Robert Tudway, senior policy adviser on climate change at the London Development Agency, insists the European Court of Justice’s decision on the Citiworks case is not as important as the new licensing regime unveiled for consultation last week by regulator Ofgem and the Department for Business, Enterprise and Regulatory Reform (BERR).
Earlier this year, energy company Citiworks challenged monopoly supply arrangements at Leipzig airport. Last month, the Luxembourg-based court ruled against the German law which allowed, in some cases, monopolies for onsite energy providers. It said the prevention of third-party access breached European law.
Mr Tudway said the threat to the UK market might not be as serious as initially feared, especially with the consultation indicating major changes to the system.
“The Citiworks case means the decentralised energy industry has got to look to the future and the new regime rather than having to rely on the past arrangements,” he said. “Strategically, it should not have a major effect.
“If the framework they [BERR and Ofgem] have produced is implemented thoroughly it will be a major step forward.”
The Citiworks case is seen as important in the UK as a class exemption order (CEO) has until now allowed smaller decentralised energy systems to operate outside the licensing regime and in some cases create monopolistic supply arrangements which reduce the risk of investment.
BERR is still looking at the implications of Citiworks, but hopes updating and clarifying the CEO will help, while overhauling the licensing system will provide clarity.
Mr Tudway said CEOs only applied to small-scale projects and his experience in London indicated that the trend is towards larger decentralised schemes, including major district-wide heating projects.
“The new regulatory environment is likely to preserve and enhance the economic benefits of decentralised energy while allowing third-party access,” he said. “The new regime will actually allow decentralised energy to become much larger in the number of people it serves.”
Mr Tudway said private wire networks established by energy service companies to provide electricity at sites without connecting to the grid do not automatically exclude third-party access: “Where private wire systems can allow third-party access, no issues arise.”
The Combined Heat and Power Association said it was waiting for more information from BERR on the Citiworks issue, but said the consultation proposals still did not do enough to promote small-scale production.
“A key barrier to progress towards decentralised energy is the current reach of central trading arrangements which are premised on the large scale production and supply of electricity and were not designed to accommodate development of local markets – including heat,” a spokesman said.
“All routes to market for even small levels of decentralised trading has to be routed through the central trading arrangements, which are dominated by large suppliers. This imposes significant and unnecessary costs and complexity. It is unclear the extent to which Ofgem and BERR’s response will address these issues in their entirety.”