Ofgem cuts payments to embedded generators

UK energy regulator Ofgem today announced a decision to cut the payments to some small generators for producing electricity at peak times.

Most affected by the change will be diesel and small gas, combined heat and power plant, and biomass generators, the regulator said. Together these generators account for roughly one third of the UK's 30-GW embedded generation capacity. The other two thirds, mainly renewable generation, will not be impacted to the same extent because generally they do not receive this payment, Ofgem said.

Embedded generators are connected to the lower voltage distribution networks. Smaller embedded generators of below 100 MW can get payments from suppliers for helping them to reduce their charges to use the transmission network. These payments will be reduced from around GBP 47 (USD 60/EUR 54) per kW currently to between GBP 3 and GBP 7 per kW over three years to 2021.

Ofgem said the move is designed to protect consumers, with the payment having cost them GBP 370 million last year.

"We are concerned that the current level of the payment is distorting the market and is set to increase further," said Ofgem chief executive Dermot Nolan.

(GBP 1 = USD 1.276/EUR 1.141)

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