Small-scale electricity generators’ support slashed

29 June 2017

It has been confirmed that energy regulator, Ofgem, will cut payments made to small-scale electricity generators. The original consultation in spring proposed reducing the benefit to around £2/kw. However, it has been announced that the main rate (TDR) payment will be cut from £45/kw to between £3/kw and £7/kw, phased over three years from April 2018 to April 2020. This applies to all existing and new-build embedded generators and storage devices (not applicable to those behind the meter however).

Industry advisory panels that recommended the proposals were comprised of mainly large-scale power developers and large utility companies. When the proposed changes were announced, small to medium sized developers, utilities, and operators were deeply concerned, as were developers of new flexibility technologies that the Government’s National Infrastructure Commission has in the past expressed support for.

The Renewable Energy Association (REA) and allies have continuously campaigned against the move to reduce or remove the embedded benefit and fought off previous such attempts, but alas, this change couldn't be successfuly halted and will now proceed. There may be a small silver lining in the increase to the final payment from that originally proposed, as a result of National Grid updating their forecast of avoided costs.

This cut is in addition to the over a dozen negative policy changes that the renewable energy and clean tech industry has endured over the past 18 months.

Dr. Nina Skorupska CBE, Chief Executive at the REA said: “This ruthless cut will be damaging to the development of next-generation flexibility and energy storage technologies. Additionally, several gigawatts of already installed renewable generation capacity will be negatively impacted. This comes on top of 18 months of damaging and sudden policy changes to the sector which are not only hammering the financial viability of new low-carbon projects, but now the viability of existing ones now too.

“This move will clearly benefit larger, incumbent companies compared to the innovative renewable energy players that have burst onto the market in the past decade.

“This decision flies in the face of where the market is headed. Other nations are actively supporting the deployment of embedded renewable generation and further decentralisation. They see this as leading to a grid that is cheaper, cleaner, and will strengthen jobs and consumers.

“Many manufacturing sites across the country have chosen to strengthen their bottom lines and reduce their carbon footprint by investing in onsite energy generation. Despite government rhetoric about supporting manufacturing through the Industrial Strategy, these sites too will be impacted by increased costs, potentially in the millions of pounds for larger installations.”

Not known for giving up, the REA will be raising this in a Director-level meeting with Ofgem next week.