Generation Use of System Charges

Nigel Turvey

Background

• Regulatory incentive allows:• Recovery of a percentage of any reinforcement costs• A value per kW of generation connected• An allowance for the O&M costs on the sole use and

reinforcement assets

• The incentive applies to generation connected post April 2005 or to incremental additions to existing generators made post April 2005

• This results in a positive allowed revenue from generation

Existing Position

• For generators connected at EHV:• LRIC methodology applies • which can result in positive or negative charges • Continue to be cost reflective and do not need further amendment

• For generators connected at HV/LV:• Charges calculated from yardsticks which have characteristics

derived from demand data• Originally set using cost data used in the last price control settlement• Concerns raised whether this approach is cost reflective and whether

there are benefits not being reflected in the charges• For microgeneration:

• Charges set to zero• At existing low level of activity neither costs nor benefits have been

identified and zero charge continue to be appropriate

Proposed method for HV/LV generator charges - Data

Scatter graph of West HV Coincidences 0607

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0.2

0.4

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0.8

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0 5 10 15 20 25 30 35 40 45 50

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Coincidence range across technology typeHV connections

0.00

0.20

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0.60

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1.00

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landfill chp wind waste tmt other

Proposed method for HV/LV generator charges - Data

Proposed method for HV/LV generator charges - principles

• Generation tends to be widely dispersed• Unlikely that benefits (or cost not recovered in connection charges)

will be seen at voltage of connection• Some benefit likely at higher voltage levels due to the impact of

multiple higher load factor generators• For consistency with security standards, benefits will not be applied to

intermittent generation• Yardstick constructed including:

• negative coincidences at voltage levels above the voltage of connection (for high load factor generators)

• zero coincidence at the voltage level of connection• Positive service connection costs

Proposed method for HV/LV generator charges - scaling

• Proposed method will result in negative export yardsticks whilst allowed revenue is positive

• Whilst scaling to a positive allowed income will reduce the pricing signals it will reflect a recovery of other costs not in DRM yardsticks

• Scaling by a £/kW adder will be required• Scaling to required revenue will result in low load factor

generators (generally renewable) having higher UoS charges than at present

• The only way to prevent this would be to recover some allowed generation revenue from demand – this would require Ofgem’s agreement

Proposed method for HV/LV generator charges – resulting charges

South Wales South West

Existing Charge Proposed Charge Existing Charge Proposed Charge

Microgeneration £0 No Change £0 No Change

Profiles 5 to 8 7.85p/MPAN/day ?? 6.49p/MPAN/day ??

LV > 60% Load Factor

2.01p/kVA/day

-11.91p/kVA/day

1.67p/kVA/day

-12.63p/kVA/day

LV < 60% Load Factor

5.85p/kVA/day 4.43p/kVA/day

HV > 60% Load Factor

2.49p/kVA/day

0.37p/kVA/day

1.74p/kVA/day

-2.68p/kVA/day

HV < 60% Load Factor

5.75p/kVA/day 4.14p/kVA/day

EHV -4.51 to +2.25p/kVA/day

No Change-1.67 to

+1.77p/kVA/dayNo Change

Some examples – low voltage connections

South Wales South West

Existing annual charge

Proposed annual Charge

Existing annual Charge

Proposed annual Charge

250kVA Demand, 30%LF 20% of units at night

£11,104 No change £9,810 No Change

250kVA landfill generator operating at 70% LF

£1,834 £-10,870 £1,524 £-11,526

250kVA windfarm operating at 30% LF

£1,834 £5,340 £1,524 £4,044

Some examples – high voltage connections

South Wales South West

Existing annual charge

Proposed annual Charge

Existing annual Charge

Proposed annual Charge

1MVA Demand, 30%LF 20% of units at night

£25,313 No change £22,627 No change

1MVA landfill generator operating at 70% LF

£9,089 £1,340 £6,351 £-9,794

1MVA windfarm operating at 30% LF

£9,089 £20,987 £6,351 £15,117

Proposed method for HV/LV generator charges - timetable

• Draft modification report prepared• Expecting to issue a WPD consultation to get

users views shortly• Modification request to Ofgem June/July• Implementation April 09