'Damaging': Renewables sector slams proposed Ofgem energy network reforms.

Plans to reduce embedded benefit payments for small power generators risks undermining rollout of clean, cheap and flexible energy grid, warn critics

The UK renewables sector has responded angrily to the outcome of an Ofgem review aimed at reforming the electricity network, with green energy figures claiming the regulator's proposals amount to a "trashing of the business case for renewables and flexibility".

In a long-awaited final decision today, Oftem said it would press ahead with changes to the payment regime where smaller electricity generators on the distribution network receive money from energy suppliers for exporting their energy to the local power network during peak times.

These so-called 'Embedded Benefits' are paid to larger and smaller generators - including some wind, solar, energy from waste, and combined heat and power installations - in a bid to help reduce net electricity demand at times of peak use.

But following Ofgem's Targeted Charging Review (TCR) today, the regulator said it planned to reduce the payments for smaller generators with a capacity of 100MW or less, a move UK clean energy trade bodies said risked damaging the rollout of cheap, clean, and flexible energy projects.

Tom Steward, regulation and compliance manager at green electricity supplier Good Energy, offered a stinging assessment of Ofgem's decision, which he said would harm renewables and the emerging flexible grid services sector and "put up energy prices for some of the most vulnerable in society".

Ofgem argues the energy system is "undergoing radical transformation" with more intermittent clean power sources coming online which require a more flexible grid, and it believes changes to the Embedded Benefits regime need to be made to ensure generators and technologies on the grid are fairly remunerated.

It therefore plans to remove the Transmission Generation Residual payment for larger generators, as well as reducing Embedded Benefit payments for some smaller generators, it announced today.

Part of the TCR also examined the 'residual charges' which recover the fixed costs of providing existing electricity pylons and cables and are currently estimated to make up around 10 to 15 per cent of an average user's energy bill. Those charges will now be levied in the form of fixed charges for all households and businesses, Ofgem said.

But Nina Skorupska, chief executive of the Renewable Energy Association (REA), said while the industry accepted that the system for how generators pay to connect and use the grid needed to change, Ofgem's reforms would only serve to undermine the move towards a more flexible power system.

"As Embedded Generation types such as onshore wind and solar become ever-more affordable and widely deployed, and fossil fuel generators come offline, the future grid charging and access regime will need to properly incentivise flexibility technologies - mainly energy storage and demand response," she explained. "These reforms mean that businesses and homes which have taken responsible steps to install low carbon technologies will effectively pay more to use the wires needed to support the system."

Ultimately, she said Ofgem's decision would "negatively impact subsidy-free renewables" and risked "further shrinking the pipeline of new projects".

Also joining the chorus of criticism, RenewableUK's head of policy and regulation Rebecca Williams suggested the reforms would undermine the renewable energy sector's ability to attract much-needed investment to help deliver a net zero economy in the UK.

She said that as a regulator, Ofgem's remit should specifically include decarbonising the UK energy system, so as to guard against perverse outcomes from any reforms that inadvertently result in higher emissions or delayed clean energy deployment.

"Although we welcome the fact that Ofgem has listened to industry's calls to modernise the way network charges are redistributed across the grid, we are concerned that today's announcement risks damaging the UK's ability to deploy cheap renewables as fast as possible for consumers," she said. "We need to pull out all the stops to deliver the low carbon transition. Ofgem's current remit takes no account of this and that is why a clear change in strategic direction is needed to make it fit for purpose."

21 November 2019

businessGreen