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Generation Use of System Charges

Generation Use of System Charges. Nigel Turvey. Background. Regulatory incentive allows: Recovery of a percentage of any reinforcement costs A value per kW of generation connected An allowance for the O&M costs on the sole use and reinforcement assets

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Generation Use of System Charges

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  1. Generation Use of System Charges Nigel Turvey

  2. Background • Regulatory incentive allows: • Recovery of a percentage of any reinforcement costs • A value per kW of generation connected • An allowance for the O&M costs on the sole use and reinforcement assets • The incentive applies to generation connected post April 2005 or to incremental additions to existing generators made post April 2005 • This results in a positive allowed revenue from generation

  3. Existing Position • For generators connected at EHV: • LRIC methodology applies • which can result in positive or negative charges • Continue to be cost reflective and do not need further amendment • For generators connected at HV/LV: • Charges calculated from yardsticks which have characteristics derived from demand data • Originally set using cost data used in the last price control settlement • Concerns raised whether this approach is cost reflective and whether there are benefits not being reflected in the charges • For microgeneration: • Charges set to zero • At existing low level of activity neither costs nor benefits have been identified and zero charge continue to be appropriate

  4. Proposed method for HV/LV generator charges - Data

  5. Proposed method for HV/LV generator charges - Data

  6. Proposed method for HV/LV generator charges - principles • Generation tends to be widely dispersed • Unlikely that benefits (or cost not recovered in connection charges) will be seen at voltage of connection • Some benefit likely at higher voltage levels due to the impact of multiple higher load factor generators • For consistency with security standards, benefits will not be applied to intermittent generation • Yardstick constructed including: • negative coincidences at voltage levels above the voltage of connection (for high load factor generators) • zero coincidence at the voltage level of connection • Positive service connection costs

  7. Proposed method for HV/LV generator charges - scaling • Proposed method will result in negative export yardsticks whilst allowed revenue is positive • Whilst scaling to a positive allowed income will reduce the pricing signals it will reflect a recovery of other costs not in DRM yardsticks • Scaling by a £/kW adder will be required • Scaling to required revenue will result in low load factor generators (generally renewable) having higher UoS charges than at present • The only way to prevent this would be to recover some allowed generation revenue from demand – this would require Ofgem’s agreement

  8. Proposed method for HV/LV generator charges – resulting charges

  9. Some examples – low voltage connections

  10. Some examples – high voltage connections

  11. Proposed method for HV/LV generator charges - timetable • Draft modification report prepared • Expecting to issue a WPD consultation to get users views shortly • Modification request to Ofgem June/July • Implementation April 09

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