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United Kingdom

Charges a blow to renewables -- High cost of transmission

New proposed charges on generators in remote areas of Scotland for using the electricity system have been slammed by a renewables industry group as punitive and unnecessary. The high cost of transmitting power from some areas will discourage renewable generators from developing projects in Scotland, says Scottish Renewables.

The charges, proposed by National Grid, are to be introduced as part of a current reform known as BETTA (British Electricity Trading and Transmission Arrangements). This is to be introduced in April this year when the Scottish electricity system is merged with the English and Welsh system, and National Grid becomes the Britain-wide system operator. The new transmission use of system charges come after energy regulator Ofgem rejected National Grid's initial proposals for lower charges. Ofgem directed the grid company to strengthen locational charging to make it more cost-reflective.

At their highest, charges will be almost £25 per kW each year for the area of Skye and the Western Isles. At the other end of the scale, operators in south-west England will be given over £8 for every unit they generate. According to Scottish Renewables, an average Highland operator of a 50 MW wind farm would pay over £2 million more per year than a similar sized English generator for using the same grid system.

Penalty

Maf Smith from Scottish Renewables describes the charges as "just plain daft," explaining: "It's clear that the system doesn't work when you take an English system and apply it lock, stock and barrel to Scotland. These BETTA reforms were meant to help renewable generation in Scotland, but the end result seems to be a penalty discouraging companies operating here."

The government's Secretary of State for Scotland, Alistair Darling, weighed into the debate, saying he recognises the problem for Scottish renewable generators. The new proposals by National Grid will have the advantage of removing charges to use the interconnector between Scotland and the rest of the UK, he said in the House of Commons. But he added: "It is important that we do not disadvantage renewable generators, particularly in the north of Scotland and in particular some of the proposals in relation to wind farm or wave power generation on the islands."

consultations

Anxious to meet its green energy targets, the government indicated in early 2004 that it favoured reducing transmission charges for renewable generation "in peripheral areas." The renewables community expects the Department of Trade and Industry to begin consultations soon over the issue. This could set the government in conflict with the regulator, which insists that cost-reflective charging should be one of the cornerstones of the restructured electricity market.

Meantime, Ofgem is due to decide in February on whether to accept National Grid's proposed charges. "I very much hope (Ofgem) will take on board the very legitimate concerns there are on the part of generators and others in Scotland," says Darling. "We have got to ensure that generation in Scotland can compete on fair terms with energy generated in other parts of the UK."

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