The UK’s Ofgem, regulator of the electricity and gas markets, has launched a consultation on ways to clear the regulatory burden on local generation projects.

Initial proposals aim to reduce barriers to growth for power stations connected to regional networks, known as distributed energy which can significantly reduce losses. The agency acknowledges that changes to regulation must maintain protection for customers and encourage technological innovation.

The consultation examines a range of options to remove unnecessary barriers for distributed energy projects after a working group was set up by Ofgem in June 2007 to identify barriers and develop solutions.

The joint consultation with the Department for Business, Enterprise and Regulatory Reform (BERR) outlines options for modifying the current regulatory arrangements so that they are more suitable for distributed energy, such as Combined Heat and Power (CHP) projects and small-scale renewable generation.

Energy Minister, Malcolm Wicks, said: “Government has made clear that we want distributed energy to be able to compete alongside the conventional alternatives. Through this consultation we are showing that we mean business. We want to ensure that the regulatory system is fit for purpose; cutting costs and reducing burdens so that new and smaller players can plug into the electricity system and play their part in a lower carbon future.”

Meanwhile Ofgem chief executive Alistair Buchanan commented: “We want to create opportunities for everyone – not just the existing big energy companies – to try out new technologies and commercial arrangements in a bid to discover the most cost effective ways of reducing carbon emissions within the competitive energy market.”

The options set out in the consultation look at measures that could be implemented in both the short and long-term, including: making it easier for local schemes to sell small amounts of electricity in the wholesale market, putting more pressure on Distribution Network Operators (DNOs) to charge in a way that fairly reflects the costs and benefits of distributed generation, inviting electricity companies to come forward with specific proposals to trial ideas that will benefit distributed generators, and making it easier for small operators to be licensed, by allowing licensing obligations to be sub-contracted to another larger licensed supplier.