Blame the weather for your energy bill

Reuters News
Posted: Oct 14, 2011 8:18 AM
Blame the weather for your energy bill

By Karolin Schaps

LONDON (Reuters) - Greater reliance on solar, wind and hydro power means that utilities can now blame extreme weather for high electricity and gas bills, a meteorologist at global forecaster WSI told Reuters.

Drought, freezing weather and heavy clouds can all hit household budgets as they restrict output from renewable energy plants.

"It gives the utility companies an easy excuse now, they don't have to blame speculators, it's the weather," said Mark Stephens-Row in an interview on the sidelines of WSI's winter weather outlook presentation, while Britain's energy regulator Ofgem pushed ahead with plans to force suppliers to make energy bills more transparent.

As European governments pursue legally binding targets to cut carbon emissions, renewable energy accounts for a bigger slice of energy production.

In Europe's biggest economy, Germany, power producers are already relying on renewable energy more than ever after the government imposed the immediate closure of eight nuclear power plants with a combined capacity of nearly 9 gigawatts (GW) in the aftermath of Japan's Fukushima nuclear disaster.

"The weather is an even bigger driver now because Germany is relying so much more on its renewables than it used to," Stephens-Row said.

Renewable energy accounted for 20.8 percent of all German power production in the first half of 2011. Solar capacity is forecast to grow strongly, adding another 5 gigawatts (GW) to the market next year, according to figures from German transmission grids.

Prices in the German power market, also Europe's largest, act as a benchmark for many other European electricity markets, which means volatile trading patterns are reflected in neighboring markets the Czech Republic, France, Austria, Switzerland and the Benelux countries.

Stephens-Row said weather which brings drought, sunshine and high temperatures also comes with low wind -- combining factors which restrict hydro storage and boost energy demand with weak wind power output.

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"It's a double whammy. You've got no wind and no rain so all of a sudden you're not generating anything from those resources," he said.

In these cases power suppliers see rising wholesale prices (because demand is high but renewable output low), which are eventually reflected in customer bills, but suppliers can use weather phenomena as a reason for hiking retail prices.

Higher volatility in the energy markets is also likely to attract higher liquidity and growing competition which, in theory, helps keep prices low for consumers.

"Going forward all these countries dashing for renewables is going to produce more volatility," he said.

"Ultimately it does bring more players into the market because there's more opportunities to make more money."