Industry groups Regen and the Electricity Storage Network have warned that Ofgem’s reforms to how to pay for the electricity network will damage the business case for renewable energy and electricity storage.
The warning came in response to Ofgem proposals to reduce incentives for demand customers in order to cut energy usage.
This is a significant revenue source for storage assets and onsite renewable generation, the groups said.
They added that Ofgem are also removing the payments made to smaller ‘embedded’ generators and storage for reducing the costs of the network – in addition to previous reductions in such payments over the last two years.
The proposals will result in a potential increase of costs of £4-5 a megawatt-hour for a typical renewable generator, according to Regen analysis.
The analysis also found that previous reductions in incentives have resulted in projects being pushed back by at least two years, putting them at risk of failure.
Cost incentives for onsite generation will decreased by as much as 96% and lost revenue for onsite storage could be up to 50% of the business case, Regen said.
Regen chief executive Merlin Hyman said: “We support reform of how we pay for the electricity network – but Ofgem’s proposals disproportionately affect renewable generation and flexible technologies and are another blow that will slow down investment in this vital sector.
“Reducing carbon emissions is a key societal and government policy goal. Ofgem’s failure to make decarbonisation a principle of its reviews of network charging is an egregious failure to meet its statutory and moral duties to protect future consumers.”