Under Ofgem’s final decision on its Targeted Charging Review (TCR), fixed charges will be applied to all households and businesses to recuperate residual charges while some embedded benefits for generators will be scrapped.
Sub-100MW generators will no longer be able to receive payments from suppliers for reducing their so-called Transmission Demand Residual payments.
The reforms, due to be implemented in 2021, are designed to save consumers up to £300m per year.
Ofgem claims applying fixed charges will spread the cost of recovering residual charges more fairly.
Renewable trade associations however said reform to embedded benefits would see smaller distributed generators lose out.
The Solar Trade Association estimated the reform could entail a potential loss of £2.50 per megawatt-hour in revenue for solar PV.
The Renewable Energy Association said Ofgem’s announcement undermined the move towards a more flexible power system.
“As embedded generation types such as onshore wind and solar become ever-more affordable and widely deployed, and fossil fuel generators come offline, the future grid charging and access regime will need to properly incentivise flexibility technologies – mainly energy storage and demand response,” said chief executive Nina Skorupska.
Ofgem meanwhile has rowed back from proposals to end the exemption for sub-100MW generators from paying generation balancing services charges.
The regulator has asked National Grid ESO to launch a second Balancing Services Charges Taskforce with the aim of determining who should pay for the charges.
The taskforce is due to report its findings early next year.
“Although we welcome the fact that Ofgem has listened to industry’s calls to modernise the way network charges are redistributed across the grid, we are concerned that today’s announcement risks damaging the UK’s ability to deploy cheap renewables as fast as possible for consumers,” said RenewableUK policy head Rebecca Williams.
“For example, just setting up yet another taskforce does very little to mitigate uncertainty for the energy industry and kicks the can down the road,” she added.
