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Letter: Energy pricing is no longer fit for purpose (1)

Published 19 February 2025

From Rachael Padman, Dalham, Suffolk, UK

As you note, the underlying reason for energy bill spikes in renewables-dominated markets is mainly down to the pricing mechanism, which sets it according to the most expensive generator in the mix, usually gas. It is a relic of a time when renewables were a small proportion of the total, and was created to incentivise them to grow (1 February, p 11).

Now, it provides a perverse incentive not to increase such generation and storage capacity enough to eliminate gas from the mix. Not all European markets suffer from this, with the price of electricity in some much lower than in the UK. There is no reason for the current pricing mechanism to continue.

Issue no. 3531 published 22 February 2025

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