Regen’s Local Energy Coordinator, Ky Hoare, attended Ofgem's local energy and the energy system transition conference last week to hear their thinking on local energy and find out more about how their proposed changes in the Targeted Charging Review (TCR) will affect communities. Regen have now responded to the Ofgem's consultation on the TCR, looking at reforming charges for network infrastructure and raised several points, as follows:
Decarbonisation should be a key objective and by leaving it out, Ofgem are not meeting their duty to protect consumers in the long run.
The 'fixed charge' option means costs will be based on user type, so consumers who have reduced their carbon impact with onsite generation or reducing demand are most affected. Houses with solar PV and battery storage would be paying almost £40 per year more for the network and schools or community centres with rooftop solar could be paying around £900 per year more.
By removing incentives to reduce energy demand or generate onsite, by increasing balancing system charges for assets connected to the distribution network and by cutting embedded benefits payments, the proposed changes will mean higher costs, greater uncertainty and even less deployment of new renewable energy.
At their event, Ofgem were keen to stress the opportunities in local energy and that they were willing to take on feedback from consultations and events, these were their key messages:
TCR changes are about ensuring the costs of reinforcing the system don't fall on those who can't engage in it. This follows on from the removal of Embedded Benefits payments for renewable generators, as they weren't reflective of real network savings.
Access and forward looking charging will vary more based on how you use and how much you save the system, so local energy systems should pay less.
Ofgem are looking for a better way of allocating capacity, rewarding people who use the network efficiently and reducing risk of stranded assets.
They're going to look at shared access rights, e.g. if a community scheme had 2 different sites, they could coordinate generation between them and pay single price for connection.
They want to remove barriers to flexibility and won't be regulating this too heavily yet.
Ofgem are reviewing arrangements for the future energy retail market with government to allow more specialisation and innovation in services offered, e.g. reduce retailer requirements or allow multiple suppliers to one consumer.
The forward-looking charging review won't reach a decision until next year, and that gap creates uncertainty for community projects and may make it more difficult to secure finance.
All these changes will be fully implemented by 2023 but Ofgem are still considering timescales.