Please read my letter of objection to OFGEM about the granting of an Independent Distribution Network Operator License (INDO) to Green Generation Energy Networks Cymru Limited.
"Objection to the Granting of an Independent Distribution Network Operator License to Green Generation Energy Networks Cymru Limited
I am writing to formally object to the issuance of an Independent Distribution Network Operator (IDNO) License to Green Generation Energy Networks Cymru Limited. The concerns I wish to address are twofold: the nature of the proposed operations as outlined in their business model and the financial stability of the applicant.
Firstly, the operational model of Green Generation Energy Networks Cymru Limited raises significant concerns regarding their suitability to hold a distribution license. It is evident from their own consultation documents and the information shared during discussions that their intended operation model does not align with the traditional role of a distribution network. Instead of distributing electricity to customers, they propose to use the infrastructure to transmit electricity from Bute Energy’s wind farms directly to the grid. This is not only a deviation from the defined purpose of a distribution system under current regulations but also sets a concerning precedent where private companies could potentially circumvent established grid strategies without appropriate oversight.
Moreover, the proposed lack of distribution points along the Towy Usk line, as confirmed by the route mappings in the Stage 2 consultation brochure, suggests that the line will serve a purely transmission function, which requires a different form of licensing. The implications of granting a distribution license under these circumstances could potentially be ultra vires, as it conflicts with the statutory definitions and intended purposes set forth in existing energy legislation.
Secondly, the financial stability of Green Generation Energy Networks Cymru Limited is highly questionable. Their recent financial disclosures, as well as those of their parent company Bute Energy Development Holdings Ltd, show substantial carried forward losses and a reliance on high-interest, unsecured loans for funding. This financing structure is not only unsustainable but also suggests a significant financial risk, which is further evidenced by an interest rate considerably higher than the current investment grade yield. Such financial instability makes it difficult to trust that the applicant can maintain the required standards of operation and financial robustness as stipulated in the licence conditions BA 3 and BA 4.
Additionally, the current management structure where significant control is maintained by the founders, coupled with shared directorships across the generation and proposed distribution entities, does not comply with the regulatory requirement for management separation. This lack of independence between operational control and ownership poses a further risk to the unbiased and efficient operation of a distribution network.
Given these considerations, along with the speculative nature of their planned developments and the volatile state of the renewable energy sector, it would be inappropriate and potentially detrimental to the strategic interests of the National Grid and the wider energy market to grant an IDNO License to Green Generation Energy Networks Cymru Limited at this stage.
I urge Ofgem to reconsider the provisional decision to grant this licence, taking into account the substantial risks and the apparent misalignment with both regulatory requirements and industry standards."