The Commission for Energy Regulation (CER) looks set to abolish a waiver for small renewable energy generators, including combined heat and power (CHP) units used by businesses, even though the government has set removing barriers to CHP deployment as one of its goals in its recent energy white paper.

Businesses that install generators, including CHP units, with a capacity of up to 500kw currently do not have to pay fees when applying to be connected to the state's electricity distribution system, which is operated by ESB Networks.

Businesses planning to connect larger generators have to pay an application fee of 7,880.

However, CER is considering tightening eligibility requirements for the waiver so that it only covers generators with a capacity of 50kw. Industry sources claim that the move was motivated by complaints from ESB Networks. 'Distributed generation' schemes are increasingly popular in several US states and may eventually produce up to 40% of all UK electricity requirements.

A spokesman for CER admitted that 50kw was only sufficient for household purposes. He said, however, that the proposed new fees for applications for generators under 500kw would be "substantially less" than those currently applied.

A connection to the distribution system is necessary if a business is to benefit from the full cost savings of generating its own electricity as it means that any excess power generated can be exported to the national grid.

Ibec's energy executive, David Manning, said CER's plans contradicted government policy and would act as barrier to attempts by businesses to become more environmentally friendly and energy efficient. "If the government is sincere about its commitment to energy efficiency, every effort must be made to encourage the uptake of energy-saving solutions such as CHP and to remove barriers to their development, " he said.

A spokesman for ESB Networks declined to comment on whether it prompted the CER review of the waiver. He said a proposal to levy fees for generators outputting between 50kw and 500kw was merely under consideration.