Ofgem review of embedded generation benefits

Ofgem have published their “minded to” decision and draft impact assessment of industry proposals (CMP264 and CMP265) to change the electricity transmission charging arrangements for Embedded Generators. 

Over the past year, Ofgem has highlighted concerns about the electricity transmission network charging arrangements for smaller Embedded Generators (EGs), including the exemptions and payments collectively referred to as ‘Embedded Benefits’. Ofgem has previously indicated that the ability of a supplier to use sub-100MW (‘smaller’) EG to reduce transmission use of system charges, and for smaller EG to be paid to help others avoid them, is a distortion. Ofgem indicated in July and again in December 2016 that one element – specifically the TNUoS Demand Residual (TDR) – was a significant cause for concern. The industry has raised modifications CMP264 and CMP265 to address these distortions. Ofgem has published an impact assessment that covers those modification proposals.

https://www.ofgem.gov.uk/system/files/docs/2017/03/minded_to_decision_and_draft_impact_assessment_of_industrys_proposals.pdf

Ofgem’s provisional view is that the level of TDR payment to smaller EG should be reduced to the level of avoided Grid Supply Point (GSP) costs, and introduction of the new arrangements should be phased over the three years from 2018 to 2020. Ofgem has invited stakeholders’ views on this draft impact assessment and on their “minded to” position.