12 July 2011: Amongst the myriad new market instruments proposed in today’s Planning Our Electric Future White Paper, most of which are targeted at larger scale generation plant, the Government does briefly turn to look at the opportunities from smaller decentralised (termed as distributed generation in the paper) generating plant. The White Paper states: “Used in the right ways and as part of an evidence-based approach to energy planning, distributed energy technologies have the potential to complement both each other and the wider centralised energy system. They can also be an important tool in engaging consumers in their energy use. In particular, we recognise that integrated, local-level distributed energy systems could be an important step towards a more coordinated approach that includes, for example, transport and waste.”
However, no specific proposals are put forward by Government to support smaller decentralised energy projects – the White Paper just goes on to say that “our proposals have been developed with consideration of all scales of generation. These include the following… both types of Feed-in Tariff (FiT) and the Capacity Mechanism will encourage distributed generation in different ways .”
The ‘Feed-in Tariff with Contract for Difference (FiT CfD)’ – as it’s more fully called – will offer long term power price contracts to generators, reducing the risks associated with market price volatility, and hence help stimulate investment in the development of new generation plant.
The Capacity Mechanism will effectively pay generators to be on standby to help ensure that there is a sufficient margin of generation capacity on the electricity system, hence providing additional stability and guarding against power blackouts. These capacity payments are being introduced as a result of concerns over the numbers of power stations being closed down over the next decade (around one third of UK generation plant – mostly aging coal and nuclear) and also due to the increased levels of intermittent generation being added to the network, predominantly wind power.
It is not clear as yet how the particular challenges faced by smaller decentralised energy schemes will be taken into account as all of the work done in the White Paper relates to larger centralised generating schemes. Though references are made in the White Paper to community-based schemes coming forward, no guidance has been provided on how Government will support such activities. The Government has left the resolution of these issues to be worked out by a new ‘Government Industry Contact Group on Distributed Energy’ to be convened later this year. The group is to “be chaired by Ministers, and will involve a small number of key industry representatives ” which seems to suggest that local authority representatives, key players in supporting the growth of such systems, will not be included on the group…