Unfair transmission charges hampering Scottish renewable sector

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Electricity transmission charges in Scotland are acting as a disincentive to renewable energy projects a lobby group has warned.

Highlands and Islands Transmission Working Group (HITWG) has said that the current transmission grid charging system is unfair and are urging reform in order to provide a “level playing field”.

HITWG is a partnership of Highlands and Islands Local Authorities and Highlands and Islands Enterprise.  It was established to lobby on behalf of the region for equitable access to the transmission grid system.

The group claim that the present Transmission Network Use of System (TNUoS) regime, with its emphasis on locational charging, is not suitable for a country that plans to utilise a range of low carbon generation technologies from a variety of geographical locations to provide its future energy requirements.

The current charging regime means that, for example, an energy provider in Peterhead, Aberdeenshire would have to pay £20 per kw for a grid connection while London-based energy provider would be subsidised by £3 per kw.  It is estimated that Scottish based companies currently pay £100 million more than they should as a result.

HITWG also point to the high capital costs required to gain full access to the transmission system and say this is acting as a barrier to companies wishing to set up in remote areas.  The group cited the postponement of the Western Isles subsea link, or bootstrap, until possibly 2015 as an example.

Renewable projects on Skye are charged £23 per kilowatt (kw) – the highest transmission charges in the Highland region.  HITWG warned: “It is estimated that the costs of the “bootstraps” could double this, and thus act as a disincentive to the development of the area’s renewable energy resources.”

OFGEM
OFGEM, the Office of Gas and Electricity Markets, issued a call for evidence on Project TransmiT, their review of transmission charging and associated connection arrangements, at the end of September 2010.  The energy regulator described the purpose of the review as being to facilitate movement towards a low carbon energy sector while at the same time ensuring a safe and secure, and value for money, electricity network.

HITWG suggested the following reforms in order to facilitate a low carbon energy sector:

• A charging regime that does not only encourage generation close to the existing network, but anticipates the new networks that a low carbon energy sector will require;

• A level playing field for UK generation and European generation. Recent changes to the charging regime for accessing interconnectors means that European generators will be able to access the UK without having to pay the TNUoS required by British generators;

• TNUoS charges seem to assume that all generators are equal. This seems to contradict the principles surrounding the Renewables Obligation which is designed to help develop new low carbon technologies, and not to act as a subsidy for generators facing high connection and charging costs.

Discrimination
The current system sees Scottish generators produce 12 per cent of UK generation, but account for 40 per cent of the transmission costs and has been accused of hampering Scotland’s fledgling renewable industry.   The costs imposed on Scottish based generators have caused anger north of the border with politicians describing them as “discriminatory”.

Speaking in August last year, SNP Westminster Energy spokesperson Mike Weir MP said:

“…what is really crucial is ending the discriminatory connection charging regime which works against the development of clean, renewable energy in Scotland by forcing generators to pay millions of pounds more to use the grid.

“Scotland has overwhelming energy potential but our future wealth is being sabotaged by these unfair charges which discriminate against Scotland. For example, Peterhead Power Station has been forced to pay £29 million a year for the right to produce power while an identical generator in London would be paid £3million to set up shop. This ridiculous position must be brought to a halt.”

OFGEM is the regulator of the gas and electricity industries in Great Britain.

The HITWG report can be read here: http://www.highland.gov.uk/NR/rdonlyres/BE7CBAE5-BB20-4F43-95BE-CDE43BA475B5/0/Item12Ped0911.pdf

Related stories:
http://newsnetscotland.com/general/643-ofgem-launches-review-of-unfair-electricity-grid-charges

http://newsnetscotland.com/general/653-first-minister-calls-current-grid-charge-system-indefensible