Ofgem has approved a modification to the Connection and Use of System Code (CUSC) that will end the double charging of storage for balancing services as promised by the regulator almost three years ago in its smart systems and flexibility plan.
The amendment will mean storage operators only pay Balancing Service Use of System (BSUoS) charges on exports of electricity and not imports too as is currently the case.
Scottish Power submitted the modification, named CMP281, in June 2017 but later withdrew its support following the sale of its conventional generation business. It was adopted by Engie in November 2018 and approved by the CUSC panel last September.
Ofgem said it did not cover the issue as part of its targeted charging review in order to deliver the changes “as quickly as possible”, instead encouraging industry parties to enact the amendment through the usual modification process.
Explaining its final decision, the regulator noted the conclusions of the first Balancing Services Charges Task Force that BSUoS charges should not be considered cost-reflective and repeated its view that storage operators should not pay a disproportionate share of charges for which this is the case.
Given their need to import large volumes of power, more than they export due to storage losses, Ofgem said liability of storage operators to pay BSUoS charges on both imports and exports put them at a competitive disadvantage when compared to other forms of generation providing the same or a similar service.
The regulator acknowledged that the modification would introduce differential treatment between different types of storage, depending on their eligibility for the exemption from import charges, but said this would have “a less significant impact that the large distortion and differential treatment which currently exists”.
Ofgem said it considered the amendment a “stepping stone” towards an enduring solution for BSUoS charging that may flow from the second Balancing Services Charges Task Force, which is due to report its findings in the autumn. Despite the challenges caused by the coronavirus pandemic, the regulator considers April 2021 an appropriate date for its implementation.