Liddell accepts that the new electricity trading regime, the New Electricity Trading Arrangements (NETA) will adversely affect the economics of "distributed generation," that is electricity output feeding into local electricity networks. But operators of renewable and combined heat and power (CHP) plant are entitled to fair access at fair prices, she says. "I intend to reduce the burden of regulation faced by these plants. We must also make the access and charging regime fairer and more transparent."
The amount of distributed generation is set to grow; the government expects up to 10,000 MW of extra embedded plant if its targets for increased renewable capacity and CHP are met. To help renewable and CHP generators, the DTI is considering changing the present rules governing generation and supply licenses to exempt some groups of generators from the need to hold a licence.
At the moment generators above 50 MW are required to be licensed. An exemption could be of particular benefit to intermittent generators -- such as wind -- which would otherwise be open to penalties for failure to comply with the requirement for licensed generators, under the new trading arrangements, to notify in advance the amount they expect to generate. However, most wind plant operators are below the 50 MW threshold and are therefore unlicensed.
The DTI also proposes a series of measures for levelling out the playing field for access to networks and for access charges. The measures include ensuring that distribution companies reward any embedded generation that contributes to network security, and greater transparency in connection and use of system charges. For the medium and longer term, it suggests that networks should be designed with the needs of embedded generators in mind. To examine these issues, Liddell is setting up a joint industry and government working group to be chaired by the Office of Gas and Electricity Markets (OFGEM).
The DTI's moves to improve access to networks for small generators has been welcomed by industry analysts. But some renewable energy players claim the DTI's proposed changes address only part of the problem posed by the new trading arrangements. License exemption is likely to be more helpful for CHP operators than most wind generators -- except for large offshore schemes. And even if wind generators are able to avoid exposure to the extra costs of the "balancing and settlement" code of the trading process, the price they eventually secure for their electricity from suppliers will still reflect the uncertainties associated with intermittent generation, points out Peter Musgrove from National Wind Power. "It means you can avoid some of the administrative burden of coping with the settlement and balancing system, but you cannot avoid the financial consequences of NETA," he says.
The DTI was inviting responses to both consultations by the end of December.