A CEO of a popular energy company has lashed out against the United Kingdom's 'bonkers' energy market, with renewable electricity costing even more than gas amid the cost of living crisis.
As the energy crisis strengthens its grip on British consumers, many are feeling the knock-on impact of spiralling wholesale gas prices, prompting horror warnings that Ofgem's energy price cap could even reach £5,500 by April 2022.
And with the price of gas, electricity bills are also spiralling as a result of an 'outdated' link according to Octopus Energy CEO, Greg Jackson - whose firm specialises in renewable energy.
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The Express reports that as a result of the current system, renewable electricity - which is meant to be cheaper to run - is ending up more expensive than gas. Greg, said: “The UK has an outdated way of running its electricity market, which is why renewable electricity is costing more during a gas crisis.
“The way it works is that every half hour there’s a single price for electricity in the UK, and it’s set by a process in which National Grid procure the generation to meet our needs from generators every half hour. And they pay a single national price to all those generators.
“So, companies like Octopus face a single price regardless of whether we are buying renewable or non-renewable electricity. In fact, to make it worse, renewable typically costs more because we either have to pay for certification or to pay for what’s called balancing costs.”
The energy boss has called for a complete overhaul of the current system, which Business Secretary Kwasi Kwarteng has admitted won't stay forever. He previously stated: "One of the things we are very keen to do in BEIS is to look at the pricing mechanism in the electricity market because it cannot be the case forever that we can link directly our electricity prices to gas prices when gas is only a portion of the electricity generating mix.”
Greg added: “This is bonkers. Fundamentally, we need a market reform that enables all to see the benefit of cheaper, renewable electricity. What we really need is market reform and dramatically more renewable generation to bring the cost down.”
However, while struggling to access the low cost in one respect, the energy company also has a method of shielding customers from soaring bills. Under its 'Fan Club' model, Octopus is allowing those who live closely to wind turbines to access cheaper electricity.
Extended to a total of three locations as it stands, the unique tariff can provide consumers a discount of up to 50% off their unit rates for 100% renewable electricity. Through this promotion, the company anticipates that households will be able to shave £350 off their annual bill.
The 'Fan Club' model appears to be based on a pricing mechanism known as locational marginal pricing, which is aimed at giving customers cheaper costs of renewables where green energy is manufactured.
Ofgem and the National Grid are also said to be exploring locational marginal pricing in order to reform the wholesale electricity market.
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