Image: Ofgem.
UK renewables groups have lobbied together to urge Ofgem to rethink ‘unfair’ network charging reforms which could nudge renewables and flexibility projects towards failure.
Earlier this week the industry regulator closed its consulted on Targeted Charging Review proposals which stand to overhaul how network operation and maintenance costs are recouped.
Those proposals, unveiled in November last year, included the controversial addition of fixed charges for final demand network users as well as the end to Embedded Benefits for smaller generators via the removal of Balancing Services Use of System payments from suppliers.
At the time Solar Power Portal reported how solar PV stood to be one of the hardest hit technologies, a fact which even Ofgem pointed to in its own analysis, with solar and solar-plus-storage projects set to witness an increase in network charges “in all cases”.
Anecdotally, some solar asset owners have suggested that cuts to Embedded Benefits payments could trigger a mid-single-digit percentage drop in revenues.
However the industry has voiced more concern over the potential impact the proposed changes would have on new project.
Trade body Regen, which is also responsible for the management of the Electricity Storage Network association, said that the proposals, if enacted in full, would add an extra £4-5/MWh to the costs of operating a typical renewable generator, an increase which could push fledgling projects back two years or even to the brink of failure.
Such a hit to operating costs could also result in a significant delay to the onset of subsidy-free renewables which are currently just around the corner.
Merlin Hyman, chief executive at Regen, said the body supported network cost reforms in general, but Ofgem’s minded-to proposals threatened to “disproportionately affect renewable generation and flexible technologies” and would only “slow down investment in this vital sector”.
“Reducing carbon emissions is a key societal and government policy goal. Ofgem’s failure to make decarbonisation a principle of its reviews of network charging is an egregious failure to meet its statutory and moral duties to protect future consumers,” he said.
The closure of the consultation has also triggered senior representatives from six similar trade associations to co-sign a letter to Ofgem, warning the body of “significant issues” with the fixing of residual charges before forward charges undergo reform.
The letter, signed by leading figures of the ADE, STA, BEAMA, RenewableUK, Tech UK and the REA, said that decoupling the two reviews from each other threatened to leave a “big gap in the market” that could destabilise their representative industries.
“We view these decisions as contradictory to government’s ambition to decarbonise the energy system and create a market for flexibility. Particularly, we are concerned the Targeted Charging Review is misaligned with government plans to achieve a more flexible and low carbon energy system under the Smart Systems and Flexibility Plan,” the letter states.
Chris Hewett, chief executive at the Solar Trade Association, went one further, by arguing that the proposals fail Ofgem’s own fairness test.
“We cannot see how it can be fair that the single occupant of a small flat should pay the same contribution to recovering network costs as a family living in a mansion. And when it comes to the vital issue of carbon, unfortunately once again we are seeing policy penalise companies who have done everything Government has asked of them to reduce their energy use and to invest in smart technologies, like solar and storage.
“Furthermore, the timing of these changes is totally out of sync with any rewards for 'smart' energy use, creating uncertainty for everyone in this important market, and damaging the year-on-year business case."
Responses are to be reviewed and published on 30 April 2019, leading to a consultation decision and policy statement which is currently pencilled in for June 2019.