Supplementary memorandum from Ofgem
1. QQ 447-452: In what specific ways does
Ofgem take account of the interests of "future customers"?
1.1 Investment decisions made today can
impose environmental costs on future generations or may result
in limiting their options for development by the early depletion
of scarce resources or by the locking in of particular technologies.
The gas and electricity industries are characterised by the importance
of investment in assets, such as pipelines and power stations,
which have useful lives of a generation or more. Consequently,
considering the needs of the present and the future is central
to the operation and regulation of these industries.
1.2 Over the next three years important
work in this regard will be taken forward in the context of the
next electricity distribution price control review, which will
set the framework within which these companies will operate until
2010. An important element of this will look at the treatment
of small-scale generation (typically renewable and CHP), which
connects directly to the distribution network. A further important
element will look at incentives to reduce losses from the network.
1.3 In gas, agreement on a five-year price
control was reached last year with the gas trasportation company,
Transco. Ofgem has also recently reviewed options for managing
and encouraging gas and electricity industry best practice in
asset risk management, with a view to enhancing the industry's
capacity to meet longer-term requirements. Ofgem has also reviewed
options for promoting innovation throughout the industry, and
will be taking this work forward over the coming years.
1.4 In those areas open to competition,
Ofgem works to ensure that markets are open and that they function
as efficiently as possible. Ofgem acknowledges that efficiently
functioning markets will not, of themselves, necessarily take
account of the needs of future consumers. However, Ofgem's view
is that it is for Government, not the regulator, to decide how
best to incorporate environmental costs into market decisions.
1.5 Further, Ofgem considers that it is
not for the regulator to take a particular view of the future
mix of generation, or to back particular technologies for the
future. Rather, Ofgem considers that a well-functioning market
should deliver durable solutions for the medium term and that
a more diverse energy supply mix will help secure supply by preventing
over-reliance on any one source. It would be for Government to
take any decisions to promote individual technologies over and
above others, as it has with its renewables policy for example.
1.6 In carrying out a range of domestic
energy efficiency programmes since 1994, Ofgem (and before that,
Offer) has pioneered work to involve electricity and gas suppliers
in improving the fabric or Britain's housing stock. This is a
sustainable approach to reducing carbon emissions from domestic
sources and to reducing fuel poverty.
2. QQ 447-452: Does Ofgem consider that the
"interests" of customers include the cost externalities
involved in energy production, such as acid rain and global warming?
2.1 The benefits of incorporating environmental
costs into prices are that the consumers of products thus priced
directly have to meet the costs of environmental damage caused
by their consumption. However, the political unpopularity of incorporating
such costs, and the impact of doing so on the disadvantaged, also
need to be considered by Ministers. Under Ofgem's statutory framework,
the role of charging for the environment falls to Ministers, to
local authorities, or to agencies mandated by them. Since pollution
does not respect national boundaries, Ministers will often be
bound by international agreements to try to ensure that environmental
costs are appropriately shared. This is a complex and difficult
area, calling for delicate judgements to be made.
2.2 Ofgem has also stressed that, so long
as the correct value is placed on environmental costs and benefits,
then environmental impacts will be neutralised, and consequently
there will be no environmental "goods" or "bads".
2.3 For example, it can be argued that CO2
taxes are an effective way to incorporate the costs of climate
change into prices, since they have the advantage of relating
the size of the penalty to the amount of pollution. They result
in a continuous pressure to cut down on production or consumption
of energy in order to save tax. However, the aim of a CO2
tax is not to reduce the consumption of energy to zero. If it
were, it would be simpler to ban CO2-emitting activities.
Rather it is argued that, once the tax is correctly incorporated
into energy prices, decisions on the amount of CO2-emitting
energy produced or consumed will be based on correct economic
2.4 However, Ofgem recognises that there
are often social and political reasons preventing Ministers from
placing the full value on environmental costs. For example, if
the costs are being borne directly by consumers (such as VAT on
domestic fuel), they will tend to be regressive unless there are
less polluting alternatives available at a reasonable cost, or
unless poorer consumers are compensated by some other mechanism.
Concerns about international competitiveness are another reason
that Ministers can be reluctant to incorporate the full value
of environmental costs into prices, if similar incorporation is
not undertaken in other countries. This is the reason that there
is so much emphasis on the need for a global response to climate
3. Q 469: If the existing draft Environmental
Guidance had been issued on a statutory basis, would it have made
any difference to any aspect of Ofgem's work over the last year?
If so, what?
3.1 Had the draft Social and Environmental
Guidance been issued on a statutory basis a year ago, Ofgem would
have drawn the Guidance to the attention of the Authority members
immediately, and there would have been a careful consideration
of its implications at the next meeting of the Authority. The
Authority would then have had regard to its contents in taking
individual decisions, taking account of all the relevant circumstances.
The Authority would have been mindful of the place that the Guidance
has in the hierarchy of its statutory duties, and that it cannot
constitute specific instructions to the Authority, but only advice
that the Authority needs to consider within its overall statutory
4. Does Ofgem consider itself subject to the
Greening Government initiative, including the commitments, objectives
and targets that are set?
4.1 As Ofgem is not a Ministerial department
it is not formally a part of the Greening Government initiative.
However, Ofgem's own programme of environmental improvement is
in many respects consistent with the Government's "Greening
Government" initiative. That initiative aims to promote the
integration of sustainable development across government, to encourage
the use of environmental appraisals as part of policy making and
to improve the environmental performance of departments in managing
their buildings and operations.
4.2 Ofgem has implemented an internal environmental
policy, which has been launched on the Ofgem intranet. This explains
Ofgem's policies on:
building managementeg heating,
ITie power saving, recycling
recyclingpaper, cans and toner,
other policies such as business travel
and cycling to work.
This policy is made available to all staff on
the intranet, and is brought to the attention of all new starters
through the induction process. Reference to Ofgem's internal environmental
programme was included in our Environmental Action Plan, published
in August 2001.
4.3 Ofgem also committed to embarking on
a programme of work with the aim of gaining ISO 14001accrediation.
This work has progressed well and on 25 February 2002 Ofgem was
awarded ISO 14001 accreditation.
4.4 As part of the ISO 14001 process, Ofgem
has set up an internal Environment Team who are responsible for
defining and reviewing Ofgem's environmental impacts, objectives
and targets. The team will be responsible for monitoring and reporting
annually on Ofgem's environmental targets under the standard.
4.5 Ofgem has contracted with a supplier
to provide ten per cent of its electricity from green sources.
This means that at Ofgem's head office at 9 Milbank there will
be a reduction in CO2 emissions, for electricity use,
of approximately 196 tonnes per year.
5. Q 492-493: The Committee understood that
the term "consolidation" referred to a specific arrangement
under NETA whereby renewable generators could group together,
under a "consolidator", to participate directly in NETA;
and that such an arrangement is significantly different to the
traditional situation where renewable generators contract with
electricity suppliers. It is not misleading to suggest that almost
all small generators are making use of consolidation services?
5.1 Consolidation is a process whereby the
output of any number of generators may be pooled together as if
it came from a single source. It is not restricted to any specific
generation source; it may be from a renewable or a non-renewable
energy source. The main advantage for participants is that their
individual exposure to imbalance prices is reduced, as the collective
output is more likely to be close to the target output for the
group and imbalance charges can be shared across the grouping.
This aggregation of variable energy is not limited to generation;
it applies equally to demand. Small generators (Licence Exempt
Generators) can combine their variability with the variability
of customers and achieve a similar effect. This is the provision
of a consolidation service and is being utilised by almost all
smaller generators. Many smaller generators constitute but a tiny
fraction of the variability of the larger Supply portfolios. The
fact that this has been a traditional route to market for many
smaller generators does not diminish the fact that they are receiving
this consolidation service, hence our previous statement that
almost all smaller generators are making use of this service.
The concern is whether smaller generators are receiving an appropriate
price in their contracts.
The Ofgem website originally listed various companies
which were planning to provide consolidation services. How many
of these companies are actually providing them? Does Ofgem consider
that there is adequate competition in this area?
5.2 Ofgem anticipated that there would be
opportunities for specialised "Consolidators" to compete
with traditional suppliers in offering this service along with
other specialist market trading services. In promoting this competition,
Ofgem listed any company that wished to offer this service on
its website. Six companies are currently listed of which at least
three are actively engaged in consolidation without being active
Suppliers. These independent companies are competing with established
Supply companies for the consolidation business. Ofgem has also
approved a number of proposals that will further facilitate competition
in this area.
6. Q 515-524: Ofgem agreed to set out, for
the benefit of the Committee, what progress has been made against
the individual milestones set by the Embedded Generation Working
Group (and summarised in Ofgem's response to that report). It
would also be helpful if Ofgem could clarify what targets and
deadlines the DTI/Ofgem Distributed Generation Co-ordinating Group
has set itself (or been set) for its own work, and when it intends
to issue its first monitoring report.
GROUP (DGCG) WORK
DGCG/Technical Steering Group (TSG) work programme
6.1 The DGCG was established to implement
EGWG's recommendations. Its work programme therefore derives from
the suggested dates set out in the EGWG report. Much of the detailed
work will be taken forward in projects managed by the TSG, which
reports to the DGCG. The six TSG workstreams have been finalising
plans for their initial projects. A full DGCG/TSG work programme
will be available for publication in mid-June.
6.2 The TSG's workstreams are:
||Area of work|
|1||Distributed Generation Status and Projections
||Current status of connected and planned distributed generation.
Likely future distributed generation mix.
|2||Standardisation of Information and Solutions
||Relevant and accessible standards for the industry, reflecting current developments.|
Appropriate categorising, or banding, of distributed generation types.
EGWG recommendations on information and guidance documents.
|3||Short-term Network Solutions
||Technical, regulatory and commercial issues relevant to the development of basic active management of distribution networks.|
Identification of short-term measures to allow fuller recognition of the contribution of distributed generation to network security and performance.
||Removal of barriers to micro-generation.|
Simple, standard solutions for connection of micro-generation.
To advise on micro-generation in the context of the next distribution price control review.
|5||Long-term Network Concepts and Options
||Technical, regulatory and commercial issues pertaining to the longer-term transformation of distribution networks in order to facilitate distributed generation.
|6||Industry Skills and Resources
||To help ensure that future skills and human resource requirements of DNOs and other organisations do not present barriers to the implementation of EGWG recommendations.
First monitoring report
6.3 The DGCG's first meeting was held in November 2001.
It is anticipated that the group will make its first annual monitoring
report to the DTI and Ofgem early in 2003. In the meantime, a
website is disseminating information about the issues being considered
by the DGCG.
6.4 The original milestones listed in the table below
have been subject to modification in the light of subsequent work.
We have, therefore, indicated what progress has been made and
what work is currently planned in respect of each milestone. A
fully revised work programme for the Distributed Generation Co-ordinating
Group (DGCG) and its Technical Steering Group (TSG) should be
available by the end of June.
|1||Review of options for future network design
|2||Connection process guide
|3||Review of Engineering Recommendation P2/5
|4||Identification of any short-term changes to price controls
|5||Format for provision of information by distributors
|6||Studies related to power quality and the technical contribution of embedded generation
|7||Development of "information packages" for potential distributed generators
|8||Work on "islanded operation" of distributed generation
|9||Review of options for control and management of networks
|10||Review of options for domestic and micro generation
|11||Analysis of network design practice
|12||Review of incentives in price controls
|13||Implementation of revised charging principles
|14||Implementation of revised network design package
Review of options for future network design
6.5 This is a major subject area. Some of the major issues
were scoped during a preliminary Ofgem seminar in October 2001.
Currently, the TSG's Workstream three (Short-term Network Solutions)
is considering how networks might move to basic active management.
Workstream five is taking forward work on long-term network concepts
Connection process guide
6.6 The EGWG Rapporteur Contribution on Facilitation
of Competition recommended that work should be done on "generic
industry documentation for information that assists potential
new connectees wherever they wish to connect". EGWG suggested
building on "A Technical Guide to Connection of Embedded
Generation to the Distribution Network", previously published
6.7 This work is being taken forward by TSG Workstream
two (Standardisation of Information and Solutions) as a discrete
project, embracing work that DTI continues to fund. It is anticipated
that the project will be completed by September 2002, and that
it will result in the publication of a revised guide.
Review of Engineering Recommendation P2/5
6.8 ER P2/5 was produced, before privatisation of the
Electricity Supply Industry, under the aegis of former Electricity
Council. Although hitherto of interest only to operators of distribution
networks, it now has considerable significance to a wider communitynotably
including prospective distributed generators, because it helps
to determine to what extent distribution network operators may
use the contribution of such generators to justify offsetting
network reinforcement. Accordingly, issues surrounding the governance
of P2/5 needed to be addressed before progress can be made on
detailed amendments. Indeed P2/5 is just one of a range of technical
standards that are written by, or are adopted by, electricity
companies and which can either constrain or facilitate developments
of the sort necessary to accommodate increased numbers of distributed
generators. On 30 April 2002 Ofgem issued a consultation paper
aimed at identifying and resolving wider issues governance of
the governance of technical standards. Responses have been requested
by 18 June.
6.9 Concurrently, TSG workstreams are identifying the
changes that will be required to P2/5. Changes to Table 2, which
covers the contribution that distributed generation can make to
network security, may be feasible in a relatively short timescale.
A revision of the full document will probably follow later.
6.10 TSG Workstream three (short-term Network Solutions)
has formed a sub-group to review the principles and proposed methodologies
in extending Table 2 to modern generation. It will take account
of relevant work that UMIST
has already done for DTI.
6.11 TSG Workstream two (Standardisation of Information
and Solutions) will be working closely with Ofgem on its wider
consultation on governance of technical standards. Additionally,
it has the remit to formalise Workstream three's project on short-term
changes to P2/5.
Identification of any short-term changes to price controls
6.12 In September 2001, Ofgem consulted widely on the
options for re-opening or early termination of the existing distribution
price control to accommodate changes to the network changing regime
for embedded generators. The consensus was overwhelmingly against
making formal changes in advance of the distribution price control
review scheduled for 2003/04. Ofgem concluded that modifying the
price control would risk dislocation of DNOs' business plans and
increase risk and uncertainty (with consequent upward pressure
on prices to customers). Modification of the control would be
likely to affect the assumptions underlying the price control
and would be tantamount to reopening the control. Moreover, there
was no evidence that short-term changes would have any significant
effect on generators' long-term investment decisions. Ofgem's
September paper also discussed the possibility of introducing
some interim measures or guidance before the next review and,
in its March 2002 document on distributed generation Ofgem was
able to recommend the introduction of a series of such measures.
Responses to that document are still being analysed, but it is
clear that these interim recommendations have met with broad support.
6.13 Ofgem's paper sets out some significant changes
that can be introduced without delay. These include:
giving distributed generators the choice of paying
only a shallow connection charge up-front, with further costs
being spread through an annualised connection chargeas
opposed to paying a deep connection charge initially;
reducing the time and cost of network studies
for individual generation proposals;
reimbursing "initial contributors" when
other connections subsequently share connection assets for which
they have paid;
reducing connection charges where the new connection
helps the DNO to avoid asset replacement or reinforcement costs;
new standards for quotations for connection of
ensuring that householders who purchase DCHP equipment
will not be faced with burdensome procedures or unreasonable charges;
appropriately metering imports and exports of
active power, to ensure fair, cost-reflective charging;
protecting the interests of existing distributed
ensuring that accurate, comprehensible information
is available to anyone interested in connecting distributed generation.
Format for provision of information by distributors
6.14 EGWG's report contained a separate Rapporteur Contribution
on Provision of Information. It identified the need for appropriate
network information to be included in a system statement made
available by each DNO. EGWG acknowledged that a "pragmatic
and economic balance" would need to be struck between the
value of information provided and the cost of providing it.
6.15 Ofgem's work on the development of Long Term Development
Statements (arising from the requirements under standard licence
condition 25 in the new Distribution Licence) will deliver the
improved information that EGWG identified as desirable. In June
2001, a consultation document
sought views on the possible content of the statements. Responses
were summarised in a follow-up document in August 2001
and discussed at a subsequent workshop. It is anticipated that
the direction bringing licence condition 25 into force will be
made in August 2002. DNOs will then have three months to publish
their statements. However, some DNOs have already issued draft
or summary statements.
6.16 TSG Workstream two (Standardisation of Information
and Solutions) has established a project to monitor the statements
and to review the cost/benefit of any proposed changes. This project
is expected to extend to March 2003.
Studies related to power quality and the technical contribution
of distributed generation
6.17 This covers a wide range of work that will be taken
forward by the TSG. The milestone date of January 2003 is not
a realistic target for completion of all this work. Indeed it
will continue over a period of years as experience with increased
numbers of distributed generators develops. However, the TSG anticipates
making significant progress in these areas by early 2003. The
DGCG/TSG workplan will shortly be made publicly available on a
new website. The workplan will be regularly updated.
Development of "information packages" for potential
6.18 Ofgem's papers of September 2001 and March 2002
stressed the importance of accessible and comprehensible information
for potential distributed generators, and particularly for those
contemplating micro-generation and DCHP installations. Responses
from DNOs almost universally recognise the need for the development
of "plain English" information packagesand signal
an intention to produce them. Ofgem will be taking a close interest
in the development of this information material. June 2003 is
a realistic date for completion of this work.
Work on "islanded operation" of distributed generation
6.19 Ofgem's Distributed Generation Project envisages
completion of some preliminary work on islanded operation by early
2003. This is, however, a challenging technical area in which
developments may be expected over a number of years. Work on the
prospects fro islanding can proceed in parallel with the connection
of increased amounts of distributed generation.
Review of options for control and management of networks
6.20 TSG Workstream three has started work on network
control and management.
Review of options for domestic and micro-generation
6.21 TSG Workstream four (Micro-generation Solutions)
is responsible for this work and is currently finalising its plan.
Its objectives are to:
work remove the main regulatory and institutional
barriers to the introduction of micro-generation;
develop simple, standardised solutions for the
connection of micro-generation to distribution systems;
implement short-term solutions that can be effected
within the existing regulatory and legislative framework;
identify necessary changes to policy, regulation
and legislation in order to bring about a more favourable general
regulatory framework for micro-generation; and to
advise on the next distribution price control
review, identifying mechanisms to incentivise DNOs to encourage
the early adoption by consumers of micro-generation.
Analysis of network design practice
6.22 TSG Workstream five (Long-term Network Concepts
and Options) will take this work forward.
Review of incentives in price controls
6.23 On 28 May 2002, Ofgem held a preliminary seminar
on the development of price controls. A consultation on the principles
underlying the price control of networks will follow shortly.
The issue of incentives for the connection of distributed generation
will be an important factor in the next distribution price control
6.24 It is too early to comment on the last two milestones,
which relate to implementation of new arrangements, in and after
7. Q 534-537: Ofgem agreed to provide a paper to the Committee
on the inconsistency which currently exists, whereby "deep"
charges are levied on embedded generators connecting to distribution
networks but not on major generators connecting to the transmission
Connection charging: Introduction
7.1 Distributed generators, unlike demand customers and
unlike generators wishing to connect to the transmission system,
have in the past paid "deep" connection charges, but
no Use-of-System (UoS) charges, to the distribution network operator
(DNO). Generators connected to transmission networks pay "shallow"
connection charges, and also pay UoS charges to the transmission
network operator. The principal difficulty with this situation
is not that distributed generators are necessarily disadvantaged
in comparison with those connected to transmission systems, but
rather that the "up-front" payment of "deep"
connection charges can sometimes constitute a barrier to development
of distributed generation schemes. The Embedded Generation Working
Group (EGWG) paper on charging principles notes that the key concern
in respect of charging for distributed generation is to ensure
that DNOs receive appropriate remuneration for distributed generation,
while at the same time removing barriers inherent in the existing
charging mechanism. In essence, this is a question of achieving
an appropriate balance in the proportion of distribution costs
recovered from up-front connection charges and UoS charges.
Guiding principles: "deep" v "shallow"
7.2 Up-front charges for connection to transmission networks
(in England and Wales) and to gas transportation networks are
"shallow" or "shallowish", in that they recover
the costs only of local reinforcement. In principle, Ofgem considers
that connection charges for embedded generators should also be
"shallow", unless there are genuine, practical reasons
indicating the contrary.
7.3 Treating transmission and distribution connections
in the same way might tend to reduce perverse incentives for marginal
generators choosing between connection above or below the transmission/distribution
boundary. Ofgem's September 2001 consultation sought views on
whether it might be possible to move towards shallower connection
charging, as an interim measure. Some progress was made in Ofgem's
March 2002 decision document. The issue will, however, need to
be looked at again as part of the next distribution price control
Distribution in Comparison with Transmission
7.4 Although some have suggested that prospective distributed
generators are at a relative disadvantage in having to pay "deep"
connection charges, it has not been conclusively proved that this
is the case. On the face of it, the one-off, "up-front"
connection charge paid by distributed generators looks more likely
to constitute a deterrent than do "shallow charges"
and on-going UoS payments. However, to compare transmission and
distribution networks is hardly to compare like with like. It
is not self-evident that the connection policies of the two types
of network operator should necessarily be the same.
7.5 Transmission networks have been designed and developed
to accept generation connections. Distribution networks, in contrast,
are frequently radial and "tapered". They are designed
to meet minimum voltage requirements for customers at the end
of circuits furthest from substations, but will frequently lack
the capacity to export significant amounts of distally-connected
7.6 Transmission systems are actively managed, having
the appropriate control systems in place. Few distribution systems
have anything that could be described as active management. There
are no control or monitoring systems at low voltage, where it
now seems that micro-generation and domestic combined heat and
power (DCHP) installations may be connected in significant numbers.
7.7 It may prove difficult for DNOs accurately to attribute
the reinforcement costs associated with micro-generation and CHP.
Although this is not a problem faced by transmission operators,
it may indicate that shallower charges for embedded generation
connections could be appropriate. The "deeper" costs
of reinforcement could then be spread over all demand customers
or, if such connections were treated as excluded services, over
all distributed generation connections.
7.8 It is not necessarily true that generators seeking
transmission connections enjoy any real advantage. Transmission
connections are made in accordance with strict standards. The
generator is required to pay a security deposit, and would expect
to be liable for termination payments. The requirements of distribution
connection are such that the prospective distributed generator
can choose between quality and cost of connection, while not being
subject to a deposit or termination payment.
7.9 Distribution connections may also allow more scope
for choice in respect of access to higher voltage networks, including
(for higher voltage connections) access to the transmission network.
Prospective distributed generators will often have the option
of negotiating lower connection charges by accepting non-firm
connection and the possibility of being constrained off for restricted
Principles for connection charging
7.10 The policy for connection charging is for the individual
DNOs to set, subject to the licence requirement for Ofgem's approval
of the form of the statements in which DNOs must set out their
connection charging policies ("Condition 4 statements")
However, in protecting customers, Ofgem considers that connection
charges for distributed generators, as for other parties seeking
connection, should be efficient, equitable and comprehensible.
7.11 Charges should be efficient in that they give appropriate
cost signals to prospective generators. If charges do not reflect
costs, they may lead to connections at inappropriate points on
the network. In the longer term, this could result in further
investment for reinforcement that could have been used more efficiently
7.12 Connection charges should be equitable in that they
do not create cross-subsidies between customer groups and do not
recover network costs (such as general reinforcement, betterment
or asset-replacement costs) that should properly be met from that
part of Distribution UoS revenue that is price-controlled. In
this context the comparability of transmission and distribution
connection charging is relevant, in that the combined effect should
not be skewed in favour of either distributed or non-distributed
schemes. Consideration should also be given to equity as between
generation customers and load customers. These complex issues
of perceived discrimination will have to be considered in the
light of Ofgem's statutory duties under the Electricity Act 1989.
7.13 In March 2002 Ofgem issued a paper (Distributed
generation: price controls, incentives and connection chargingFurther
discussion, recommendations and future action) which detailed
some recommended interim measures that could be implemented immediately.
One of these was that generators connecting to a distribution
network be offered a choice of how they pay for their connection.
They could either pay the full "deep" connection charge
up-front or opt to pay a "shallow" connection charge
up-front, with the further costs being spread through an annualised
charge negotiated with the DNO.
7.14 These interim measures address some of the issues
and perceived barriers in the short-term, however, connection
charging will be considered further as part of the work on the
2005 distribution price control review.
8. Wind Energy in Denmark
The points below have been obtained by Ofgem from speakers
at recent conferences. We believe they are fair and accurate.
8.1 The Danish system has some 5,000 wind turbines totalling
1,900 MW capacity. We understand that wind and CHP have been encouraged
to such an extent that they have, in effect, been given unfettered
access to the grid. This is now resulting in serious operational
difficulties for Eltra, the grid operating company.
8.2 The wind generation capability now exceeds the Danish
minimum demand (1,200MW). If the wind is blowing at the time of
minimum demand this results in a very serious situation for the
integrity of any electrical grid. It is not possible to store
the excess energy and, on the occasions this has happened to date,
the operational difficulties have been overcome only by spilling
the surplus energy into their interconnectors to Norway, Sweden
and Germany. These were emergency actions and it was fortunate
that there was available capacity on the cables at the time.
8.3 Eltra report a lower quality of supply being experienced
by customers. This is likely to be because a large proportion
of wind generators will result in an electrically "weak"
system. (Wind turbines use induction generators that have no sustained
fault infeed capability.) In this situation, faults on the network,
for example due to lightning strikes, will be seen as dips on
the lights over a very much larger area. Weak systems also suffer
waveform distortion and restrict the operation of HV DC interconnectors.
8.4 The Danish conference speaker remarked that "the
rules for wind and CHP were too simple, too cheap and now we are
living to regret it". It has been politically unacceptable
to constrain the operation of wind generators and the grid operator
has no more then a telephone number for them. There are no operational
control systems available to the grid operator for managing emergency
8.5 A separate Danish commentator, from the Elkraft distribution
company, has remarked that there are economic issues to be addressed
in Denmark: excess production from wind and CHP at times of low
electricity prices results in their marginal costs not being covered
during these periods. This speaker also noted that Germany is
likely to have an excess wind capacity problem and will be limited
in its ability to provide an export opportunity for Denmark.
8.6 The position in Britain must of course be considered
in its own context. It is advantageous from the wind energy perspective
that our minimum demand is substantially greater (demand in GB
is some 20 times larger); on the other hand, we have very much
less interconnection capability to our neighbours (less than 5
per cent of peak demand, compared with 75 per cent in Denmark).
We have the further challenge that our operational management
of minimum demand also needs to accommodate the nuclear generators
which, for different reasons, also cannot readily have their output
reduced. National Grid would be better placed to comment on this
9. Ofgem response to DTI's consultation on draft social
and environmental guidance to Ofgem
9.1 Ofgem's short response to DTI's consultation of May
2001 is attached.
In order to meet consumer demand, DNOs are required to develop
their networks in accordance with the security requirements of
ER P2/5. Back
"Governance of Electrical Standards: Consultation paper",
Ofgem, April 2002. (www.ofgem.gov.uk/docs2002). Back
University of Manchester Institute of Science and Technology. Back
"Proposed Electricity Distribution Licence Condition 25-Form
of Long Term Development Statement: Consultation Paper",
Ofgem, June 2001 (www.ofgem.gov.uk/docs2001/licencecon25.pdf). Back
"Proposed Electricity Distribution Licence Condition 25-Form
of Long Term Development Statement: Summary of responses",
Ofgem, August 2001 (www.ofgem.gov.uk/docs2001/ltds-responses.pdf). Back