Posted on: 31/05/2016
Proposals to remove embedded benefits could push up energy costs for manufacturing businesses by £170 million, the Association for Decentralised Energy (ADE) has warned.
The ADE, which represents large manufacturers including Boots and British Sugar, said some businesses could face an extra £3m a year on their energy bills.
The UK Government has asked Ofgem to consider removing embedded benefits, which currently allow generators connected to local distribution networks instead of the larger transmission networks to avoid paying transmission charges.
Ministers are considering scrapping the benefits amid fears that so-called “diesel farms” are using the rules to win more Capacity Market auctions.
But the ADE said local generators – including manufacturers that generate their own power and some renewable energy projects – out-number diesel farms by ten-to-one.
Tim Rotheray, Director of the ADE, said: “Asking a local generator to pay for the transmission network is akin to charging drivers for the use of a toll road even when they took alternative routes.”
Higher costs for consumers too
A report by consultancy firm Cornwall Energy, which was commissioned by the Association for Decentralised Energy (ADE), has suggested that costs for consumers would be higher if embedded benefits were removed.
The report calculated that removing the embedded benefit would have increased the 2015 Capacity Market auction price by £4.73, pushing up the costs to consumer by £214 million.
Peak wholesale power prices would also have risen by between 63p/MWh and £2.84/MWh, in turn pushing up consumer costs by between £10m and £45m.
> Download the report