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8 | 5th - 11th August 2016 | utILItY WEEK Policy & Regulation This week Embedded benefits 'distorting' market smaller generators connected to distribution network gain advantage from charging system Transmission network charging arrangements appear unfairly advantageous for embedded generators, Ofgem has warned. The energy regulator is con- cerned that the current charging arrangements, known as embed- ded benefits, favour sub-100MW embedded generators over their larger rivals. The system is also detrimental for transmission-connected generation, Ofgem suggested. The concerns were raised in an open letter, published on Ofgem's website. The regulator said it has been concerned for "a num- ber of years" that the system of embedded benefits may be "distorting investment decisions and leading to inef- ficient outcomes in the capacity market". Many market participants share these concerns, according to Ofgem. Setting out its main worries, Ofgem wrote: "With the increase in overall transmission network use of system (TNUoS) charges and the rapid increase in the volume of embedded generation, the size of TNUoS charges demand residual payments has grown, as has the num- ber of parties receiving them. This creates a large benefit to connecting to the distribution network rather than the transmission network." Ofgem said the market distortion resulted in an inefficient mix of generation. That is because smaller distribution-connected generation can take advantage of the embedded benefits revenue stream while potentially more efficient larger transmission-connected generators or 100MW+ generators cannot. JG EnErgY 'Dysfunctional' market faces probe An investigation into the UK's energy market has been launched by the House of Lords' economic affairs committee. It will examine whether the "present mix of policy inter- ventions and subsidies" for solving the 'energy trilemma' has resulted in market failures. Energy is becoming less affordable as renewables subsi- dies are loaded onto consumers' bills, while security of supply is "seriously threatened" by a "lack of investment in baseload capacity", the committee said. The state of affairs suggests "a dysfunctional energy market or a conflict of government policies". The committee will examine what measures might correct these failures, and will seek answers to a number of ques- tions, including what the key economic challenges are for the energy market over the next decade, and which emerging technologies could materially change it over the next decade. EnErgY MPs demand Wylfa Newydd subsidy cut The Wylfa Newydd nuclear project should not be awarded the same level of subsidy as Hin- kley Point C, MPs on the Welsh Affairs Committee have argued. They insisted the government should not proceed with the project in North Wales unless it is viable with a comparable level of subsidy to renewable energy sources such as onshore wind. "The UK government is in favour of new nuclear build, but not at any price," they said in a report. "Energy policy should balance cost against energy security and environmental concerns. "We recommend that the government negotiate a strike price for Wylfa Newydd below that agreed for Hinkley Point C and seek a price that would be competitive with renewable sources, such as onshore wind. The government should not continue with the project if the price is too high." WAtEr Ofwat forecasts 40 retail applications Ofwat has said it expects up to 40 applications from companies for retail supply licences in the coming financial year. Since the regulator opened the application process, 12 companies have applied for retail water supply and sewer- age licences (WSSLs). Ofwat's 2015/16 annual report said it expects about 30 to 40 WSSL applications in the coming year. The regulator insisted that the market remains on track to open in April 2017. Bias for distribution-connected generation Political Agenda Mathew Beech "Another day, another delay for the Hinkley green light" The day May hit Hinkley with a delay arrived. Unfortunately for EDF and its Chinese backers CGN, it happened to be the same day the French energy giant made its final investment deci- sion on the much delayed new nuclear power station. The official BEIS line is that the new PM and energy team want to carefully consider all parts of the deal between the government and the EDF/CGN venture. It paints a picture of a duly diligent department only station. It could also be that the prime minister and her new chancellor, Phillip Hammond, want to distance themselves from the approach of their pre- decessors. EDF remains "confident" the government will sign off Hinkley Point C. And with international investors, and the UK's reputa- tion for sticking to its word, potentially at risk, everything still seems to be pointing towards the green light being given – albeit delayed. Again. postponing the power plant because it's the sensible thing for a new administration to do. However, the former business secretary Vince Cable has shone a light on the motives behind the move: the ghost of George Osborne's chancellorship. Cable told BBC's Today pro- gramme that May has concerns over the former chancellor's "gung-ho" approach to deals with the Chinese in a bid to attract their investment into the UK. She is said to have objected to the deal at the time. Other rumours are that there are security concerns over Chinese involvement and owner- ship of a British nuclear power