That was another good piece, Gerard! So important to be reminded of the arguments and you always add an angle. Repetition's a good thing. Going to delve into the electricity pricing mechanisms - the new proposals. And also the environmental costs of LNG infrastructure. Italy wants terminals but NIMBY's the roadblock.
Korea offers a cautionary mirror here. Like Europe, Korea is heavily exposed to gas — but with an added vulnerability: it imports virtually all its gas as LNG, with no pipeline alternative. Since LNG-fired plants are the marginal price setter in Korea's wholesale market for most hours, every spike in spot LNG prices feeds directly into the system marginal price. The policy response has not been market redesign but regulated tariff freezes, forcing KEPCO to absorb the gap between rising wholesale costs and frozen retail revenue — roughly 43 trillion won in cumulative operating losses since 2022. Europe is right to ask how to make electricity cheap, but Korea's experience shows that the mechanism matters as much as the price level: suppressing the number without fixing the cost structure just moves the crisis onto the utility's balance sheet.
Ok quite irritated I bothered to read this. But I am sitting around in frigging airport waiting for broken plane to get fixed, so I have time to kill. Now Gerard this really irritated me because you are saying something that has been said far more eloquent by others for ages. Why not bother to read that first and then ponder if you have anything original to say. If not hold your peace.
I'm now more curious about why Finland is at the top of this list. I live here. Would be VERY interesting to read about that - perhaps Germany and other can replicate its success?
Those who question why expensive natural gas power plants set the price—why don’t you apply the same logic to corn, coffee, or oil? Am I missing something?
On your second point, it is worth noting that solar and wind generation is very predictable from year to year - plus or minus a couple percent, at most. This contrast with hydro, oil and gas, with availability and pricing fluctuating greatly from year to year.
A big issue faced by both UK and Germany is that the procurement of renewable energy sources is heavily controlled by the rules of the auction or purchasing systems.
Our company is rolling out full wind/solar/BESS systems across africa and this provides power stabilisation but also lowers the cost especially on a system level.. and yet we would not be "allowed" to build projects like this in the UK or Germany as the authorities specify technology by technology who gets a tarrif.
They should kill all this overcomplex system and just put out auctions (technology agnostic) specifying power quality and CO2 (if they want) and first come first served with the lowest cost projects.
Great seeing you at the Alexa Capital dinner. It is sad to see how the "Industrial Heart" of the 20th century is currently being hollowed out by a 19th-century market philosophy (marginal pricing) and a 21st-century geopolitical crisis (just the beginning as petro-states lose their edge). The current European energy policy is effectively an economic suicide pact with a "pay-as-clear" wholesale marginal pricing model that incentivises speculation over anything else. Any policy that does not prioritize the consumer and has clear objectives on the type of infrastructure investors to appeal to under a regime of minimal, intelligent intervention is destined for obsolescence. I think we know what needs to be done. The question is how to make it happen within the current political landscape. I’m open to being my two cents to a holistic a resolution.
Fully align. I would add to the necessary steps to seek further interconnection and market alignment across Europe, enabling each country to profit from the flexibility and strong points each geography has to offer (e.g wind from n sea, solar from southern Europe, nuclear from france, hydro from the north, etc). Thus creating a more robust system less affected by weather volatility due to interconnecting of largely uncorrelated weather systems
Agreed BUT that takes a lot of time and there are solutions such as plug-in-solar, batteries and applications of digital technologies that can happen much faster
That was another good piece, Gerard! So important to be reminded of the arguments and you always add an angle. Repetition's a good thing. Going to delve into the electricity pricing mechanisms - the new proposals. And also the environmental costs of LNG infrastructure. Italy wants terminals but NIMBY's the roadblock.
I hope we do ‘real’ change in electricity pricing mechanisms..
Korea offers a cautionary mirror here. Like Europe, Korea is heavily exposed to gas — but with an added vulnerability: it imports virtually all its gas as LNG, with no pipeline alternative. Since LNG-fired plants are the marginal price setter in Korea's wholesale market for most hours, every spike in spot LNG prices feeds directly into the system marginal price. The policy response has not been market redesign but regulated tariff freezes, forcing KEPCO to absorb the gap between rising wholesale costs and frozen retail revenue — roughly 43 trillion won in cumulative operating losses since 2022. Europe is right to ask how to make electricity cheap, but Korea's experience shows that the mechanism matters as much as the price level: suppressing the number without fixing the cost structure just moves the crisis onto the utility's balance sheet.
Well said! The answer is simple: break the addiction to LNG
Ok quite irritated I bothered to read this. But I am sitting around in frigging airport waiting for broken plane to get fixed, so I have time to kill. Now Gerard this really irritated me because you are saying something that has been said far more eloquent by others for ages. Why not bother to read that first and then ponder if you have anything original to say. If not hold your peace.
Bruce, others may have said what I have said more eloquently but they had no impact otherwise we would not be in this mess…safe travels
Totally agree, Bruce! Laughing!
I'm now more curious about why Finland is at the top of this list. I live here. Would be VERY interesting to read about that - perhaps Germany and other can replicate its success?
Those who question why expensive natural gas power plants set the price—why don’t you apply the same logic to corn, coffee, or oil? Am I missing something?
I couldn't agree more Gerard!
On your second point, it is worth noting that solar and wind generation is very predictable from year to year - plus or minus a couple percent, at most. This contrast with hydro, oil and gas, with availability and pricing fluctuating greatly from year to year.
A big issue faced by both UK and Germany is that the procurement of renewable energy sources is heavily controlled by the rules of the auction or purchasing systems.
Our company is rolling out full wind/solar/BESS systems across africa and this provides power stabilisation but also lowers the cost especially on a system level.. and yet we would not be "allowed" to build projects like this in the UK or Germany as the authorities specify technology by technology who gets a tarrif.
They should kill all this overcomplex system and just put out auctions (technology agnostic) specifying power quality and CO2 (if they want) and first come first served with the lowest cost projects.
Great seeing you at the Alexa Capital dinner. It is sad to see how the "Industrial Heart" of the 20th century is currently being hollowed out by a 19th-century market philosophy (marginal pricing) and a 21st-century geopolitical crisis (just the beginning as petro-states lose their edge). The current European energy policy is effectively an economic suicide pact with a "pay-as-clear" wholesale marginal pricing model that incentivises speculation over anything else. Any policy that does not prioritize the consumer and has clear objectives on the type of infrastructure investors to appeal to under a regime of minimal, intelligent intervention is destined for obsolescence. I think we know what needs to be done. The question is how to make it happen within the current political landscape. I’m open to being my two cents to a holistic a resolution.
I am in agreement with you!
Fully align. I would add to the necessary steps to seek further interconnection and market alignment across Europe, enabling each country to profit from the flexibility and strong points each geography has to offer (e.g wind from n sea, solar from southern Europe, nuclear from france, hydro from the north, etc). Thus creating a more robust system less affected by weather volatility due to interconnecting of largely uncorrelated weather systems
Agreed BUT that takes a lot of time and there are solutions such as plug-in-solar, batteries and applications of digital technologies that can happen much faster