Distributed Generation
109. Distributed generation is generation which is connected to local distribution lines rather than the transmission grid. It is expected to play an increasingly important role in meeting electricity demand as the cost of smaller-scale and new renewable technologies continues to decline. Distributed generation can improve security of supply by creating diversity of fuel types, locations and technologies, and, where appropriately sited, helps reduce the need for transmission and distribution upgrades. Accordingly, it is important that there are no unnecessary barriers to its development.
Access to Lines
110. The Government proposes to introduce regulations prescribing reasonable terms and conditions on which line owners and electricity distributors must enable generators to be connected to distribution lines. The objective is to facilitate the use of distributed generation by ensuring that it does not face undue barriers in connecting to lines. The Electricity Commission will have responsibility for administering the regulations and for proposing amendments as required.
Purchase of Surplus Generation by Retailers
111. The Electricity Act 1992 provides powers to regulate terms and conditions for the purchase by retailers of small surpluses of electricity from generating units owned or operated by consumers.
112. It can be difficult for owners of distributed generation units to negotiate terms and conditions with local retailers to purchase small surpluses of electricity generation. High transaction costs are involved. The Government would like to see this barrier to the development and uptake of distributed generation reduced by setting appropriate terms and conditions for purchase of small electricity surpluses by local retailers. The Government envisages that this policy should apply to consumers with generation units capable of generating up to 40,000kWh over a year. A key principle however is that retailers should not incur ongoing financial losses by the requirement to purchase such electricity.
113. The Commission should seek to develop non-regulatory arrangements to achieve these objectives, but should recommend regulations or rules if voluntary arrangements are unsuccessful in achieving the policy outcomes the Government seeks.
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