This is potentially damaging news for the commercial and industrial energy storage sector in the UK. One of the main benefits to businesses installing batteries is to switch their demand profile to avoid Triads, times of peak UK demand, reducing their demand charges which effect their energy bills for the whole year. Ofgem are proposing to change the current demand charge mechanism for C&I customers and replace it with a fixed charge. This completely takes away the business case for installing batteries.
Ofgem are suggesting this to ensure network providers are not losing out on revenues but this will have a negative effect on the energy network. Businesses installing batteries are not only saving themselves money but they are positively contributing to reducing peak demand. Smoothing out the demand profile makes network planning and matching generation and demand far easier. We'll have to see how this story progressing and how it will impact the C&I storage sector.
If a customer has to pay a flat fee for consumption during a specific time window, battery storage may be able to significantly reduce the charge by predicting the hour and delivering power at that time (actual results may vary). That’s good news for the customer, and the storage developer, but not so good for the people who levied that tariff to efficiently distribute the costs of the electric grid. Put another way, if everyone figured out how to avoid paying certain fees, regulators would have to figure out a new way of socializing the cost of the grid; that money still has to come from somewhere. That’s what happened in the U.K. Ofgem became concerned that some customers were getting out of paying residual charges, which cover sunk network costs, McCarthy wrote in an analysis of the proposed change.