distributors all at once.      

Edited by Barbe bleu

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On 10/08/2022 at 09:05, Nuff Said said:

The French have also 100% nationalised EDF which, like several European state-owned transport companies, is offsetting the costs to their citizens by making profits in our wonderful deregulated markets.

(I can hear the cries of “communism!” now)

I think the phrase is 'they saw us coming'. We can't have any complaints on that score though.

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21 minutes ago, Barbe bleu said:

Seems sensible enough but it's not clear to me where that leaves companies  that are producers,  generators and distributors all at once.   

CM has it right - I just didn't go into the detail originally.

However the companies that you mention are I understand actually structured into separate entities for tax/reporting purposes anyway - Centrica/British Gas etc. There is a reasonably clear division between the 'producer' and 'retail' arms of the above - the 'retailers' basically contracting to buy energy (gas) at market rates for distribution. It's the 'retailers' that are being squeezed (and indeed I think the government has given them a credit line to help else the big 6 might reduce further - I suppose that's one way to nationalize them!)

 

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11 minutes ago, Yellow Fever said:

CM has it right - I just didn't go into the detail originally.

However the companies that you mention are I understand actually structured into separate entities for tax/reporting purposes anyway - Centrica/British Gas etc. There is a reasonably clear division between the 'producer' and 'retail' arms of the above - the 'retailers' basically contracting to buy energy (gas) at market rates for distribution. It's the 'retailers' that are being squeezed (and indeed I think the government has given them a credit line to help else the big 6 might reduce further - I suppose that's one way to nationalize them!)

 

So what would you do?

At the moment the consumer and retailer are protected by the government.  You seem happy with that, so what else would you do as an immediate step?

 

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7 minutes ago, Barbe bleu said:

So what would you do?

At the moment the consumer and retailer are protected by the government.  You seem happy with that, so what else would you do as an immediate step?

 

All you need to do is to increase the windfall tax on the producers. That's nothing more than they expected anyway. They can and will still make exceptional profits for the next year or two.

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3 hours ago, Yellow Fever said:

All you need to do is to increase the windfall tax on the producers. That's nothing more than they expected anyway. They can and will still make exceptional profits for the next year or two.

I'd probably agree. Fine line though between a regime that fairly shares the windfall and one that makes the UK a bad bet for investment.

Edited by Barbe bleu
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1 hour ago, Yellow Fever said:

All you need to do is to increase the windfall tax on the producers. That's nothing more than they expected anyway. They can and will still make exceptional profits for the next year or two.

Its already at 65% on profits of about 40 billion. How is that going to close the 150 billion gap.?

Good luck with trying to get something out of Saudi Aramco or Qatargas.

The idea that a windfall tax will solve all our problems is for the birds. You could make the tax 100% and It still won't  even touch the sides.

 

Edited by ricardo

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15 minutes ago, ricardo said:

Its already at 65% on profits of about 40 billion. How is that going to close the 150 billion gap.?

Good luck with trying to get something out of Saudi Aramco or Qatargas.

The idea that a windfall tax will solve all our problems is for the birds. You could make the tax 100% and It still won't  even touch the sides.

 

I never said it would but as above its not a binary choice. Its really about the UK producers making a sensible contribution as per the comment of BB. The fact that wholesale gas prices have shot up 5 or ten-fold is whats causing windfall profits. They can still make exceptional profits even after tax.

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13 minutes ago, Yellow Fever said:

I never said it would but as above its not a binary choice. Its really about the UK producers making a sensible contribution as per the comment of BB. The fact that wholesale gas prices have shot up 5 or ten-fold is whats causing windfall profits. They can still make exceptional profits even after tax.

It was a good political move by Starmer and gave people the impression that the energy companies profits would pay their bills. When you look at the numbers you see that this is not possible but most people don't  look at the numbers and just hear the soundbites. A good move by Starmer votewise but thats all it is.

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1 minute ago, ricardo said:

It was a good political move by Starmer and gave people the impression that the energy companies profits would pay their bills. When you look at the numbers you see that this is not possible but most people don't  look at the numbers and just hear the soundbites. A good move by Starmer votewise but thats all it is.

I don't think that's true. It was only ever about the producers helping out that Sunak eventually went along with.  Things have moved on since Sunaks first intervention anyway. Its now Truss that seems to dig her heels in idealogoically about windfall taxes 

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20 hours ago, Barbe bleu said:

I can see what you are saying: the price cap protects the consumer. To protect the distributors and generators from the high wholesale prices that cannot be passed on the government is prepared to subsidise the difference (ie the difference between the capped retail price and the wholesale costs they fa e).

 The above to be funded in  part from the new windfalll tax on producers/extractors.

Seems sensible enough but it's not clear to me where that leaves companies  that are producers,  generators and distributors all at once.      

 

20 hours ago, Barbe bleu said:

I can see what you are saying: the price cap protects the consumer. To protect the distributors and generators from the high wholesale prices that cannot be passed on the government is prepared to subsidise the difference (ie the difference between the capped retail price and the wholesale costs they fa e).

 The above to be funded in  part from the new windfalll tax on producers/extractors.

Seems sensible enough but it's not clear to me where that leaves companies  that are producers,  generators and distributors all at once.      

"Seems sensible enough but it's not clear to me where that leaves companies  that are producers,  generators and distributors all at once."

Probably ringing the best creative accountant they can find to discover a way to minimise the tax element and maximise their subsidy.

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I have now had my solar panels and battery online since Monday. I can happily report that beside the (outrageous) standing charge, I have not paid for any imported electricity. I have exported some, but not a huge amount. 

I would say that this last week has been  typical late summer/early autumn fayre. 

I wonder how the panels will be performing in a month?  

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