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Chart of the Week

2018

Q418 Feed-in Tariff mutualisation - assessing the risk

Stuart Leaver Analyst

On 13 November Ofgem announced that FiT mutualisation had been triggered, due to a £4.17mn shortfall in the levelisation fund, just above the £4.07mn threshold. This equates to an estimated 565GWh supply volume that did not pay into the fund, calculated to have an impact of ~7p/MWh on the confirmed Q318 levelisation, pushing it to £7.45/MWh. Further analysis by Cornwall Insight in association with Pixie Energy found that a further shortfall in the fund is expected for Q418. There has been 274GWh of unclaimed supply so far from failures of suppliers Ure Energy, Ephase, Extra Energy and Spark Energy. Currently, this unclaimed volume equates to a £1.33mn shortfall in the levelisation fund. Though more than two thirds under the mutualisation threshold, further supplier failures could exceed this lower boundary, causing another trigger of mutualisation that will impact domestic bills.The above chart displays the likely impact of mutualisation passed to consumer bills with increasing shortfall in the Q418 levelisation fund. Exceeding the threshold is expected to cause a minimum impact of 6p/MWh to levelisation costs, and a maximum impact of 62p/MWh at the £40.7mn cut off. We will be continuing to monitor these developments in the lead up to scheme closure given that levelisation may become more prevalent in current market conditions. Cornwall Insight produces a Quarterly Feed-in Tariff Forecast, outlining a five year ahead forecast of levelisation costs, changes to capacity and policy developments. For any questions, contact Stuart Leaver at s....

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