Posted on: 04/12/2018
Ofgem has been accused of “seriously undermining” small-scale renewable energy projects through its proposals to reform grid charges.
Under the regulator’s Targeted Charging Review ‘minded to’ proposals Ofgem is looking at removing the remaining grid charge benefits for small, embedded generation, and making such sites pay balancing charges.
The regulator has also set out its preference to introduce fixed residual charges for all households and businesses rather than charges based on the amount of electricity they take from the grid under the current charging system.
Ofgem, which is seeking views on its proposals, said the need for action comes from the changes in the energy sector.
“The existing approach to reflecting the costs of the electricity networks in the charges people pay is becoming increasingly problematic. The rapid pace of changes in energy mean that the issues with the existing charging structure are likely to become worse over time. Ofgem is therefore taking action to address this and to ensure that network charging works in the interests of current and future consumers as a whole,” it said.
The proposals come on top of the UK Government’s current proposals to end support for new small-scale renewables from next year by closing the Feed-in Tariff scheme.
‘Discriminating’ against renewables
The Renewable Energy Association (REA) accused Ofgem of discriminating against those with existing small-scale renewable assets and said the update “only serves to highlight the disconnect between the need to decarbonise through expansion of decentralised generation assets and the chipping away of support”.
It said the move would have a “very negative impact” on large businesses and manufacturers that had installed renewables.
The REA warned the proposals would disincentivise those planning to install small-scale renewables, which could in turn undermine the UK’s decarbonisation targets.
A final decision on the plans is yet to be made, with any changes coming into force in 2021 or 2022.
Saving only ‘a cup of coffee a year’
Nina Skorupska, Chief Executive of the REA, said: “While our sector accepts the network must be paid for, these proposals would specifically hit homes and businesses which have installed on-site solar, wind, and other generation, as well as energy storage.
“This is clearly the exact opposite of what is needed to decarbonise and provide system flexibility.
“For the price of saving some consumers the equivalent of a cup of coffee (£2) a year, these proposals will make it tougher to build small scale renewables and punish homes and businesses that have taken the socially and environmentally responsible decision to install renewables such as solar.”
The Solar Trade Association also voiced concerns. Chief Executive Chris Hewitt said: “We are naturally concerned that Ofgem’s own analysis shows that its approaches will particularly impact homes and businesses with solar power.
“The regulator’s preferred option, to move away from consumption-based to fixed charges means that the most profligate energy users will be rewarded, while those who take action to effectively manage and reduce their electricity consumption are penalised. Under this option the hardest-hit sector will be the thousands of forward-thinking businesses across Britain who invest in storage and on-site generation.