Utility Week

UTILITY Week 10th March 2017

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Finance & Investment This week Triad reforms could drive plant closures Reduced revenues may force some embedded generation to be 'shelved or scrapped completely' Plans revealed by Ofgem to dras- tically cut the triad avoidance payments available to embedded generation could have a "danger- ous unintended consequence", law firm Pinsent Masons has warned. The reduction in revenues could force some distributed gen- eration projects to be "shelved or scrapped completely", leaving a shortfall in capacity. "Any changes to the charging regime for those gen- erating the UK's energy supply will have a far-reaching financial impact on the energy industry," said energy partner Jeremy Chang. "Tackling embedded benefits has always been about creating a level playing field. But while this agenda is laudable, the method in which you achieve this is crucial." The term embedded benefits refers to the exemptions from balancing and transmission charges enjoyed by generation embedded in distribution networks, especially triad avoidance payments collected from suppliers. Concerned that they give an "unfair advantage" to distributed generation, Ofgem has proposed phasing in drastic cuts to triad payments over three years between 2018 and 2020, subject to the outcome of a consultation. Chang said that while generators were relieved that Ofgem wanted to phase in the changes and would not be "pulling the rug out from under their feet" by scrapping the charges wholesale, it could still "mean some projects are rendered uneconomic when charges are imposed, with the potential for them to be shelved or scrapped completely". TG ENERGY Networks 'most transparent' The chief executive of the Energy Networks Association (ENA) has pushed back against accusations that UK energy networks are making excessive returns. Writing for Utility Week, David Smith said: "As tightly regulated companies, networks are the most transparent part of the energy industry and the lat- est Ofgem reports provide clarity and detail on what networks are spending and the value that customers are getting for their money." Smith also said that Ofgem's projections for network returns during their current price con- trols are uncertain. It is "far too early to speculate on the future profitability of network compa- nies and what the end of price control rate of returns will be", he insisted. See full article, p18 ENERGY Policy costs behind Eon price hike Eon has claimed that rises in social and environmental policy costs are behind its announce- ment of imminent price increases. The energy supplier's cost base has increased by 36 per cent, and as a result its standard electricity and gas tariffs will rise by 13.8 per cent and 3.8 per cent respectively, effective from 26 April. Eon UK chief executive Tony Cocker said: "It is an announce- ment we never want to make but is due in large part to the fact that many of the costs we don't directly control." ELECTRICITY Embedded changes will not help coal Changes to the embedded benefits regime for distributed generation (see lead story) will not lead to a renewal of coal- fired power in the UK, Uniper's UK chairman told Utility Week. When Ofgem revealed its plans to slash the "embedded benefits" available to distributed generators, the Association for Decentralised Energy said the move would lead to a renewal of coal-fired power and disadvan- tage new energy players. The association's director, Tim Rotheray, said: "Ofgem's proposal will support increased coal generation at the expense of the smarter, more flexible and innovative energy solutions we should be supporting." However, Felix Lerch, UK chairman of the conventional generation and energy trading firm Uniper, said that while the change might avoid "unneces- sary closure of gas assets", it "is unlikely to support coal or disad- vantage other energy solutions". Embedded generation set to lose benefits UTILITY WEEK | 10TH - 16TH MARCH 2017 | 21 Stock watch 15 14 13 12 11 10 9 UNIPER SHARE PRICE, FIVE DAYS Oct 16 Nov 16 Dec 16 Feb 17 Mar 17 UNIPER SHARE PRICE, SIX MONTHS Uniper's share price shot up earlier this week aer the company announced the sale of its stake in the Yuzhno-Russkoye gas field in Russia for €1.75 billion (£1.51 billion). Aer closing last Friday at €13.53, the shares jumped nearly 5 per cent to €14.18 as trading resumed on Monday morning. At the time of going to press they were changing hands for €13.97, meaning the share value is up 3 per cent since the company's stock market debut in September. 14.2 14.0 13.8 13.6 13.4 13.2 2 Mar 1 Mar 3 Mar 6 Mar 7 Mar Jan 17 euros euros

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