Holistic approach urged on embedded benefits

A renewables trade body has called for a holistic approach to any reform of the embedded benefits system.

In a letter to regulator Ofgem on the issue, Scottish Renewables warns that incremental change to the charging arrangements will have knock-on effects across the electricity market. It has urged Ofgem to carry out a significant code review with an achievable scope and delivery timescale.

The UK Government has asked Ofgem to consider removing embedded benefits, which currently allow generators connected to local distribution networks instead of the larger transmission networks to avoid paying transmission charges. The move comes amid concern that transmission network charging arrangements may give embedded generators an unfair advantage over those connected to the transmission system.

Concern over sudden switch-off

Scottish Renewables said there is widespread support in the renewables sector for a holistic approach to reform in order to “avoid incremental change with the potential for unintended consequences”.

The trade association said it was “very concerned” about the implications of a sudden ‘switch-off’ of Triad benefit and the impact this would have on existing embedded hydro, wind, biomass, biogas and bio-CHP plants owned and operated by its members.

The letter sets out a number of key issues that Scottish Renewables believes should be fully considered as part of any review. These include:

The value of embedded renewable generation - Scottish Renewables says further work is required to fully understand and assess the value that intermittent embedded generation can provide the system.

The principle of net charging -  the letter points out that the current ‘net supplier model’ recognises that, in the majority of cases, embedded generators do not use the transmission system and generally bring benefit to it by reducing flows being demanded on the main system.

Exporting Grid Supply Points – Scottish Renewables says work is required to ensure generators are exposed to an appropriate price signal

Cost reflective solution urged

“Overall it is important that any change to embedded benefit arrives at a cost reflective enduring solution. Ultimately this should support the growth of renewable energy generation and ensure that the charging regime is fit for purpose for the future energy system,” says the letter
SmartestEnergy has also raised concerns that a piecemeal review of embedded benefits has the potential to create more distortions than it solves.

A report commissioned by UK Power Reserve and carried out by accountancy firm KPMG earlier this year estimated that if embedded benefits were immediately removed then 2.1GW of new distributed generation already in planning would be withdrawn.

> Read the letter in full
> Read SmartestEnergy's blog on embedded benefits