Local microgrids must pay network charges

Local microgrids must contribute to network costs to avoid disadvantaging other consumers, Ofgem has argued.

1st February 2017 by Networks

Local microgrids must pay network charges

Allowing local energy projects to avoid system charges could result in escalating costs being passed through to customers, especially poorer and less engaged consumers who are unlikely to be participants in such schemes.

In the latest paper from its Future Insights series, energy regulator Ofgem said that as technology costs fall it may become “more realistic” for groups of consumers to form local micro grids, which seek to avoid certain network costs whilst keeping a connection to the national grid as an “insurance policy”.

Ofgem said some parties are already using such models to offer discounted tariffs to engaged local consumers by avoiding the “sunk costs associated with pre-existing network infrastructure”.

The regulator said the issue highlights a “fundamental tension” between economic efficiency and fairness.

Ofgem said it is already considering the issue, including through its ongoing review of the ‘embedded benefits’ available to distribution-connected generators.

It said network charging models must adapt to reflect the value of grid connections both in terms of actual use and as an insurance policy, but avoid driving those that can go “off-grid” to “defect” to avoid the costs entirely.

A version of this story first appeared on Network’s sister publication Utility Week.