National Grid has confirmed that the expansion of Balancing Use of System (BSUoS) charges to include embedded generation is being considered by Ofgem, after Engie attempted to fast track the decision via a system operator workgroup.
The French utility put forward a code modification proposal to National Grid’s Connection and Use of System Code (CUSC) panel last month calling for a change in the current collection of BSUoS from suppliers and embedded Exemptible generation.
It would have seen BSUoS charged on a gross basis to suppliers and on exports from embedded exemptible generation, a change which the company and National Grid acknowledged would have “a high impact on embedded generation”.
BSUoS charges, which recovers the cost of day-to-day operation of the transmission system from generators and suppliers on that system, are not currently applied to embedded generators on the distribution system.
Engie claimed this ‘defect’ allows embedded generators to receive “a significant benefit” from BSUoS avoidance despite requiring the system stability paid for by BSUoS charges “whether they are transmission or distribution connected”.
“Embedded generation does not make a fair contribution to the costs of system balancing and other system costs that are required to support the overall power system, leading to higher costs for others,” the company said in a submission to the CUSC panel on 20 September.
It argued that around 10-15% of all generation is now being supplied from embedded sources who do not, in general, pay BSUoS – a figure due to increase in the coming years. Expanding these charges to more than transmission connected generation would, Engie said, have an indicative benefit to consumers of up to £230 million per year.
The company, which operates over 2GW of generation in the UK across the transmission and distribution systems, had presented its case to the panel on 28 September and called for a workgroup to complete an assessment within 12 months, with a target implementation date of April 2021.
The presentation by Engie, given by CUSC panel member and Engie’s own Simon Lord, sparked objections from the Solar Trade Association which raised concerns with Ofgem that the decision-making process on the proposed modification was proceeding “with unreasonable haste and in a non-transparent manner”.
The association also argued that affected stakeholders were not being considered and that the “abrupt and exclusionary approach” being considered risked undermining Ofgem’s Targeted Charging Review (TCR).
It would now seem that National Grid agreed with this assessment, stating in minutes released last week that the modification was in scope of the TCR and Significant Code Review (SCR) launched by Ofgem in August 2017.
According to Engie, it had not been clear before submission of its modification proposal that this was being considered by Ofgem and so now both it and the CUSC panel have agreed to suspend the modification accordingly.
Ofgem has indicated that the issue will be considered under the SCR, which launched in August last year with two main objectives in mind; to consider reform of residual charging for transmission and distribution, for both generation and demand, and to keep other ‘embedded benefits’ under review.