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Home/Reform to network charges: The Targeted Charging Review and its Implications

Reform to network charges: The Targeted Charging Review and its Implications

We are pleased to present Aurora’s new strategic insight report, Reforms to network charges: The Targeted Charging Review and its Implications. The report presents our findings on the ongoing Targeted Charging Review and its implication for the power sector.

The analysis draws upon our market experience, with much of the content developed through a detailed consultation process across market participants. The report was first presented during a Group Meeting in March 2019 and was subsequently updated to reflect feedback provided by clients.

Key messages to emerge from the analysis are:

  1. The Targeted Charging Review was launch in August 2017 by Ofgem over concerns that the current framework for residual network charges could lead to an inefficient use of the network and negatively impact consumers
  1. Ofgem’s preferred option would see a removal of benefits behind the meter, embedded and transmission assets, and embedded generators paying BSUoS charges. The full magnitude would however depend on other ongoing regulatory/code modifications
  1. Implementation of Ofgem’s preferred option will result in a fall in baseload prices of £1.7/MWh which is partially negated by a rise in annual capacity market prices of up to £12/kW
  1. The Targeted Charging Review would threaten the economics of renewables and cause GB to miss its 2030 emissions target. Crucially, the regulatory change could impact investors confidence as existing assets see a dip in IRRs.

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