Millennium Wind Energy has proposed an extension to the discount on transmission charges currently available to some small-scale generators in Scotland.
The company said the concession for sites with a capacity of less than 100MW connecting to 132kV networks should remain in place until Ofgem has completed an ongoing overhaul of charging arrangements.
The discount was introduced in 2005 to level the playing field between generators in Scotland and rest of Great Britain.
In Scotland, 132kV networks form part of the transmission system, whilst in England and Wales they are part of the distribution system. As a result, small generators connecting at this voltage in England and Wales enjoy multiple financial advantages over their Scottish equivalents.
These so-called embedded benefits include a complete exemption from paying Transmission Network Use of System (TNUoS) charges themselves, as well as triad avoidance payments they can earn from suppliers for reducing their charges.
TNUoS charges are levied on both generation and demand and are split between forward-looking and residual charges. Forward-looking charges vary by location and are designed to reflect users’ impact on costs due to required investments in new capacity. Residual charges are intended to recover the sunk costs of the existing network.
Ofgem set the discount at 25 per of the sum of the forward-looking and residual charges on generation and residual charges on demand pertaining to eligible sites. In 2018/19 it will be worth £11.10/kW, costing almost £31 million in total.
The end date has been pushed back several times, most recently in January 2016 when Ofgem extended it for three years to 31 March 2019.
Millennium Wind Energy is a subsidiary of Falck Renewables and operates the Millennium onshore windfarm in Scotland.
The company has put forward a modification to the Connection and Use of System Code (CUSC) called CMP302 which would extend the discount until Ofgem has finished its work to revamp network charging. The regulator is currently conducting a significant code review looking at residual charges and is also considering holding another to examine forward-looking charges and connection arrangements.
In the proposal document, Millennium Wind Energy said: “Continuing the discount until the enduring arrangements are put in place would mean one set of changes rather than two. This would be less disruptive and provide greater certainty.”
“A precedent has been set with Ofgem extending the small generator discount a number of times due to the lack of an enduring solution,” it added.
The CUSC panel will now scrutinise the proposal before presenting its recommendations to Ofgem. The regulator will have the final say on whether the modification should be adopted.
It has previously rejected the code modification CMP239 which sought to implement grandfathering arrangements generators already receiving the discount.
Last year Ofgem decided to slash the residual element of the triad avoidance payments available to small-scale distributed generators. The three-year phaseout began in April.