New report reveals renewable projects could lose £15 per MWh due to regulatory changes

A new report issued today by SmartestEnergy forecasts that renewable projects could lose up to £15 per MWh by 2023 due to the combined impact of Ofgem’s proposed embedded benefit cuts and the Targeted Charging Review (TCR). The changing regulatory landscape could place future renewable investments at risk, but the energy industry is already demonstrating its resilience by finding ways to counteract this.

The report titled, The Future Energy Stack: Driving Value in an Uncertain Future, has been compiled using a mix of survey responses and qualitative feedback from owners, operators and developers of renewable technologies. It explores how the industry is responding to regulatory changes, focusing on the different ways in which the commercial benefit of renewable assets can be optimised to maximise income.

One key finding is that, despite the cost impact of regulatory changes, many asset owners and developers continue to push forward with renewable projects. They are discovering new ways to deliver commercial benefit and maintain green growth momentum: more than two thirds (68%) of UK generators who responded to the SmartestEnergy survey said that they were already taking positive action to adapt to a changing commercial landscape, with more than half (59%) negotiating better power prices through Power Purchase Agreements (PPAs) and 41% exploring the use of ancillary services, such as participation in balancing schemes.

As well as providing an in-depth analysis of the potential opportunities that lie in the wholesale market, battery storage, the Capacity Market and Balancing Mechanism, The Future Energy Stack report examines inconsistencies in the payment of Renewable Energy Guarantee of Origin certificates (REGOs) in the UK. REGOs are vital for the traceability of renewable supply in the energy mix – and could become increasingly important as our reliance on renewable energy grows – but around two thirds (62%) of generators currently receive no or limited payment for their REGOs.

Chris Smith, Head of Renewable Sales at SmartestEnergy, said, “Faced with reduced incomes, regulatory change and an uncertain future, it’s vital that renewable generators re-evaluate their assets and explore every opportunity to maximise value. Renewables are crucial to our low carbon future, so generators who can take control of revenues during this difficult time stand to see great commercial success at the end of it.”

Mark Knights, Director of Power Portfolio Management at Viridor said, “While there are challenges ahead, it’s clear that the long-term outlook for renewables is good. There is a lot of resilience in the industry and as long as we’re prepared to adapt and find new revenue streams, the golden age of renewables is still ahead of us.

A full copy of the report can be downloaded here.