Interconnectors unfairly advantaged in energy market

“Uneven playing field” with interconnectors damaging to UK generators

Interconnectors are being unfairly advantaged in the energy market compared to indigenous generators, Uniper’s UK chairman has warned.

In an interview with Utility Week, Felix Lerch said interconnectors “are not competing on even terms with generators. That should be addressed.”

Lerch said the disparity comes because interconnectors can benefit from access to market payments such as contracts for difference and capacity market contracts, but they are not subject to the system charges which apply to generators.

“They don’t pay carbon floor price, nor for transmission losses. They don’t pay any transmission charges. That leaves interconnectors at an advantage when compared to indigenous generators,” said Lerch.

He continued: “It is not right at the one end you are a network operator – but you are competition with a generator. But not on the same terms. Only because I label something different does not make it right to have an uneven playing field as far as I am concerned.”

Lech recognised that interconnectors are an important part of the energy mix,” but he urged government and the regulator, Ofgem, to address the unlevel playing field.

In addition to raising concerns about unfair competition arrangements for interconnectors, Uniper has also contributed to Ofgem’s review of embedded benefits for distributed generation.

Uniper is concerned that “double benefits” for operators of diesel reciprocating engines and open cycle gas turbines are undermining the ability of the capacity market to deliver emissions reductions and bring on new generation capacity.

“Recips do not have the same cost structure in terms of what they have to pay,” he told Utility Week. “They have an additional subsidy that other generators do not get and they do not provide benefits in terms of emissions.”

He concluded: “It is not a level playing field…There must be a level playing field and a fair allocation of costs.”

Utility Week understands that Ofgem will publish its final decisions on reforms to embedded benefits on Monday 27 February.