Ed Davey, who served as the UK’s energy secretary in the last coalition government, has added his voice to the call for the country’s energy regulator not to disadvantage renewable energy in a pending legislation.
The Association for Decentralized Energy expressed fears recently that the Ofgem decision to 'level the playing field' for energy generators could damage renewables rollout and now Sir Ed Davey has warned a pending decision to shake-up the UK's network charging arrangements could prove a "massively bad decision", leading to a drop in low-carbon energy generation, higher security risks and higher energy prices for consumers.
In July Ofgem published an open letter to the industry outlining its concern about payments which smaller generators on the distribution network receive from suppliers for exporting energy to the local power distribution network during peak periods, which helps to reduce net electricity demand. The regulator is currently completing analysis before setting forth its view.
These smaller generators include some wind power, energy from waste and combined heat and power installations. According to Ofgem, these 'embedded benefits' payments come in addition to the price smaller generators receive for selling their electricity. However, larger generators do not get these additional payments, which Ofgem said puts them at a "competitive disadvantage" and may be distorting the energy market.
"This whole embedded benefits review is justified in the sense that clearly the costs in transmission aren't right and the field isn't level," Davey said. "I get that. But they are approaching it with a slither of the problem when you need a holistic approach, when you look at all the system costs."
"There will be some energy security risks," he predicted, "there will certainly be less low-carbon [power]. So they need to think very carefully otherwise they are sleepwalking into a really bad mistake which looks technical but actually has far-reaching ramifications."
A spokesman for the Department of Business, Energy and Industrial Strategy (BEIS) told BusinessGreen the government is looking to publish the review "soon".
The BEIS spokesman added the government's top priority is ensuring families and businesses have a secure, affordable clean energy supply which they can rely on now and into the future. "That is why we recently announced reforms to the Capacity Market to ensure it remains fit for the purpose of maintaining our energy security."
"The largest payments are made to embedded generators when they produce power at peak times," An Ofgem spokesman told BusinessGreen. "So we are focusing on this first and we are looking closely at the responses to our consultation.”
Ofgem said it expects to take a decision on the proposals in early 2017.