Locogen CEO Responds To NGESO Modification

The National Grid (NG) Electricity System Operator (ESO) has raised a modification to allow it to manage potential low demand due to the ongoing effects of COVID-19 “demand destruction”. The change will be used as a last resort to instruct DNOs to disconnect embedded generation. If this is used, it may mean that embedded generators could be curtailed by the DNO without compensation.

Locogen CEO, Andrew Lyle, had this to say: 

“There has always been a risk of temporary disconnection from the grid, without compensation, during maintenance works as well as under emergency situations relating to the distribution network due to the vast majority of embedded generators having non-firm connections with the local distribution networks. This modification, however, is announced with few details on how DNOs will implement the new emergency instructions – causing owners and managers of embedded generators potentially major concerns. For instance, if powers were used at any other point other than as a ‘last resort’ – owners/managers may have to compensate other parties. Further, if the length of any disconnection extends beyond the minimum time period necessary – the downtime endured will negatively impact embedded generators’ revenue. These appear to be major oversights to owners/managers of embedded generators in the NGESO’s plan to secure the supply of electricity during the COVID-19 lockdown.

Perhaps acknowledging some of their shortcomings, the NG later announced the offer of Optional Downward Flexibility Management (ODFM). This stipulates that small-scale generators, if asked to turn down or turn off their generation of electricity, would receive payments from the ESO. This type of offer ensures mutual benefits for both parties. The NGESO will continue to benefit by effectively managing the transmission network (and therefore the security of supply) by reducing the amount of electricity supplied at the local, distribution level. Meanwhile, owners/managers of small-scale embedded generators will benefit from being reassured that their revenue is protected even if they are asked to turn off or turn down their generator over the COVID-19 period. 

Having said this, large-scale embedded generators are still unaccounted for, and with the largest amount of revenue to lose, Locogen have been exploring the potential for them to claim on their insurance. As it stands, it is unclear whether any loss in generation resulting from these temporary disconnection measures could be claimed under operational insurance policies. Most policies clearly state that any planned grid outages which deal with short-term grid supply issues are not claimable, whilst unplanned outages (e.g. caused by storm damage) are claimable. With the security of large-scale generators’ revenue in mind, Locogen will continue to pursue clarity from insurance providers on this modification until the provisions are due to fall away on the 25th of October 2020.

If you have concerns about this modification, or any other change to your embedded generator due to COVID-19, please don’t hesitate to contact us

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