How the centralised generators are trying to strangle the decentralised energy revolution in the UK

Just as the UK Government has stopped onshore renewables (mainly wind power and solar pv) from getting all-important long term power purchase agreements (PPAs) through the feed in tariff system (the big one being now reserved for Hinkley C), so government agencies are moving to make sure that the rules of the electricity market favour centralised generators over decentralised ones. The Government says that no subsidies will be available for onshore wind and solar pv. Yet it is busy doling out subsidies and altering rules to favour big power stations over decentralised renewables.

In setting the regulations, the Government and the agencies, including OFGEM and the National Grid (NG) clearly seem to favour big power plant over other decentralised options for balancing electricity supply and demand including battery storage and demand side response (DSR). Really these technologies should now be routinely combined with renewable energy schemes to create 'virtual power plant' to deliver energy services for consumers. Yet despite the celebrated Clayhill 'subsidy-free' solar pv-battery project, progress is very slow. The revolution is being held back by the dead hand of the centralised power regime.

The Government's preferred solution of course is lots more large gas fired power plant - and nuclear power plants of course. Yet these technologies are falling behind the newer decentralised ones whose costs and information based technologies are becoming more and more economic. But instead of helping decentralised energy, the Government is pushing more and more subsidies towards the old, centralised, solutions.

This action to roll back the revolution is taking place in the 'boileroom' of the electricity system, with its  the arcane and often impenetrable rules and language of the electricity market, well away from the understanding of the wider public. However various trade and academic reports are flagging how the centralised generators are trying to hold back the decentralised energy revolution by whatever means are possible.

How is this happening? Essentially there are two strands. First there is the way that the so-called 'capacity market' is oriented to favour the interests of centralised power plant, and second is the way that the regulatory incentives are being geared to penalise smaller and more innovative players and to favour the big ones.

Capacity Market (CM)

Matthew Lockwood, in a recent working paper, tells the story of how the CM has largely been shaped to be a riverstream of income for the existing gas and coal and nuclear power plant. First came the decision to reward all existing generators for providing capacity, providing a subsidy for plants that have been built a long time ago. A much cheaper option would have been to operate a 'strategic reserve' that would fund a dedicated set of assets to be brought in to balance supply and demand. But that. of course, would not help the centralised power plant. Of course the mere term 'capacity' is biased against the decentralised solutions which include DSR and battery storage.

Then has come a series of decisions that have given centralised power plant an inbuilt advantage over decentralised options for balancing demand with supply. Cornwall Energy as well as Matthew Lockwood has written about some of these decisions and how they adversely affect the decentralised players.

First, DSR and battery storage are given much inferior terms compared to the big power stations in the CM. Their contribution is deliberately de-rated, subject to expensive monitoring and accorded much shorter contracts compared to the big power plant operators.

Second, OFGEM has issued rules which slash payments earned by distributed generators, that is small generators, through the TRIAD system. This is a mechanism whereby the system rewards companies which can reduce peak power requirements.

Third, the rules seem to favour the big operators even when it comes to providing storage solutions in what is called 'frequency response' services. This is a mechanism that incentivises those who can produce instant remedies to keep national electricity frequencies with a prescribed margin. Yet the decisions of the National Grid in awarding the contracts seem to favour the big boys.

Clearly the dinosaurs are thrashing about to great effect in an effort to delay the decentralised revolution. They will not win the war, but at the moment they are managing to delay the onward march of decentralised energy.

Without doubt they are winning the propaganda war. Any incentives given to renewables are deemed subsidies, whilst the reality is that these subsidies have been eliminated whilst the effective bank of subsidies given to big power station operators is growing rapidly.


For further info, read:

https://theenergyst.com/ofgem-outlines-deep-cuts-to-small-generators-triad-payments/

http://projects.exeter.ac.uk/igov/wp-content/uploads/2017/10/WP-1702-Capacity-Market.pdf

https://www.cornwall-insight.com/newsroom/all-news/latest-frequency-tender-results-exacerbate-battery-challenges

https://www.carbonbrief.org/in-depth-how-smart-flexible-grid-could-save-uk-40-billion