UK cuts support for small-scale energy generation

By Erin Voegele | June 22, 2017

In the U.K., Ofgem has announced it will reduce a specific payment to some small electricity generators receive for producing electricity at peak times. Embedded generators with less than 100 MW capacity, including small-scale biomass generators, are among those impacted.

Ofgem explained that embedded generators are power plants connected to lower voltage distribution networks. Smaller embedded generators with capacities less than 100 MW can receive specific payment from suppliers for helping them to reduce their charges to the transmission network. According to Ofgem, these payments are in addition to the price these generators get for selling their electricity.

The current level of this payment is approximately £47 per kW ($59.62 per kW). That level of payment was forecast to increase over the next four years, reaching £70 per kW. However, Ofgem said it has decided to accept an industry proposal to phase in a reduction of the payment to between £3 and £7 per kW over the next three years, through 2021. The move aims to reduce customer costs.

Ofgem estimates there is approximately 30 GW of embedded generation capacity on Britain’s electricity distribution networks. Those most impacted by the reduced payment levels will be those that can control when they produce electricity, including facilities fueled by diesel and small gas, combined-heat-and-power facilities, and biomass generators. Together, these producers are estimated to account for approximately one-third of embedded generation in the country. 

The U.K. Renewable Energy Association said the cut will damage existing products and the development of new clean tech projects.

“This ruthless cut will be damaging to the development of next-generation flexibility and energy storage technologies,” said Nina Skorupska, chief executive at the RFA. “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,” Skorupska continued. “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 decentralization. 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,” Skorupska said. “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.”