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United Kingdom

Rewiring Britain -- in search of reason

There has been much hype about the supposed need to "rewire Britain" for renewables, mainly based on the assumption that the government's targets for green power can only be met through the use of Scotland's wind resource. Whether this assumption is correct or not is an unresolved issue. So too is how the cost of any grid upgrades are to be recovered -- and where upgrades can present best value for money. Rewiring Britain could be years away yet

As the UK government and energy regulator Ofgem invite industry views over plans to "rewire" Britain -- the huge task of upgrading transmission and distribution networks which the government claims is necessary to meet its targets for renewable energy -- key issues still remain unresolved, such as who is to pay and whether the plans represent the best value for money for the consumer.

Much of the "rewiring Britain" hype gives the impression that the UK will not meet its target of 10% of electricity from renewables by 2010 without significant quantities of wind in remote Scottish locations. Between 8000 MW and 10,000 MW of renewable capacity is needed for the UK to meet the 10% target, according to the government's energy white paper. It expects some 44% of this renewable capacity to come from new wind plant -- 26% onshore and 18% offshore.

The Department of Trade and Industry (DTI), the Scottish Executive and energy regulator Ofgem have launched a series of consultations over the details of transforming Britain's transmission and distribution networks to take anticipated high levels of renewables. Meantime, the unspoken assumption by all three bodies is that Scotland's resources are so vast and so fruitful that they justify the significantly higher costs of grid reinforcement up north, compared with that needed for offshore and onshore plant further south. At least one wind developer has his doubts: "Looking at the bigger GB picture, I'm not sure we've got the balance right. We have not run out of onshore wind farm sites south of the border."

Beware over-investment

Energy company Innogy also sounds a note of caution: "We must accept that there will be an element of re-wiring of Britain, but this must not be an excuse for over-investment. Ofgem has a critical role in ensuring that the necessary work is done at least cost and that the impact on customers is minimized," it says in its response to a review of the government's energy white paper by the Parliamentary Renewable and Sustainable Energy Group (PRASEG).

In recent consultation documents, the DTI and the Scottish Executive talk about exploiting renewable resources economically, but avoid the issue of whether the high costs of transmission reinforcement needed for substantial Scottish developments are, in practice, a least cost solution. One of the problems on the Scottish system is overcapacity of electricity generation. But by the time much of the new wind plant is in place, closure of older Scottish coal and nuclear plant is likely to have freed up space on the wires.

Where the overall responsibility lies for deciding whether Scottish wind represents best value for money for British consumers is far from clear cut. Ofgem denies that such strategic thinking forms part of its remit. Its role is to push for transparency and cost reflectivity, it says. "We try to ensure that transmission investment only takes place where there is a demand for it -- not on a speculative basis," says Ofgem's Sonia Brown. She stresses, however, that it is up to generators to signal where they want to connect to the network and for transmission companies to respond to those signals by reinforcing the system. And wind generators are signalling that they want to build in Scotland.

The Scottish temptation

According to the British Wind Energy Association (BWEA), some 760 MW of wind power projects with planning consent and over 5 GW of projects in pre-planning stages of development are located north of the border (see chart page 50). Generators are tempted to Scotland by the best wind resource in Europe, by a proactive government support from the Scottish Executive, a more positive site permitting framework than the rest of Britain, and large areas remote from centres of population which are less likely to run foul of NIMBY (not in my back yard) attitudes.

Moreover, the current UK renewables support mechanism -- the Renewables Obligation -- allows certificates from wind plant to be traded anywhere in the country, so generation from wind turbines in the far north of Scotland can help electricity retailers (who are referred to as suppliers in Britain) in the extreme south of England to meet the legal requirements of the national green power obligation.

Brown points out that connecting in remote areas carries a cost penalty through use of system charges. The generator has to evaluate whether the economics of a better wind resource in the north of Scotland outweigh the cost of sending a wind farm's output down south, she says. "Ultimately the end cost goes on customers' bills," she adds. "If customers in the south are getting electricity from wind farms in the north, then customers in the south will be paying for it."

Network upgrades

Planning work has already begun on preparations to reinforce the Scottish grid to take substantial north to south power flows from renewable-generated power -- mostly from wind plant. This follows a recommendation by the Transmission Issues Working Group (TIWG), set up to look into the scale of reinforcement of the British transmission system needed to help meet the UK 10% renewables target. TIWG urges that work should start immediately on planning the first stage of network upgrades at a cost of £520 million to allow an increase of up to 2000 MW of renewable generation in Scotland.

Some £190 million of this work will be spent by Scottish and Southern Energy (SSE) -- mostly on upgrading the present transmission line from Beauly near Inverness to Denny near Stirling from 132 kV to 275 kV. SSE says it is already dealing with requests from generators to connect around 4000 MW of renewable plant -- "overwhelmingly wind" -- to its network in the northern half of Scotland. "There has been a huge increase in potential wind developments since the Renewables Obligation came along to make them more viable," says a spokesman for SSE. "The question is getting the electricity to where it is needed."

Market pricing

Renewables trade organisation, the Renewable Power Association (RPA) argues for strong locational price signals, such as use of system charges and charging for transmission losses, to encourage new generation to locate where the system needs it most to minimize large scale power flows. "Current government policy is to exploit the cheapest resources first, the more expensive later. If superficially cheap resources come with a high price tag for transmission reinforcements, they are not really cheap," states the RPA in a response to a government consultation on charges for transmission losses. The association points out that wind developments in two of the three offshore zones identified by the government, the Wash and the Thames Estuary, would be favoured by locational charging.

Indeed, according to the TIWG report, works to the transmission system to take 3000 MW in the Outer Wash area of eastern England and 1000 MW in the Thames estuary further south would cost just £80 million, compared with the £520 million to accommodate 2000 MW of Scottish wind.

Charles Davies from National Grid Transco, one of the authors of the report, cautions, however: "What the study did not cover was the fact that the actual connections offshore would be more expensive and the cost of the turbines offshore would be more expensive."

The indication is that the difference in cost between getting wind power into the system from offshore plant in the east and south of England, compared with from onshore wind plant in Scotland, is perhaps marginal. As yet, however, neither the government nor Ofgem have presented evidence to prove the point, one way or the other.

Timing of renewables deployment is also a crucial factor, says Davies. Generation on land can be developed more rapidly than out at sea. "So if we are looking for 10% from renewables in 2010, we are more likely to achieve that through development in Scotland than offshore." What's more, he adds, if the government's 20% aspiration for renewables is to be met, "It is not going to be a case of either/or, it is going to be and."

Cost is peanuts

The DTI agrees with this view. An official claims that against the background of total investment in renewables, the cost of transmission reinforcement would be "peanuts." He explains that the TIWG's most ambitious investment scenario of some £2 billion to connect 11,000 MW would cost around £200 million a year, taking account of capital payments and interest. "This would cost £10 per year per customer."

If the government decides that Scottish winds are worth the investment, the next question is: how are costs for transmission upgrades to be recovered? Maf Smith from the Scottish Renewables Forum warns that Scottish customers should not have to pick up the bill for network upgrades for electricity exported to the rest of Britain. This is also the view of the Scottish Executive, which states that consumers in Scotland should not pay more than their share of the additional costs of renewable energy.

The issue is still up for debate. Ofgem may have given Scottish transmission operators the green light to spend a small amount of money on desk studies for their rewiring plans, but a decision on how the costs of major upgrades are to be recovered is years away. Until this is resolved, no major rewiring to take thousands of megawatts of Scottish wind-generated electricity down south will be attempted.

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