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Ofgem on course to clash with government over energy costs

07 November 2017

More in-depth consideration by Ofgem of how business energy users keep long-term energy costs to reasonable levels has been called for by the Association for Decentralised Energy (ADE).

Although ADE supports the Ofgem review of network charging, it has voiced concerns that this may overlook the contribution of business energy users who generate their own electricity on-site.

The association has emphasised that this can provide flexibility to the grid at peak times while also reducing the need for upgrading electricity networks, which involves considerable cost.

Businesses that reduce the amount of electricity consumed at certain times are able to avoid some local and national network costs, but Ofgem has proposed ending this.

ADE says the national transmission network costs alone are worth £47 per kW, or £500,000 a year for a 10MW industrial site, with additional local distribution network costs also applied.

This approach could see an increase of up to 20% in energy costs for industrial energy users, compromising competitiveness while also impacting on smart energy projects, including demand-side response and battery storage.

ACE director Dr Tim Rotheray said electricity generation and use is undergoing rapid change as businesses generate and manage their own power.

"We welcome consideration of new ideas to ensure all customers, including those with and without their own generation, are charged fairly to pay for network costs," he said.

However, with national electricity network costs rising from £943m in 2007 to £3.7bn by 2021, it is essential to incentivise behaviour to keep costs down.

"Otherwise Ofgem will be asking business users to pay over the odds for electricity they barely use, and industrial sites will see large, unfair increases in their electricity bills in contradiction with the aims of the government's Energy Cost Review," said Dr Rotheray.

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