Utility Week

UTILITY WEEK | 7TH - 13TH SEPTEMBER 2018 | 11 Policy & Regulation This week Higher load factors for CfD schemes Next CfD round will use higher load factors in the valuation formula for renewable projects The government is pressing ahead with plans to assume higher load factors for renewable projects supported by bill payers through contracts for difference (CfDs). A government consultation on the future operation of the scheme, which was launched last December, proposed that CfDs should use higher assumed load factors – the ratio of how much electricity a generating unit produces over a period divided by its theoretical maximum output. The proposal is designed to guard against the risk that CfD-supported projects produce more power than expected, resulting in greater than initially forecast pay- ments by electricity suppliers that must then be passed on to consumers. In the second of two responses to a consultation, published on 30 August, the government says it will implement the proposal to use higher load factor assumptions in the valuation formula for projects in the next CfD allocation round. The assumptions will be an upper portion of the expected distribution of load factors for each renewable technology, rather than the central assumptions currently used. However, the response states that the government does not intend to use different load factor assumptions for individual technologies in the next allocation round, but will keep this position under review for future rounds. The government has allocated up to £557 million of support via CfDs until 2025. DB ENERGY Plaid Cymru to review energy policy Plaid Cymru's opposition to Horizon's Wylfa Newydd nuclear plant is growing as party leader Leanne Wood pledged to review the party's energy policy. Wood told a meeting last week that alongside a "full review" of Plaid's energy policies, she will commission a study into the possible negative effects of con- struction of the 2.7GW plant. The Welsh nationalist party's policy of opposition to nuclear power does not cover the replacement of existing plants due to concerns about job losses in rural areas such as Ynys Môn, where Horizon is planning to build Wylfa B near the site of the island's former Magnox plant. However, Wood expressed concern about the scale of Wylfa, which she said will require an extra 3,000 homes to accom- modate its workforce: "There is growing concern from Ynys Môn residents that the construction phase will require an influx of workers from outside. Intolerable strain will be put on local infra- structure, housing and services." ENERGY Balancing code reforms approved Ofgem has approved a pack- age of reforms to the Balancing and Settlement Code being introduced in preparation for a new Europe-wide balancing platform. The code modification P344 will implement the com- mon settlement arrangements that will be used by countries participating in the Trans European Replacement Reserves Exchange (TERRE). Ofgem said the introduction of TERRE will give National Grid access to additional sources of flexibility from across the continent. ENERGY Ofgem opens data 'disclosure room' Ofgem is to open a "disclosure room" to review "sensitive and confidential" data regarding the development of the impending default energy price cap. The data that has been received con- cerns smart metering costs and wholesale allowance models, the regulator said. A letter from Ofgem's deputy director of retail price protection, Anna Rossington, confirmed the publication date for its statutory consultation on the temporary tariff cap for customers on stand- ard variable and default tariffs will run from 6 September to 8 October. She added: "In light of the sensitive and confidential nature of the underlying data, Ofgem considers it necessary to disclose the underlying data to a limited number of approved external legal and/or economic advisers of the relevant parties." Renewable energy: revised formula for CfDs Ofgem has revealed it will not reconcile payments made by National Grid Gas to the green- house gas emissions incentive due to the use of an incorrect carbon reference price. National Grid wrote to the industry regulator in October 2017 and February this year to explain two issues about how incentive payments had been calculated. These related to: • The use of an out-of-date carbon reference price in formula year 2016/17. ENERGY Ofgem will not reconcile all National Grid's emission payments • The incorrect inclusion of sta- tion vent emissions between formula years 2013/14 and 2016/17. National Grid said the errors meant overpayments of £361,587 for the inclusion of the station vents had been made dating back to 2013/14, while £74,151 for using the wrong carbon reference price had been made in 2016/17. Ofgem said it was "not persuaded" that there is suf- ficient justification to reconcile the incentive payments made in 2016/17 to reflect the carbon reference price published in December 2015 in a letter to National Grid Gas' senior com- mercial developer, Chris Hewitt. Louise van Rensburg, the regulator's interim deputy director for energy system transition, wrote: "We agree that an incorrect carbon reference price was used to calculate incentive revenue in 2016/17. This was an oversight on your part and we are satisfied with the assurances that you have given that a similar mistake will not be made in the future. "However, we are not persuaded that there is suf- ficient justification to reconcile the incentive payments made in 2016/17 to reflect the carbon reference price published in December 2015. You are respon- sible for the accuracy of the data values submitted and for ensur- ing that the values are correct. Consequently we will not adjust this payment."

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