Comment by russss

Pretty much all electricity markets worldwide set the unit price based on the the cost of the "marginal" (most expensive) generator running during each time period. It's a weirdly common misconception that the UK is unique in doing this.

If you paid generators what they bid, then they're incentivised to manipulate their bids to try and make the most money, distorting the market.

Almost all the wind farms and many solar farms in the UK operate under the "contract for difference" system, where they're guaranteed a fixed price per unit and have to pay back any income above that. So a lot of the money paid is clawed back through that method.

The reason the UK's electricity has been expensive over the last few years comes down to:

  - Shutdown of several nuclear plants without any replacement
  - Shutdown of coal plants and replacement with gas
  - The Ukraine war affecting gas prices
  - Clean energy surcharges on bills (which hit electricity bills a lot harder than gas bills, regardless of how clean the electricity is...)

There will be a bunch more renewables coming online soon which will hopefully start crowding out gas and driving the price down more regularly, so hopefully prices will start dropping faster soon.