HomeDecentralized EnergyCogeneration CHPADE slams decision to remove subsidies for small-scale generation

ADE slams decision to remove subsidies for small-scale generation

The UK’s energy regulator announced proposals on Wednesday to reduce subsidies to some small-scale power producers that provide back-up electricity during peak demand.

The government says the move could cut household bills by about à‚£20 a year but has been criticised by the Association for Decentralised Energy who believe the move could ‘significantly damage smaller, local generators (eg combined heat and power providers) from hospitals and universities to industrial manufacturers.’
ADE Director Dr Tim Rotheray
Consumer electricity prices are under scrutiny in Britain after some of the big six providers, including Innogy-owned Npower and Iberdrola’s Scottish Power, announced price rises this year.

Ofgem said that lowering the subsidies could cut bills because their cost is included in overall network fees charged to power companies, which they pass on to consumers.

Under the changes proposed by regulator Ofgem, power generators with less than 100 megawatts of capacity embedded into local power grids would see payments they receive for providing electricity during peak demand reduced drastically to à‚£2 per kilowatt (kW) from about 45 pounds/kW.

Large power producers have said that the subsidies are too generous and distort the market. Ofgem said the changes could save customers up to 7 billion pounds by 2034, equating to about 20 pounds a year per household, and would be phased in over three years from 2018.

However consumers will be left footing the bill according to the Association for Decentralised Energy said.

ADE Director Dr Tim Rotheray said:”Ofgem’s proposal will support increased coal generation at the expense of the smarter, more flexible and innovative energy solutions we should be supporting.

“Ofgem has depended on a rushed industry review, led by large coal and gas generation interests, and has not undertaken the kind of robust evidence gathering that we would expect for a decision worth hundreds of millions of pounds. Ofgem’s assumptions for consumer savings are entirely dependent on new large gas power stations being built, an assumption which was not born out by the last capacity market auction.

“Ofgem’s approach could just as easily result in higher energy costs for everyday householders, and the consequences for industrial manufacturers, hospitals, and local authorities who generate their own power could be devastating.

“Ofgem CEO Dermot Nolan’s statement yesterday that Ofgem will launch a wider, more formal review on network charging is welcome. We call on Ofgem to take a more cautious approach now, with more protections for existing generators and a lower reduction of the embedded benefit, until they have undertaken that fuller review. We will be considering Ofgem’s proposal in more detail to better understand the potential risk to consumers, industrial manufacturers, and public services.”

So-called embedded generators have grown rapidly over the past few years thanks to rules that let them avoid the costs of using and maintaining the national transmission network.