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Solar Power Firms Target End Users In Post-Subsidy World

March 8, 2019

By Paul Homewood

 

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 https://www.lightsourcebp.com/uk/ppa/

 

The solar power industry in the UK has been seen its business virtually dry up to nothing in the last year or two, following the ending of ROC and CfD subsidies.

However, they are attempting to resurrect themselves by doing direct deals with end users. Lightsource BP, who say they are largest operator in Europe, are one example and have been offering their package to large users:

 

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Their projections of electricity prices are startling, but confirm what I have been saying for sometime. While wholesale prices change little, green subsidies and grid transmission costs will carry on rising remorselessly.

Eyeballing their chart, non commodity costs will have risen from about £48 to 80/MWh, between 2016 and 2020, adding about 40% to end user prices.

These costs will continue to rise at least until 2030.

 

So what can Lightsource offer potential clients?

 

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The ability to fix costs years ahead is obviously an attractive one, but how can businesses save 25% off their electricity bills up front? After all, we know that solar power is hopelessly uncompetitive against conventional generators.

The answer is simple. The solar farm, built and maintained by Lightsource, is “hard wired” straight to the customer, via a private wire.

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By doing so, the customer avoids paying for all of those network charges and green levies. Based on the 25% saving quoted, we can guesstimate that prices will be in the order of £90/MWh, probably index linked as well.

 

There are two huge ironies here:

1) Most of the green levies are needed to pay for renewable energy subsidies and the costs of coping with their intermittency. Why should new solar power users get away with paying their share?

2) Because of the intermittency, Lightsource’s clients will still need to rely on that “old fashioned” grid to keep their lights on and computers running.

 

Large energy users opting for their own solar farms won’t do anything to reduce network costs or green levies in total. It just means that the rest of us have to pay for their share as well as ours.

Indeed, as more and more of these corporate power purchase agreements (PPAs) get to be taken out, the more costs will be loaded onto the grid to deal with  increasingly intermittent renewable generation.

 

Lightsource’s offer is for businesses using at least 5000/MWh, which would mean £500,000 plus. So only big companies need apply, like Belfast International Airport, Bentley Motors and Thames Water who are already on Lightsource’s books.

Nobody can blame businesses from looking after their own interests, but it is the rest of us who will have to pick up the bill.

10 Comments
  1. It doesn't add up... permalink
    March 8, 2019 7:55 pm

    Trying to get your head around OFGEM’s jargon filled proposals for reforming charging for networks is not easy. Kathryn Porter does get to the heart of it I think:

    In particular, there are complaints that Ofgem’s preferred approach of a fixed cost will penalise large energy users that have invested to reduce their energy demand in response to government policy. As a result, incentives to invest in storage, onsite generation or demand side response will be reduced and the business case for such technologies will be affected.
    ….
    There are also suggestions that Ofgem’s objective of creating an efficient, cost effective network which reduces bills for consumers should not be elevated above de-carbonisation goal.

    http://watt-logic.com/2019/02/12/targeted-charging-review/

  2. Coeur de Lion permalink
    March 8, 2019 10:02 pm

    52 north latitude

    • Mack permalink
      March 9, 2019 12:05 am

      It’s funny that, isn’t it? The cretins in charge of bestowing solar gifts to the plebs from the Gods have forgotten that even the Gods can’t make the f*****g sun shine that much for that long on this side of the northern hemisphere. Morons.

  3. Gamecock permalink
    March 9, 2019 3:07 am

    People should be able to make their own electricity. That Lightsource projects don’t meet politicians plans shouldn’t matter.

    The alternative to grid/Lightsource power is grid power alone. Not better. Lightsource lives or dies on being able to produce electricity for their client competitively.

    • It doesn't add up... permalink
      March 9, 2019 11:58 am

      It turns out that defining “competitively” depends crucially on how the network and backup services are costed. Those who choose to go completely off grid should be free to do so, but those who rely on the grid for backup may need to pay for the peak capacity they use in both transmission and distribution, and reserve generation when the wind doesn’t blow and the sun doesn’t shine. There is no single right way to do this, but different methodologies can produce very different outcomes: see the link I gave above.

      • Gamecock permalink
        March 10, 2019 1:52 pm

        In the U.S., big electricity consumers, like factories, do pay demand charges. Capacity-to-consume is based on annual peak usage. My company paid tens of millions of dollars a year for it.

        Residential customers do not pay demand charges. Few even know they exist.

      • It doesn't add up... permalink
        March 10, 2019 6:34 pm

        Residential customers are assumed to have the same peak demand per meter for the purpose of allocating demand charges. They most certainly pay them in the UK as part of the standing charge which is charged to the retailer, who can choose how to recover it.

  4. Chilli permalink
    March 9, 2019 2:28 pm

    Huh? I’ve no problem with people making their own electricity as long as other users don’t have to subsidise them – but that’s exactly what’s happening here: the subsidies and costs of intermittent renewables are making grid electricity unaffordable – so Lightsource are offering a way for big users to avoid paying their contribution towards those costs while simultaneously loading more intermittency onto the grid.

  5. Gerry, England permalink
    March 9, 2019 9:49 pm

    More of the great slippery slope. If more big users dump the grid it will make it less reliable and more expensive to the point where those of us who can may well find it cheaper to get our own diesel generator and exacerbate the grid death spiral. The solution has been suggested before and that is a grid access fee to cover to costs of providing the grid for these users. And if it is set high enough then is should make the Lightsource schemes uneconomic or they get their own diesel generators for when the sun doesn’t shine. I wonder if our descendants will look at our generation and wonder why we were the first to take the human race backwards.

  6. It doesn't add up... permalink
    March 9, 2019 11:12 pm

    We already have the triad system that encourages the largest users to run their own back up generators (typically diesel) during periods of peak demand (or to limit their demand by turning off machinery etc., but few do that). In theory it reduces the investment required in the grid to deliver peak demand. It does at least have some logic that it is trying to reduce the overall cost to consumers, although if triad charges are too high it leads to over-investment in onsite generation that is much less economic than a large power station, with the saved grid cost being eclipsed.

    OFGEM are proposing to downgrade the triad system’s importance in setting network charges. The reality is increasingly that the network is having to be reinforced to provide alternative pathways to handle power distribution depending on whether the wind is blowing or not. That reduces the investment that can be “blamed” on demand from large users at peak times. However the incentives to locate generation close to demand are now vanishingly small, because the total cost is simply added up and divided among consumers, instead of being used even in part to vary the price achieved by generators according to the locational benefit of their plant (if we did this there probably wouldn’t be many wind farms in Scotland). There is still some benefit, because there will be some incentive to run plant close to demand centres in order not to overload the grid, so it might get run more often as reserve. But that is diminished when there is over-investment in the grid.

    Provision of a beefed up grid is one of the biggest hidden subsidies to wind farms and solar parks. Subsidies have not gone away: they are simply morphing.

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