UK solar: Records, concerns and a persistent regulator

On May 13, a record 9.47 GW of solar power was generated in the U.K. to surpass the previous peak of 9.38 GW, set in May 2017.

The U.K. broke its coal-free energy record last month as it went 90 hours, 45 minutes without the fossil fuel. The previous longest coal-free period since the Industrial Revolution was set in April 2018, and scored 76 hours, 10 minutes but both records were blown out of the water today when network operator National Grid announced it was set to hit two weeks without coal at 3.12pm (GMT), for a #coalfreefortnight.

Jack Dobson-Smith, of U.K. trade body the Solar Trade Association, said: “Thanks to rapidly improving renewable energy technology and increased energy efficiency coal is becoming a bit-part player in the U.K. electricity mix. Solar has certainly played a significant part with this month also seeing the solar generation peak record tumble. We can expect many more coal-free days in the future and solar’s contribution to these will rise, with an anticipated 4-7 GW set to be deployed over the next four years with no need for subsidy. This transition to a clean energy future is essential if we are to tackle the climate emergency, and rising investment in solar will drive green jobs and skills for years to come.”

And there was more good news as Lightsource BP brought a 2.29 MW subsidy-free PV project online this month. The business model supporting the new facility is based on a 25-year power purchase agreement signed with the NSG Group’s European Technical Center, in Lancashire.

Regulation in a changing market

However Andrew Burgess, deputy director for energy system transitions at energy regulator Ofgem, cast a shadow over UK solar when he told a conference in London this month most of the rules governing U.K. power networks were written 20 years ago and perhaps are unsuitable for today’s technology.

For that reason, Burgess told the Westminster Energy, Environment and Transport Forum (WEETF), Ofgem is carrying out two major reviews: into network access and forward-looking charges; and the targeted charging review (TCR).

The latter is more immediate, with Ofgem aiming to publish a decision this summer. The TCR has two major components with the first of them dealing with the residual charges applied to ensure electricity grid companies can recover costs.

At the moment, residual charges are recovered from electricity users according to how much power they consume and when. Energy-intensive consumers are encouraged to avoid potential demand peaks during winter by the knowledge network operator National Grid will apply hefty residual charges to the three 30-minute periods of heaviest demand during the season. Those “triad” half-hours – which have to be separated by at least ten-day intervals – are calculated each year in the following spring.

As a result, many large business and commercial electricity users adjust their consumption – mainly by using solar, storage and demand side response systems – to attempt to avoid all potential triad demand periods.

Ofgem has proposed changing to a fixed residual charge based solely on the distribution or transmission voltage level of the grid consumers are connected to. That would mean reducing demand – by installing on-site PV, for instance – would have no impact on the residual charge.

The second component of the TCR review concerns the Balancing Services Use of System charge, which is applied to energy consumers to cover the costs to the grid of balancing supply and demand. Ofgem is proposing decentralized power generators contribute to the costs through the charge rather than receiving credit for reducing grid balancing costs.

Delaying subsidy-free PV

A report published this month by consultancy Aurora Energy Research suggested Ofgem’s TCR “will favour low-efficiency CCGTs [closed cycle gas turbines] at the expense of new renewables schemes such as onshore wind and solar PV – with subsidy free renewables delayed by 2-5 years as a result.”

With specific regard to solar, deployment “would be 5 GW lower by 2035 as a result of the changes,” added the report. Aurora’s findings about smart solutions such as energy storage and demand side response were equally discouraging. “Embedded battery storage projects would see higher network charges under [the] proposals; whilst demand response and behind-the-meter schemes would see a significant source of value removed.”

Aurora’s analysis reached opposite conclusions from those made by Ofgem regarding the deployment of CCGT plants. The regulator said such facilities would be negatively affected by the TCR proposals but Aurora argued, although “CCGTs would see an increase in network charges … they would be able to recover most of these costs through the capacity market” – the mechanism to incentivize generators to supply enough capacity to meet demand at all times.

One of the biggest concerns voiced about ending the triad regime is that large users would have no incentive to invest in winter demand reduction so an higher amount of centralized electricity generation would be needed, supported by capacity market contracts.

Any potential benefit for energy storage batteries from the capacity market – whose operation is currently suspended after a European Court of Justice ruling against it – was ruled out by Aurora on the basis of the low de-rated factor of such systems, which cannot guarantee back-up capacity around the clock.

Persistent regulator

Asked about the Aurora report at the WEETF conference, Burgess said Ofgem had taken its findings into account but did not necessarily agree with them. “Some generators will lose on payments but we don’t see the TCR reforms will harm decarbonization,” he said.

The Ofgem representative said the proposed change may cause some short term problems but would prevent investment being targeted in the wrong areas in the longer term. Burgess also stressed incentives for sustainable development should not come from network charging revenues.

However, despite his defense of the review in London, Ofgem announced recently implementation of the TCR changes would be delayed from April 2020 to April 2021 with April 2023 a possible option for residual charging regime reform.

This article was updated on 31/05/19 to mark the achievement of a coal-free fortnight in the U.K.