There is seemingly endless activity on network charging with several consultations and code reviews. To try and make sense of all this, we ran an event ton 22 January to hear directly from Ofgem and industry leaders on how the changes will affect the industry. The key concern from industry was the impact on business models due to the removal of embedded benefits.
A point of contention raised at our event was the lack of consideration of carbon emission reduction. Ofgem consider their primary aim to be reducing costs for the consumer and that network charging signals should create an efficient network which enables that low cost. They are therefore ‘agnostic’ on the type of technology that reduces network costs, arguing that by creating a level playing field, influences beyond the remit of network charging will ensure this coincides with decarbonisation.
By maintaining this narrow focus, the broader consequences for renewables and flexible technology are missed. At the event, we heard that the reduction of embedded benefits could result in increased costs of around £5/MWh and that the uncertainty created by the review is pushing back subsidy-free solar sites by two years. Combined with previous reductions to embedded benefits and Triad income, reductions in subsidies and broader barriers for new-build renewables and storage, it is difficult to say that there is a true level playing field – Ofgem should be taking such considerations into account when making integral changes to network charging.
We will ensure these messages are conveyed in our consultation response to the Targeted Charging Review. We are still engaging widely on this response and Ofgem have indicated that evidence is crucial when responding to the consultation, so if you have any figures you are willing to share on the impact of these changes, please do get in touch.