Renewable generators to receive better deal

The Embedded Generation Working Group, which consists of experts from across the industry, as well as from the gas and electricity regulator, Ofgem, have recommended a raft of measures that need to be reviewed by Ofgem in order to increase incentives for electricity distribution companies to make renewable sources more competitive.

The generators which are affected by the new recommendations are known as embedded generators – those that are connected to the distribution networks of public electricity suppliers, rather than directly onto the National Grid. Most renewable and CHP generators are embedded.

Factors such as high costs and a lack of published information regarding charges and the best or worst places for generators to connect to the network, have meant that there is not a level playing field for small embedded electricity generators, according to the working group. “The full potential for embedded generators will only be realised if incentives for all the key stakeholders are aligned to create the right commercial environment which will enable embedded generation to contribute to a stable and secure network whilst ensuring a diversity of fuel supplies in a more environmentally sustainable manner,” says the group’s report.

The recommendations of the report include:

• the establishment of a charging regime that reflects the distributor’s duty to facilitate competition among generators;
• guidance to distributors to better understand the contribution to the performance of the network by embedded generators; and
• better arrangements for distribution companies to provide charging information to developers of embedded generation, to allow them an informed choice as to the best places in which to locate generators.

“It is vital that we help developers and operators of environmentally friendly embedded plants such as CHP and renewables gain fair access to the distribution network at fair prices,” said Helen Liddell, Minister for Energy. “Consumers are increasingly demanding green sourced electricity. At the same time, cost effectiveness of smaller generation plants is improving all the time.” The minister pointed out that these measures are expected to make a valuable contribution to the Government’s target of producing 10% of electricity from renewables by 2010 (see related story).

“We welcome this substantial report, and we will be considering very carefully its recommendations aimed at enabling embedded generation companies to compete on a level playing field with other, more traditional, generators,” said John Neilson, Ofgem’s Managing Director for Customers and Supply. “During 2001/02, Ofgem will play a leading role in taking forward these recommendations. Issues on which action is likely to be required include charges for embedded generators and a review of the incentives on electricity distribution companies to enable embedded generation to be provided on fair and transparent terms while maintaining security of supply.”

Copies of the report have been sent directly to respondents of previous consultations, and can also be obtained from the DTI publications orderline: 0870 1502 500, fax: 0870 1502 333, or by emailing dtipubs@eclogistics.co.uk, quoting reference number URN 01/505. Copies can also be downloaded from the website.