carbon limited

Yesterday BERR and OFGEM released proposals for changing the way the electricity regulations work with regard to distributed energy generation. This is particularly important because it’s BERR’s first public reaction to the Citiworks ruling by the European Court of Justice two weeks ago.

In case you missed it, Citiworks challenged the electricity supply monopoly at Leipzig airport on the grounds that it breached rules on third party access to electricity networks. ECJ found in favour of Citiworks, sparking fears in the UK that private wire networks (commonly used on CHP and other distributed energy schemes and in many cases essential to their viability) would be outlawed.

BERR and OFGEM’s reaction to the ruling is crucial and they weren’t giving anything away before the release of yesterday’s document. Because of the implications for small energy generators in the UK, quite a few people have been anxiously awaiting this reaction.

There is good news in BERR’s proposals. One example is that the license exemption threshold will not be raised. In other words, the size limit on private wire networks (currently about 1000 homes) will not be increased as some of the bigger players had been lobbying for. As BERR imply, for schemes above 1000 homes there’s not much excuse for basing your business plan on locking in your customers.

And the bad news?

It’s mostly in the form of hints about forcing private wire networks to allow third party access. BERR acknowledge that the many DE schemes rely on private wires to secure funding and operate successfully: banks are more likely to loan you money and you’re more likely to stay afloat if your customer base is guaranteed. They also recognise that forcing third party access to these schemes could have a “detrimental effect” on their financial viability. And then they follow up with a bizarre conclusion:

“However, it appears that schemes that allow third party access when requested to do so will be able to operate as before.”

In other words, if a customer wants to switch to another supplier you can still operate on private wire (i.e. outside the licensing regime), you’ll just have fewer customers. Not much consolation if your business has just fallen over.

What happens next? BERR will accept feedback on the DE consultation until the end of July with implementation of proposals by the end of the year. However, it looks like BERR may tackle the issue of third party access separately (though they promise this will be “in a timely fashion”). Until then, plenty of small schemes (and their funders) are going to have to keep biting their nails.