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Case study

Modelling the impacts of embedded benefits reforms

Energy transition Technology


Ofgem commissioned LCP to provide modelling support in their analysis of modifications CMP264/265 relating to so-called ‘embedded benefits’.

Our solution

Working in partnership with Frontier Economics, we used our Envision model to analyse the impacts on the wider system of the proposed changes, including the consumer and system cost impacts. The analysis focused on the “triad chasing” behaviour of distribution-connected generation, which, without the modifications, is incentivised to run during peak periods to reduce suppliers’ exposure to the TNUoS demand residual. By varying the level of this incentive we analysed the impacts on:

  • GB capacity mix, including changes to capacity mechanism clearing prices and capital expenditure
  • Total system and consumer costs
  • Peak and baseload wholesale prices
  • Load factor, captured price and overall profitability for a range of archetypal units
  • Carbon emissions intensity

To quantify the effect of assumptions made, we considered a range of sensitivities in key uncertainties, including:

  • Projects reneging on existing capacity mechanism contracts
  • Varying efficiency of distributed generation technologies
  • Varied capital costs assumptions for key technologies

The results

Our analysis formed part of the evidence for Ofgem’s impact assessment and was published alongside Ofgem’s final decision papers. Click here to access.