‘There is a feeling that this system is rigged’

A regulatory loophole in the United Kingdom’s energy market could have households paying far more for electricity during times of low renewable power generation.

What’s happening?

As detailed by the Guardian, the United Kingdom produced a record amount of energy from solar and wind in 2024. Generally, clean power leads to lower utility bills, making it a win for both consumers and the planet, as pollution from dirty fuels is driving Earth’s dangerous overheating.

However, on Jan. 8, Great Britain’s grid operator had to shell out more than £20 million (around $25 million) to keep the power running when high demand amid frigid temperatures coincided with low wind speeds. As a result, the operator had to call on gas power plants to fire up.

Two of the plants — which received 90% of the funds to balance supply and demand — refused to operate unless they received up to 100 times the pay rate compared to normal market prices. The Connah’s Quay plant in North Wales earned £10.3 million in revenue (around $12.8 million), while the Rye House facility north of London raked in nearly £7.5 million (around $9.3 million).

Why is this important?

Prior to Jan. 8, the grid operator indicated that it would need the gas plants to operate in order to meet energy supply, yet the Connah’s Quay and Rye House facilities said they intended to shut down unless they received increasingly higher rates, as reported by the Guardian.

These actions went against “the spirit of the rules, which is to protect bill payers from excessive costs,” according to a source who spoke with the publication. In 2023, industry regulator Ofgem issued new trading rules for power plants to counteract fears the energy generators were profiting off temporary dips in renewable energy supply.

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“Under the rules, power plant owners cannot threaten to cut their generation to zero on the same day they offer to continue running for very high prices. But there is nothing to prevent owners from using this strategy if it gives the grid operator notification of the shutdown a day ahead of time,” the Guardian wrote.

“There is a feeling that this system is rigged,” a commodities trader told the publication after the gas power plants commanded exorbitant fees.

Ofgem hasn’t said whether Connah’s Quay and Rye House officially broke the regulations, but another industry source told the Guardian: “We have suspicions that some traders in the market have been allowed to hold the power system to ransom by using a loophole in the market regulation.”

VPI Power, which owns Rye House, denied violating its market obligations in a statement to the Guardian. VPI and Uniper, which own Connah’s Quay, declined to comment on the matter.

What’s being done about this?

A spokesperson for Ofgem told the Guardian that it would “not hesitate to act” if it determined foul play, adding that it has recouped more than £78 million (around $97 million) in fines and redress since the beginning of 2023.

Pranav Menon, a researcher at Aurora Energy Research, also suggested that Britain’s clean power grid would catch up as the country introduces additional energy storage technologies that can hold renewable power for later use, thus ensuring nonpolluting, affordable energy is available even when the wind isn’t blowing or the sun isn’t shining.

“While a system with greater intermittent renewable capacity is more complex to manage and increases balancing costs during periods of tightness, it also delivers benefits such as lower wholesale prices,” Menon said.

Households with their own solar panels can also tap into the benefits of battery storage by installing a home system, ensuring they have access to low-cost power during grid disruptions.

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