Remarkably, on the day thousands of schoolchildren protested in Parliament Square to demand Government action on climate change, the energy regulators, OFGEM were sharpening their knives to cut down renewable energy and boost large gas fired power plant. They are doing this by sneakily changing a couple of difficult to understand regulations governing electricity transmission and network charging. These are things that the children, OFGEM hope, won't notice! The costs of renewable energy could be increased by up to 20 per cent in some cases as a result.
For OFGEM renewables are a big problem and large gas fired power stations, evidently, are a big solution. In the conclusions to their so-called 'Targeted Charging Review' their proposals will end regulations that have encouraged local, that is 'embedded' generation, and bring in different regulations that benefit large, centralised combined cycle gas turbines (CCGTs).
In order to understand this apparent eco-destructive atavism you have to understand how the big utility players and their friends in the Government/regulatory apparatus have been frustrated that their attempts to subsidise large gas fired power stations through their 'capacity mechanism' have failed to produce new CCGTs.
The capacity mechanism is supposed to ensure that there is sufficient 'firm' capacity at all times. A big reason that CCGTs have not won contracts under these capacity mechanism auctions is simply that they cost too much compared to so-called 'embedded', decentralised generation. The generators that have bid the lowest prices in the auctions to fill the capacity market have been small generators of various types.
Some of the winners of the capacity mechanism contracts, controversially, have diesel generators. Even though it would be simple to just penalise diesels and let small gas fired plant (which are much cheaper and much more flexble than large CCGTs) anyway so the job, the Government, sorry OFGEM, has decided instead to penalise all small generators, including all renewable energy schemes. This is done by a) altering the way capacity is charged on the electricity system, and also by b) removing the ability of 'embedded' generators to contribute to reducing the need for peak transmission capacity (abolition of 'triad' charging).
But the impact on renewables will be especially severe. Increases in the cost of renewables seem likely as a consequence to range from 10-20 per cent depending on the technology and area of the country in which they are sited. Before this change there were reasonable expectations that in the next round of bidding for offshore wind generation contracts auction prices for offshore wind would drop below £50 per MWh. That would be very good given that recently wholesale power prices have been running at around £60 per MWh. Now it could well be that there will be no contracts for difference (CfDs) awarded for offshore wind because no projects will be able to bid under the Government's 'cap' of £56 per MWh.
But, whilst renewable energy projects will be put out of business, there a bit more chance that we'll get some large gas fired power stations. What, OFGEM preparing for the decentralised energy revolution. You must be kidding!
Postscript
Quote from the introduction in OFGEM's document....you get the drift.....
'These current arrangements encourage users who can afford to invest in on-site generation, Demand Side Response or storage to reduce their exposure to residual charges. Where this change in behaviour is in response to market prices or forward charges recover the total costs of balancing the system in each half hour and other system costs, and are generally difficult to anticipate, and hence provide limited forward-looking signals to network users on how they can affect their contribution to these charges. Where these activities are prompted by residual charge avoidance, they will not reduce costs for the system, and in some cases may add to them. These activities will also push residual charges up for other users. We do not think this this is a fair outcome – all users should contribute to the ongoing costs of the network infrastructure in exchange for the benefits it provides' (page 9-10)
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/766791/QEP_Q3_2018.pdf (see pages 28-29)
Some other sources:
https://www.ofgem.gov.uk/system/files/docs/2018/11/targeted_charging_review_minded_to_decision_and_draft_impact_assessment.pdf
https://cdn.ymaws.com/www.renewableuk.com/resource/resmgr/policy_uploads/TCR_Response_SR_RUK_FINAL.pdf
http://projects.exeter.ac.uk/igov/wp-content/uploads/2019/02/Exeter-EPG-response-to-Ofgem-Targeted-Charging-Review-Feb-2019.pdf
http://projects.exeter.ac.uk/igov/new-thinking-the-embedded-benefit-saga/
https://www.smartestenergy.com/info-hub/blog/targeted-charging-review-how-will-it-affect-embedded-generators/
https://www.blog.renewableuk.com/post/the-targeted-charging-review-for-dummies
https://www.businessgreen.com/bg/opinion/3070296/ofgems-targeted-charging-review-shows-a-disregard-for-the-governments-energy-policy
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