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United Kingdom

The North South imbalance

The structure of the power network in Great Britain evolved to bring power from the coal-fired power stations in the Midlands and the north to load centres in the south. Many of these power stations were sited close to the coal fields. Although no new coal-fired power stations have been built for many years, several of the new gas-fired power stations are also sited in the Midlands and the north, either to make use of the infrastructure surrounding coal fired power stations, or so as to be near locations where North Sea gas is brought ashore.

As a result of this pattern of evolution there has been an imbalance for years between generation and demand, necessitating substantial power flows from north to south. At peak times, around 8000 MW is fed along the principal circuits and National Grid Transco, the transmission system operator, expects this to rise over the next few years.

Increasing losses

Transmission losses at the time of peak demand currently amount to just over 1000 MW. Losses are expected to rise to 1250 MW by 2010, partly due to the closure of some nuclear power stations in the south, partly load growth in the south and partly continuing plans for power station construction. National Grid points out that a new 100 MW power station in the most northern zone is only worth 94 MW to the system, whereas the same size power station on the south coast is worth 106 MW.

The principal price signal encouraging generation away from the north is the Transmission Use of System Charge. There are two tariffs: one for electricity generators and another for electricity retailers (known as "suppliers" in Britain). Generators in the south are paid a yearly sum, while those in the north pay a fee to the Transmission System Operator. A 500 MW power station in the north pays up to £45 million a year, whereas a similar power station in the south is paid £50 million in the most favourable zone. There are 12 zones in all. The use of system charges are related to the need to cover the capital costs of transmission.

Transmission losses -- which may be regarded as an "operating cost" for the transmission system -- are spread over all generators and retailers. In other words, they are not allocated on a cost-reflective basis. A generator or retailer does not bear the cost of sending power many miles across the wires; neither does either necessarily benefit by meeting local demand with local power.

Britain's energy regulatory office, Ofgem, wants to bring market forces into play to control losses (and thus cut costs) by introducing additional price signals. The effect on generators would be similar to those of the annual use of system charges -- discouraging more plant in the north, but encouraging it in the south. Whether these signals will be included in new regulations has yet to be seen.

Resource in the north

The distribution of wind speeds in the British Isles also favours developments in the north. Onshore wind speeds in many northern areas are significantly higher than those found further south. Data from project developers, plus an analysis of Renewables Obligations Certificates, suggests that wind farm outputs in the north are 5-25% more productive than those in the south.

Offshore, the average wind speed from zones with water depths between ten and 50 metres and identified as "probable" sites in a study for the government was 5% higher in Scotland than in England and Wales. The offshore study also suggested there was much less potential for offshore developments, at these depths, around the coast of Scotland. By contrast, there are very substantial areas within this range of water depths around England and Wales, particularly the three "strategic sites" identified by the Department of Trade and Industry off the east, south-east and north-west coasts.

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