SE24 responds to the BEIS consultation – use this to help you plan your own response

The consultation asks eight questions. You should answer in your own way but for your guidance here is a draft of what SE24 has said in answer to each question. Questions 1,2, 6 and 7 are the ones that are strictly relevant for us. These are for discussion and may be adjusted before we finally submit.

 

Q1. Do you agree or disagree with the proposal to end the export tariff alongside the generation tariff, which would close the scheme in full to new applications after 31 March 2019? Please provide evidence to support your reasoning; for example, around the impact on jobs, deployment, consumer bills and the supply chain.

A1.We disagree with the proposal to end the export tariff.It will distort the market price signals impacting sizing decisions and viability of projects(there IS a wholesale market value from exports).Site loads and generation production profiles rarely if ever match.Especially for smaller Community Energy schemes(eg between 10 and 50 kWs).If Community Energy businesses like SE24 can not get a route to market for exports via an export tariff regime with FiT Suppliers then they will size systems on the basis of what can be assured to be consumed on site at all times…so the minimum demand for consumption on site.

So it is wrong economics.

In terms of impact analysis in our SE24 domain our pipeline of projects will have the kW potential of the bigger sites we have been looking at cut from 300kW to about 150 kW.So a 50% reduction in demand and supply chain response in our area..including feasibility analysers,structural engineers,epc assessors,installers and their suppliers and on-going operations and maintenance for that missed 150kW.

Our SE24 expected spend in this business is close to £1000/kW in our size range which trickles through the supply chain.But our guess is that two-thirds of this spend sticks in the UK and the bulk of that is local.And the bulk of that is technical design and management and subsequent installation management and associated labour costs.

This equates to about 5 jobs(@£30k per year for the £150k lost demand).

It is also very important to look forward and get the right signals about the future for this supply chain.

For Community Energy organisations working with churches,schools and other local institutions …typically gripped with the idea of addressing the issue of Climate Change locally…there needs some stable vision of the economics.

The pre-registration regime for MCS projects(10-50kWs) in prior years was really helpful in this. It gave us a year’s clarity on what our likely income would be and in that year the ability to organise and execute our legal,commercial and planning arrangements

 

Q2. Do you agree or disagree with the administrative closure and exception arrangements? Please explain your reasoning.

A2. If both generation and export arrangements cease it is quite feasible that all of our 300kW pipeline will fail to move forward.On the same basis of the calculations above this would mean a loss of 10 jobs in the UK supply chain(for us impacting on London and the South East).

We interpret the exception arrangements described at paragraphs 1.11(specifically (d) and (e)) as re-introducing pre-registration arrangements and  giving a year post pre-registration to complete installation and capture the generation and export rates in force at the time of pre-registration.Assuming that there were then no budgetary constraints affecting this(and for the 10-50 kW  size range we expect and hope that there would be no budget constraints) this would give us a spur to pre-register before March 2019 and probably pull through our 300kW pipeline for completion before March 2010.

If this interpretation of these proposed exception arrangements is correct and BEIS could eliminate budget uncertainty then we would roundly endorse these exceptions…and would hope that they would be announced and clearly clarified as soon possible.Any delays in such announcements would of course undermine their potential benefit and given that end March 2019 is effectively 5 months away we would also suggest that the 12 month period from end March 2015 was extended  to 18 months especially in the context of potentially capturing Summer 2020 installation windows for schools.

 

Q3. Do you agree or disagree with the proposal to levelise net metered export payments? Please explain your reasoning.

A3. We agree.Makes economic sense.

 

Q4. Do you agree or disagree with the use of the average time-weighted System Sell Price to determine the value of metered export to FIT Licensees? Please explain your reasoning.

A4. We agree it gets closer to actual economic costs for FiT Licencees.

 

Q5. Do you agree or disagree with the proposed calculation Ofgem would use to make the necessary adjustments to quarterly and annual levelisation payments? Please explain your reasoning.

A5. We have not explored the algebra.

 

Questions on replacement of generating plant

 

Q6. What would you expect the likely replacement rate for generating plant to be, for each FIT supported technology, if the rules were changed to allow unlimited replacements? To what extent would load factors change? Please provide evidence.

A6. SE24 has no current intention to replace any of our operating equipment on the basis of expected future performance efficiencies but we do specifically carry reserves in the expectation that plant will need replacing(particularly inverters where normal warranty periods are usually only 5 years).We also carry more general warranties and insurances and maintenance arrangements(both preventative and reactive) to help us maintain expected asset performance(kWhs per year).If equipment fails or is damaged we will replace as required.

 

Q7. What would the impact be of not allowing replacement of generating plant? Please provide evidence.

A7. We expect that this question is not referring to the replacement of plant in the event of plant failure with the primary objective of restoring expected asset performance  as we refer to in our A6.

Given the cost of removing and replacing plant we think it highly unlikely that SE24 will do this for any other reason.

 

Q8. How can government ensure that any budgetary impact from allowing the unlimited replacement of plant can be controlled in an administratively practical manner?

A8. No response.