Utility Week

UTILITY WEEK | AUGUST 2021 | 11 Special report on decarbonising water pany land. Typically, the investor's solar panels generate power which is delivered directly to the water company and not via the electricity distribution network. The water company then agrees to purchase the power for a xed number of years using a private connection. These so-called private wire power purchase agree- ments allow water companies to leverage their consid- erable land assets, but without them having to invest upfront in renewables capital expenditure, which is dif- cult under current price reviews. This behind-the-meter arrangement has allowed both the generator and the water company the opportunity to share savings by avoiding grid charges and policy costs applied to electricity imported from the grid. There is also no need for a licensed supplier, which also allows signi cant savings to be made. "If you put renewables on your own site and self- consume, the energy you purchase is currently exempt from all the renewable levies [ROCs, FiTs, CfDs] which energy consumers pay for. This could cut your electric- ity bill by a quarter on every unit you self-generate," says Craig Lucas director of energy transformation at Mott MacDonald. Even with private wires to the renewable generation, water companies will still need to retain their connec- tions to the grid to guarantee resilience. Those with pri- vate wire PPAs are particularly concerned by Ofgem's proposals, since a move to charging for the capacity of a connnection rather than its usage will make these links considerably more expensive. Ofgem's view is that xed charges are fairer than those based on usage because larger, more sophisticated consumers can avoid them, resulting in a disproportionate cost falling on smaller, less sophisticated ones. Daniel Blunt, renewables programme strategy man- ager at Anglian Water Services, says the impact could be signi cant. "Ofgem's proposed changes have the poten- tial to erode opex bene t from the PPA contracts we have entered into and cast doubt on future schemes and make carbon reduction harder to achieve. We're trying to get a sense of the likelihood of this change coming in and what range of impacts there will be." (See Anglian piece, overleaf). Pat Horne, head of strategy and commercial services at United Utilities, agrees: "Our renewables portfolio is behind the meter and o" sets grid import. It provides a good carbon performance and nancial bene t to the business. There are challenges ahead with the introduc- tion of the targeted charging review." Lisa Waters, director of Waters Wye Associates, also points to a review of supply licence exemptions by the Department of Business, Energy and Industry Strat- egy which could add to renewable levy costs of onsite generation. "If liabilities for green levies change, it will be signi - cant. Coupled with changes to network charges, it will add up to being more expensive, though I understand exemption regime changes [from needing a licence] may be considered for new generation rather than existing," she says. Read further overleaf for a case study from Anglian Water and comments on the research from Mott MacDonald. "People's waste is brown gold, and switching your mindset to the idea that there is value in everything that has come down the pipe is quite valuable and quite a fundamental culture change for the organisation." Richard Eadie, head of corporate strategy, sustainability & group transformation, Severn Trent A good starting point is defi nitely for Water UK to get more involved in our Open Networks Project, including potentially joining our Advisory Group." Randolph Brazier, director of innovation & electricity systems, Energy Networks Association Key fi ndings of the report: • Water companies are ramping up onsite renewables to cut emissions – though not necessarily the 80 per cent stretch scenario in Water UK's routemap. • Onsite renewables are also viewed as a way to save millions of pounds on energy bills and boost resilience. • Reducing or avoiding carbon emissions from electricity sooner will give water companies greater headroom to tackle the more diƒ cult process emissions and operate within a net zero environment. • Water companies are increasingly turning to private wire power purchase agreements with private developers to fund onsite renewables – but deals that suit both sides can be diƒ cult to broker, jeopardising meeting renewables targets. Ofgem's proposed charging review could also impact † nancial viability. • Water companies want to see the right incentives and – if in their customers' interests – greater headroom in PR24 to enable them to invest in green generation technology. • Water companies have included storage in their plans but are currently uncertain how this will be commercially viable. Regulations would need to change to allow water companies to accelerate nature-based solutions that will reduce energy demand. • There is greater scope for networks and water companies to work cooperatively on both a strategic and local level, with water companies providing flexibility and resilience to networks in rural areas. The report can be downloaded free https://utilityweek. co.uk/the-generation-game-can-water-companies-win- the-2030-race-to-net-zero/ in association with Quotes from the report

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