JAKARTA - The British government has begun to change its electricity market scheme. So far, as soon as the price of gas rises, the price of electricity is dragged along. Therefore, wind power plants or wind power plants (PLTB) and solar power plants (PLTS) that have been operating for a long time will be directed to enter the fixed tariff scheme.
The Guardian report, quoted Tuesday, April 21, said that the old plant covers almost a third of the UK's electricity market. Renewable energy projects that have been receiving subsidies above market prices will be asked to sign contracts at a fixed electricity price. Through this scheme, Britain is trying to "break the link between electricity prices and gas prices".
This step is one of the bold interventions taken by the British government. So far, when world gas prices rise, electricity prices in the UK are dragged along. In fact, some of the electricity comes from renewable energy whose production costs are more stable. The end result is the same, namely households and businesses that bear the burden.
The British government announced this policy in conjunction with plans to accelerate clean energy projects and encourage the use of electric technology to replace fossil fuels. In his speech, Energy Minister Ed Miliband is expected to confirm that Britain must "accelerate the pace, not retreat, in the clean energy mission." The message was born because in less than five years, Britain was rocked by fossil fuel turmoil twice.
According to The Guardian, old generators or legacy generators will be given the option to join the new contract, similar to the scheme used by the low-carbon project since 2017, or face higher excess profit tax. Simply put, the government wants more electricity supplies to be sold at prices that have been locked in from the start, so that residents' bills are not hit by market spikes.
This idea is actually not new. In April 2022, analysts from the UK Energy Research Centre had proposed it after the Russian invasion of Ukraine triggered a spike in gas prices. They estimated that the policy could save 4 billion to 10 billion pounds per year if market prices remained high.
The problem with Britain is in the way its electricity market works. About 30 percent of the country's electricity still comes from gas-fired plants. Because gas determines the overall market price, rising gas prices immediately drag down electricity prices. This is where the odd thing is: renewable energy, biomass, and nuclear can also enjoy high prices, even though the cost of production does not rise as sharply as gas.
The exemption applies to plants that are already bound by long-term fixed-price contracts, known in the UK as contract for difference. This scheme essentially makes the selling price of electricity more certain. When market prices fall, the government covers the difference. When market prices soar too high, the surplus is returned. So, prices are not left to run wild.
As reported by The Guardian, since the end of 2022, the British government has also imposed a 45 percent tax on electricity sold above 75 pounds per megawatt-hour. The policy came after the war in Ukraine pushed European gas prices to very high levels. However, market pressure has not really disappeared. In recent weeks, wholesale electricity prices have risen again from around 74 pounds to more than 100 pounds per MWh. British officials are concerned that the figure could rise even higher if market disruptions continue into the winter.
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