Electricity prices in the UK are dictated by a market in which generators bid to offer power, they all get paid at the highest price. At present the price of gas is the highest cost and so all generators are paid at the premium price needed to pay for gas and run generators. Wind and nuclear can get by at 5/6p a kWh but wholesale prices are nearer 30p, which is what they all get paid. Wind farms with cfds pay back their excess profits into the LCCC so they don't actually make more than they need to turn the agreed profit at which they would be supported.
Russia stopped the export of gas and Germany it's biggest customer had to run round buying it at high prices. The UK has supported Europe by exporting both gas and electricity since early May. We have access to North Sea gas but always top up with LNG brought by tanker. LNG is super cooled to liquify and takes up a 600th of the space of gas itself. The biggest tankers arrive from Qatar with enough gas to keep London warm in winter for a week. We have 3 terminals for LNG, 2 in Pembroke Harbour and 1 on the Isle of Grain. Heat is needed to regasify the LNG which comes in some part from waste heat from gas fired power stations. We have little gas storage in the UK but have been able to rely on adequate supplies from the North Sea both UK waters and Norway with this topping up from LNG tankers. Gas has been piped to the Netherlands and Belgium, our only 2 interconnectors to Europe at full pelt all summer. Gas fired electricity consumes twice the gas energy compared to the electricity output. Sending 5 GW of electricity to Europe is the equivalent of pumping 10 GW of gas. As I said earlier we have been pumping massive amounts of energy into Europe all summer, often more than we consumed in the UK. Coupled with savings made in Europe all the storage facilities of both gas and LNG were full by late October. This was better than anyone expected. Gas Futures have therefore fallen back but we don't know what price has been paid in hedging (future fixed price trades, not fluffy green things round gardens) and it is that that Ofgem use to fix prices.
If we get through this winter with enough gas to meet tight needs in reasonable comfort the market prices for gas will fall. Qatar have untapped reserves to exploit and they have contracts for the work to be done, but it will take 2-3 years. The US has been exporting as much gas as they can. Unfortunately an accident at a liquifying plant curtailed output in June. No one was injured in the accident but the regulators uncovered a can of worms in the operating procedures and this is holding up the restart of the plant.
The French nuclear system is the backbone of the interconnected European electricity system but faults and wear issues have arisen simultaneously at so many reactors they are some 10 to 15 GW below expected output. The UK normally buys electricity from France for much of the year but not at all this year.
Germany has stopped the closure of 3 nuclear plants for the winter, frankly there is nothing wrong with the plants it is just a political issue in Germany, if more fuel could be obtained they could run for some years. Belgium is in the same position and is keeping a reactor going. The UKs reactors are down to less than 5GW output but EDF are looking to keep them running beyond their current closure dates. They will check the integrity of the graphite cores and run them at lower power.
China is in lockdown and currently using less gas. They have a pipeline to Russia but it provides only a small amount of gas, mostly it arrives by tanker. This is good news because it frees up tankers to ship gas to Europe.
Germany has had to build LNG import terminals. By using repurposed tankers it is a straightforward job and already one in Willhelmhaven is almost ready to receive LNG. 4 other terminals are in the process of being built and should be ready for winter 2023. Though not completely replacing Russian gas they will go a long way towards it. Rotterdam is getting a similar new terminal.
LNG tankers are big ships. The biggest hold 250,000 m3 of LNG and average 180,000 m3. It takes about 25 days for a round trip to the US and 32 to Qatar. It takes 30 months to build one and they are mainly built in Korea where some 12 or so are currently being built. We can expect 4 or 5 additional tankers by winter 2023. China also has some on the stocks.
Winter hasn't started yet and tankers have been queuing to offload cargos. Many pulled up off Cadiz so their crews could get a sun tan. (More likely get painting in warm sunny weather.) They have also been slowly coming away from Cadiz and making their way to European terminals.
Poland, Lithuania (I think), Netherlands, Belgium, France, Portugal, Spain, Italy and Greece all have LNG terminals and Italy and Greece are adding to them, as well as those mentioned earlier.
Subsidising power is a path to hell, in the end no one wins. By subsidising directly the sting could have been removed from inflation but as Jeremy Hunt has said we just need to use less to support Ukraine. Letting the price rise will make everyone (nearly) more frugal. Funding insulation to promote power saving has to be helpful for the not so well off. As a heat pump user I can say that they dramatically reduce power consumption. Last year of fossil fuel we consumed 24,000 litres of oil, the heat pump has produced 17,500 kWh of heat for 5,700 kWh of electricity. The majority of that at overnight Go prices and now a higher proportion at Intelligent Octopus rates. Oil is roughly 10 kWh per litre. So there is a hidden efficiency in that 7,500 kWh, much higher than we could expect from the SEDBUK rating of what was a fairly new top class boiler. And whilst a COP of 3 doesn't seem great, this is a 14kW heat pump with 2 fans, a system with 4 pumps for a 5 bedroom house. A basic 8 kW system for a 3 bed house would achieve a COP of 3.7 or better. The pumps rob the system of 250 watts, 2 lower power Grundfos pumps in the mix could have saved 70 watts maybe and would be recommended for a smaller house.
Oh and the future of electricity prices; I think that if the French get their problems sorted for next year, Europe will be able to manage on some 20 GW less gas to generate electricity. That is equal to about a fifth of the winter consumption in the UK for heating. The US and Qatar will be able to replace the Russian gas but shipping will have to be co-ordinated and slick. China coming out of lockdown might have an effect as will windy weather. This autumn seems to have been very good for wind output. Tonight might see a record broken in the UK of 21 GW output.