Green generators hope for better deal.

Renewable energy generators are hoping to benefit from changes to the way in which they are charged for connecting to local electricity distribution systems. The present arrangements create barriers that are restricting the growth of renewable electricity supply in the UK. They are thus unwise and unfair - and discriminatory, say smaller generators producing power from green sources such as wind, landfill gas, small hydro and solar PV.

Now Ofgem, the Office of Gas and Electricity Markets, has announced that it is to “review the structure of regulatory incentives” on the companies that run the electricity distribution systems into which such generators are embedded. The review will pay particular attention to price controls and connection charges, and so ensure “that there is no discrimination against embedded generation”.

Brian Wilson, the energy minister, has also announced the creation of a new Embedded Generation Co-ordinating Group, under joint DTI and Ofgem chairmanship. “Small environmentally friendly generators have a crucial role in the UK’s green revolution,” said Wilson. “Failure to address the barriers to small generation could compromise the government’s renewable and CHP targets for 2010.”

With the right incentives, small scale eco-friendly generation could grow to reach several per cent of national supply within 10 years. At present, however, the workings of the system act as a real disincentive. “Small embedded generators with a few kilowatts of capacity are very unfairly treated, with most companies buying electricity for as little as a third of what they sell it for,” according to Dan Davies, director of engineering with Solar Century. His London-based company, which has launched a high-profile drive to promote photovoltaic (PV) roofs, has welcomed the latest government announcement. “I am hopeful that they will come up with something of value to small generators,” Davies says. “The main thing we are looking for from all this is the right to sell electricity at a fair rate.”

Different considerations apply to larger embedded generators, such as wind turbines, that are producing on the megawatt scale. Their main objection is to the very high infrastructure charges they have to pay on connection. These amount to an upfront charge reflecting the entire cost not only of the connecting cables and transformers, but of all ancillary changes to the network.

Arthur Cooke, embedded generation co-ordinator at Ofgem, said that with new demands being placed on the system, a new regulatory approach was called for. He emphasised, however, that “favouring any one sort of generation over another” was not part of Ofgem’s remit. “We are levelling the playing field, not tilting it in anybody’s favour. So if we find an inappropriate market barrier or a perverse market incentive or discrimination against anybody, that is something we must address. But if there is to be a subsidy created for renewable energy, that is a matter for Government.”

Oliver Tickell

Ofgem, 020 7901 7000; www.ofgem.gov.uk
Solar Century, 020 7803 0100; www.solarcentury.co.uk

16 September 2001

Oliver Tickell