Slashed embedded benefits won’t favour coal

Ofgem’s proposal could protect gas assets but won’t “support coal”, says Uniper

Changes to the embedded benefits regime for distributed generation will not lead to a renewal of coal-fired power in the UK, Uniper’s UK chairman has told Utility Week.

Ofgem revealed its plans to slash the so called embedded benefits available to distributed generators yesterday.

The news provoked complaints from bodies like the Association for Decentralised Energy, which said the move will lead to a renewal of coal-fired power and disadvantage new energy players.

The Association’s director TimRotheray said: “Ofgem’s proposal will support increased coal generation at the expense of the smarter, more flexible and innovative energy solutions we should be supporting.”

Felix Lerch, UK chairman of the conventional generation and energy trading firm Uniper, denied this.

“We don’t believe the proposal is likely to support coal or disadvantage other energy solutions – but it may well avoid the need for unnecessary closure of gas assets,” said Lerch. “Ofgem’s proposal is about providing a level playing field for all generation types, which in turn will lead to lower bills for consumers.”

Lerch added that he welcomed Ofgem’s “minded-to” decision on embedded benefits cuts, which are in line with recommendations put forward by the Connections and Use of System Code (CUSC) panel.

However, he urged Ofgem to move even faster than it has suggested in order to implement the changes.

“Ideally, we’d prefer the proposal to be implemented immediately rather than following a three-year phased approach, so that consumers can benefit from lower bills more quickly,” he explained.

Other commentators have claimed however that Ofgem’s review of embedded benefits and the conclusions it has drawn have been rushed. They say this risks negative unintended consequences in the energy system.

There have also been claims that the CUSC panel used to recommend changes to the embedded benefits regime is dominated by large, established companies and is unrepresentative of a diversifying and decentralising system.

Tim Emrich, chief executive of UK Power Reserve, for instance, called the CUSC panel “mafia-like” and complained that his organisation was not listened to during consultation on the panel’s recommended findings.

Again, Lerch knocked back these protests.

“The working group which looked at possible changes to embedded generation benefits reflected a wide range of industry views, with two thirds of the members representing small, embedded generation interests,” he stated.

With regards to the process being rushed, he observed that it took almost six months to complete.

Read Utility Week’s recent interview with Felix Lerch here.