In most cases, embedded benefits are not ‘benefits’, but a recognition that distribution connected generators and export from storage do not use the transmission network, and so should not pay for its use.
However, as transmission network costs have increased significantly over the last 10 years the level of benefits for not using the transmission network has risen concurrently, and some have raised concerns about whether the benefits reflect the avoided costs of distributed generation and storage.
DECC issued a consultation on 1 March 2016 announcing further changes to the Capacity Market. In the document, DECC said there may be merit in concerns that diesel engines have unfair advantages in the Capacity Market due to how they are treated in the energy market, impacting the competitiveness of new large scale gas power station projects. DECC said Ofgem is therefore reviewing whether it would be in consumers’ interests to change the charging arrangements for distributedconnected generators and that the regulator will set out its conclusions and a proposed way forward in the summer.
As a result of this announcement, Cornwall Energy was commissioned by the Association for Decentralised Energy (ADE) to review the level of embedded benefits that are currently available to generation and storage that connects directly to the distribution network and to better understand what impacts different approaches would have on the electricity market and on energy consumers.
This document provides an overview of Cornwall Energy’s findings and an overview of the key issues. Download the short briefing here.