Alarm over ‘profound impact’ of energy charging plans

PROPOSED changes to energy generation rules could trigger higher household bills, increase costs for hospitals and land British industry with a £170m bill.

More than  100 NHS Trusts, including some of the most famous hospitals in the country, such as  London’s Guys and St Thomas’ and Great Ormond Street and The Christie Hospital in Manchester, have invested in their own local power generation and could be impacted.

Energy regulator Ofgem is consulting with the public on its proposals to remove Embedded Benefits, a move which will also hit manufacturers and other energy-intensive businesses which currently generate their own power but don’t access the national transmission networks.

Trade body The Renewable Energy Association warns that manufacturers could lose “millions of pounds a year” and calls the issue as “important as any impact on the generation side to UK plc.”

Smaller power generators believe the changes are being driven after heavy lobbying by members of the Big Six energy firms, notably ScottishPower and EDF Energy, in order to make their idle, low efficiency power generation assets more competitive.

Labour MP George Howarth said he is “extremely concerned” and has raised the issue with the Government.

He said: “At a time of great uncertainty in the wake of the Brexit vote, the last thing British industry needs is rising energy costs and I am also very worried about the impact upon the investment in local generation projects, which are essential as we try and address our future energy needs. There is also concern at the impact on jobs in the industry.

“We know the Big Six energy companies have their own agenda, but surely Ofgem needs to be mindful of the whole industry before deciding to go ahead with removing Embedded Benefits as there could be serious consequence on jobs and investment decisions.”  

Liberal Democrat MP Greg Mulholland added: “Any measure that could add costs to hospitals and British industry is of serious concern and I urge Ofgem to hold fire on this issue to look at the wider implications.”

The Association for Decentralised Energy believes the proposals will have a number of adverse consequences, including hiking the cost of energy and hitting manufacturing jobs.

The ADE estimates that the changes being considered could increase industrial manufacturers’ costs by more than £170m. Some energy intensive manufacturers could see their energy bill rise by nearly £4m a year, reducing their ability to compete and putting jobs at risk.
 
Dr Tim Rotheray, Director of the ADE said: “Without a careful, independent review, the current proposals could undermine the UK’s transition to a lower cost and lower carbon network system, as well as costing energy intensive UK manufacturers millions of pounds a year at a time when energy costs are a key concern for their ability to compete in global markets.”

Manufacturers’ organisation EEF also warns of a “profound impact” from the planned reforms.

Richard Warren, Senior Energy & Environment Policy Adviser at EEF said: “Ill-considered reform could seriously undermine the economics of much onsite generation and have unforeseen consequences.

“This is not to suggest that the current system could not benefit from considered reform, but it is vital that it is done as part of a wider review of network charging and is done in full consultation with all interested stakeholders. Making these changes through the proposed avenue largely ignores the concerns of industrial users and most distributed generators.”

Clarke Energy, which employs 280 people in Knowsley, Merseyside, and supplies gas engines to many local generation projects, agrees Ofgem needs to rethink the policy.

Alex Marshall, group marketing and compliance manager said: “Embedded generation is contributing an ever greater role to keeping the lights on in the UK. The uncertainty with respect to this consultation is leading delays in investment decisions for new build power stations.”

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