Guest column: Alex Marshall – Ofgem changes could cost businesses millions

Alex Marshall, marketing and compliance manager for Knowsley-based Clarke Energy, says plans to remove financial incentives for companies that generate their own power on site will have far reaching consequences.

THE energy regulator, Ofgem, is consulting over plans to remove a key financial incentive for generators of power called Embedded Benefits.

Embedded Benefits are available to companies and organisations – ranging from hospital trusts to manufacturers and even salad growers – which generate their own power on site and therefore don’t use the transmission network.

Ofgem, under pressure from some of the larger utility firms to review Embedded Benefits, is closing its consultation on Friday this week.

We believe that if the proposals are accepted there will be far-reaching consequences on consumers and the energy market.

The Renewable Energy Association estimates it may affect 18GW (gigawatts) of energy generation and hit manufacturers, that have a high energy requirement, to the tune of “millions of pounds a year”.

Clarke Energy, which supplies gas-powered engines to businesses in the UK and internationally, believes the removal of the benefits will also reduce support for the developments of localised combined heat and power (CHP) plants, which are popular as they are highly efficient and produce less carbon emissions than other power sources.

In the UK we have installed engines capable of producing 1,180 megawatts (MW) of power – enough for 3,000,000 homes – which qualify for Embedded Benefits. Of this figure, 700 MW is renewable energy from sources such as biogas plants, landfill sites and sewage works.

The newly-introduced Capacity Market aims to match the challenges of demand and supply which arise from the closure of old, inefficient coal power plants, nuclear power plants and also the intermittent renewables – wind and solar. The aim of the Capacity Market is to bring on additional power generation capacity to balance this mismatch.

Uncertainty over Embedded Benefits is now delaying investment in new local generation projects, at the very time when, with winter looming, we should surely be doing all we can to boost capacity as supplies come under pressure.

The removal of these benefits will increase bills for the consumer, encourage centralised power generation, which is characterised as being lower efficiency and resulting in higher carbon emissions. Surely a backwards step at a time when UK plc needs to encourage new forms of power generation in the Capacity Market?

Responses to the Ofgem consultation a letter are requested by Friday 23 September. Please send to dena.barasi@ofgem.gov.uk or andrew.self@ofgem.gov.uk