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Electricity transmission charging arrangements for Embedded Generators

Over the past year there has been increasing scrutiny of the revenue streams earned by embedded generation. Ofgem identified ‘TRIAD avoidance’ in particular as an area of concern that was causing distortions to the wholesale, capacity and ancillary service markets and therefore indicated at the end of last year their intention to undertake reform to TNUoS Demand Residual (TDR) charging arrangements.

Ofgem have now published, for consultation, their minded to position and draft Impact Assessment of industry’s proposals (CMP264 and CMP265) to change electricity charging arrangements for embedded generators. This sets out Ofgem’s preferred method for TDR reform, the key features of which are:

  • The level of TDR payments to embedded generators should be reduced to the avoided Grid Supply Point cost. This is estimated to be around £2/kW
  • There will be a gradual phase introduction of the new arrangements over three years from 2018-2020.
  • Reform will apply to both new and existing generators, no grandfathering provisions will be put in place
  • During the transitional period Ofgem have proposed to undertake a targeted charging review to consider the other benefits received by embedded generation alongside the allocation of sunk and fixed costs, including for storage and ‘behind the meter’ generation.

Ofgem are consulting on their minded to position until 10 April ahead of a final decision being announced in May. Ofgem’s announcement is available here.


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