Energy charging scheme attacked as ‘anti-Scottish’ as north-south subsidy gap widens


By Martin Kelly
The transmission charging scheme that sees power generating companies in England paid a subsidy to connect to the grid, whilst those in Scotland have to pay a levy, has been criticised for being ‘anti-Scottish’.
The SNP has today called for urgent reform of the outdated and discriminatory system after publication of the latest tariffs revealed that the gap has widened between charges levied in the north of Scotland and subsidies paid in London.

Generators in North Scotland pay £21.96/kW (up from £21.49 in 2011/12) and Peterhead pays £20.11/kW (up from £19.77), while generators in London are subsidised by £13.35/kW – a doubling of the subsidy from £6.85 in the previous year.

The locational charging methodology levies higher charges on generators furthest from the main centres of demand for connection and use of the grid.  This favours generation in the southern part of the UK and presents an inbuilt bias in the UK transmission regulatory system against Scottish based generation.

As a result, Scottish generators produce 12 per cent of UK generation, but account for 40 per cent of the transmission costs, or about £100 million per year more than their fair share.

SNP Westminster Energy and Climate Change spokesperson Mike Weir MP slammed the discrepancy:

“The north of Scotland has Europe’s best renewable energy resources, yet the unfair system of locational charging means local generators face the highest charges in the UK – while subsidies are paid to generators in London and the south.

“It cannot be fair that Peterhead Power Station pays millions every year for the right to produce power while an identical generator in London is subsidised to set up shop.

“The UK Government must deliver a fundamental and effective change to create a fairer charging regime – one that does not penalise generators and developers in the very areas with the best renewable resource.

“The regulator OFGEM indicated that the system needs reform but has recently been sending mixed signals on the issue.  It is imperative that this issue is addressed quickly.  Their recent review also delivered no solution for Scotland’s islands, where there is huge potential to generate clean, green energy but the charges could make it uneconomical.”

The system has been criticised amid claims that it could hamper investment in the Scottish renewable sector. 

In December last year OFGEM published ‘Electricity Transmission Charging: assessment of options for change’ which set out new options that the watchdog claimed would result in lower connection costs for renewable generation in the north of Scotland.

Ofgem claimed that generators in the north of Scotland could see their connection charges reduce by as much as 60%.  However the latest figures suggest that in some areas at least, the problem has actually worsened.

Mr Weir added:

“Scotland has some of the best renewable energy resources in Europe, with a quarter of Europe’s tidal and offshore wind potential and a tenth of its wave power.  That is why the Scottish Government set an ambitious, but achievable, target of the equivalent of all of Scotland’s energy needs to come from renewables by 2020.

“But this locational approach makes no sense, and is a barrier to renewable energy generation in Scotland.  It is not fit for purpose to deliver a more sustainable, low carbon energy mix, ensure security of energy supply and meet Scottish, UK and EU renewable energy targets.

“Scotland has overwhelming energy potential but our future wealth is being sabotaged by the continued use of these unfair charges which discriminate against Scotland.”

In a separate move, the SNP MP also called for cross party support for his Private Member’s Bill to help pensioners beat their winter fuel bills, after a parliamentary inquiry highlighted the vulnerability of the off grid sector to fuel poverty.

The Energy and Climate Change Committee is conducting an inquiry on Fuel Poverty in the Private Rented and Off-Grid Sectors.  Important points from the evidence sessions were raised in a letter to the Minister for Energy and Climate Change Gregory Barker MP which included:

  • 16% of off grid households with gas heating were fuel poor, 29% with oil heating, 50% using solid fuel and 25% using electric heating.
  • Some of the off-grid population (3%) don’t have access to a range of suppliers so can’t switch to control costs.
  • The off-grid customers do not get the same consumer protections as those on the gas grid.
  • There was a lack of activity in addressing energy efficiency in rural areas.

Mr Weir said the evidence provides further support for the Private Member’s Bill he has introduced, to bring forward payment of winter fuel allowance for off-grid pensioners.

The Bill [the Winter Fuel Allowance Payments (Off-Grid Claimants) Bill] would provide for the early payment of Winter Fuel Allowance to pensioners whose homes are not connected to the mains grid and whose principal source of fuel is home fuel oil, liquid petroleum gas or propane gas.  This would allow vulnerable consumers to fill up their tanks prior to the onset of winter and at a time when prices tend to be lower.  

Mr Weir, who has long campaigned on the difficulties faced by off-gas grid energy consumers, now hopes to build cross-party support for the proposal and said:

“The Energy Committee’s findings reinforce the problems of fuel poverty amongst the off-grid sector, and supports the need for action to help pensioners tackle their heating bills. 

“Off grid customers, who have no access to social tariffs, are especially vulnerable to fuel poverty, but for too long have been off the political radar. Nothing has been done to ensure that these customers are afforded the same protection as mains gas and electricity households. 

“The energy committee’s work will help bring this issue to the attention of the UK Government, and hopefully provide further support for the Private Member’s Bill I have introduced.

“The Bill would bring forward payment of the pensioners winter fuel allowance earlier in the year so households can fill their tanks prior to the onset of winter and when fuel prices tend to be cheaper.”