Planned reforms to UK rules for connecting renewables to the wires have been broadly welcomed by Britain's wind industry. Doubts remain, however, about whether the government and energy regulator are showing the leadership that is needed to deliver on their key stated aim: firm connection offers for renewable energy generators within the development timeframe of their projects. Many in the wind industry do not share regulator Ofgem's belief that market forces, left to their own devices, will provide the best solution. As a result, they doubt Ofgem's willingness to implement the reforms they feel will best help the meet the country's renewable targets.
A joint review of transmission access for renewables was published by the Department of Business, Enterprise and Regulatory Reform (BERR) and Ofgem in the summer. The report recognises the urgent need for a radical shake up of the rules governing access to the high voltage grid network to pave the way for large volumes of renewables and other low carbon generation. In a proposal popular with the renewables community, the review proposes the introduction of incentives to encourage transmission companies to invest in their networks ahead of time to meet expected growth in renewables.
More than 35 GW of green generating capacity will be needed to meet the UK's 15% renewables target for 2020. Some 29 GW of this is expected to be from onshore and offshore wind. Just under 2550 MW of wind power is online today. But 16 GW of renewables projects have network connection offers, most of which is wind, with some 9 GW located in Scotland. Under the current rules, however, some of these projects will have to wait at least ten years before they can access the grid. Many are awaiting a 400 kV reinforcement of the Beauly to Denny line from Inverness in the north of Scotland to Falkirk, which has been the subject of one of the longest and most expensive public inquiries in Scottish history. And renewables are only part of the story. Overall, 49 GW of potential generation is waiting to connect throughout the UK, compared with the 77 GW currently connected to the transmission system.
A long, long wait
One of the projects held in the queue is the consented 75 MW Mid Hill wind project in Aberdeenshire being developed by Fred Olsen Renewables. Under the current regime, it will not be connected until 2018. By that time the project's planning consent will have expired, says the company's Graeme Cooper. The uncertainty over connection timescales is also affecting less advanced projects. "We had another project in development that we stopped working on because it had a 2018 connection date," says Cooper. He knows of several other developers who have not yet progressed their sites into planning because their connection dates are so far in the future.
The Transmission Access Review (TAR) report discusses possibilities for improving access in the long term and offers three models for debate. The first is a "connect and manage" approach, whereby generators are allowed onto the system even if there is not enough grid capacity at all times for all generation. This model allows for the connection of more new capacity than the current "reinforce then connect" arrangements, which require electricity lines to be reinforced before further generation is added. The two other models are more complex; the second is market-based, with tradable access rights to the system, while the third is based on "locational marginal pricing," where generators incur short run costs of transmission access in each half hour.
It is now up to the industry to debate the models and develop proposals, says the TAR. The efficiency of that process is questioned by Gordon Edge of the British Wind Energy Association (BWEA). "There are three different models; it is not clear how the decision is to be made, who is to decide and on what criteria."
Avoiding capacity auctions
But unless the industry comes up with a satisfactory solution, the fear voiced by Edge and many others is that Ofgem will drive through a system of auctioning grid capacity. Despite widespread industry hostility to the concept, Ofgem insists on keeping the option open and a proposal for annual auctions of access rights to the transmission system, similar to that supported by the wind industry in many jurisdictions in America, is being considered by British wind industry working groups.
In the UK, "the industry is very nervous about auctions," says Jason Ormiston of Scottish Renewables, which represents Scotland's renewable energy industry. Incumbent generators would automatically be more advantaged than new entrants, and conventional generation could be better placed to secure capacity in a bidding war than variable renewables. "And how bankable is this going to be?" he asks.
"Auctioning capacity did not work well in the gas business and it did not work in the telecoms business either," observes Cooper. The industry does not need auctions of a limited amount of capacity, he says. What it does need is more renewable generators connected to the wires. This would introduce more competition to drive down prices -- and meet the government's targets.
Whatever enduring access regime is developed, BERR and Ofgem warn that it might not be delivered until April 2010, and even then could be subject to further delays. To rush renewables on to the system in the meantime, the review presents a range of short term measures which, it says, could unlock 1 GW in the existing queue for connections. These measures are being touted as "a form of connect and manage."
The wind industry has been pushing for "connect and manage" for years to gain faster connection to the network. Under the current rules, a generator cannot connect to the system unless there is enough capacity to accommodate its maximum output. Yet as a variable source of energy, wind does not make use of its full transmission capacity most of the time. "Connect and manage" would allow new generation onto the system while network reinforcements are being built. It would then be up to the system operator to manage the network more actively and constrain generators at times of congestion.
But what BERR and Ofgem regard as "connect and manage" is altogether different from the industry's definition. The TAR lumps a whole range of measures under the "connect and manage" banner, some of which are already happening. One such is "queue management" by National Grid. Around 75% of the 16 GW of renewables in the UK queue does not yet have consent, but under the first come first served approach to granting connections, some of this capacity will be eligible to hook up to the wires before more advanced projects that might already have consent and financing in place. National Grid believes that better management of the queue could bring forward 350 MW. Sharing of capacity on the system is another short term measure being progressed.
Ormiston points out that a year ago, a proposal by the Scottish wind industry for "connect and manage" was rejected. This would have allowed a number of projects that are waiting for the outcome of the Beauly-Denny inquiry to be connected as soon as -- or even if -- the new line gets the go-ahead.
Pragmatic and cheaper
Now, yet another attempt by the wind industry to introduce a "connect and manage" regime looks set to be kicked out by Ofgem. Reforms to the transmission rules in the UK are "incremental" and introduced through amendments to the existing codes governing connections and use of the system. Proposals for amendments to the codes, known as CAPs, are put forward by industry players.
CAP 148 was proposed this year by Wind Energy Ltd on behalf of the industry to give renewable generators priority access over conventional generation without the need to upgrade the system. It would also allow the system operator to avoid expensive upgrades altogether if it decides that constraining conventional generation at peak times for wind could be a cheaper option than building new lines. But Ofgem says it is "minded to reject" the industry's latest connect and manage proposal. CAP 148 is discriminatory, it says. According to the regulator's impact assessment, it could cost consumers £900 million. Ofgem admits that CAP 148 could significantly reduce carbon emissions. "But we think there are better ways of unlocking these benefits that are consistent with the existing legal framework and that would not expose customers to excessive constraint costs."
The British Wind Energy Association (BWEA) refutes Ofgem's findings. It points out that the regulator's figures include the additional cost under the UK Renewables Obligation support mechanism from an increase in renewables that would result from CAP 148. BWEA's chief executive, Maria McCaffery, calls Ofgem's stance "disingenuous." She has told both Ofgem and energy minister Malcolm Wicks that Ofgem's opposition implies that the regulator disagrees with government policy on reaching renewable targets, she says. "Ofgem should be considering how to meet government's binding targets at least cost, not how to avoid meeting such targets at any cost."
Edge adds that the BWEA has commissioned its own cost assessment from Cambridge Economic Policy Associates. This finds the cost of CAP148 to be around £30 million, he says.
An Ofgem glove puppet
Yet another form of "connect and manage" is National Grid's own proposed amendment, CAP 164. But some say the grid operator's proposal is no more than a watered-down version of the policy and is included among a range of amendments to improve access to the network currently being developed by industry working groups. As a sceptical industry player explains: "National Grid's biggest incentive is to keep constraint costs low, so the manage element of connect and manage is the bit it is worried about." He notes, too, that all the amendments being considered were proposed by National Grid, the groups are chaired by National Grid and the amendments will be implemented by National Grid. "There is concern that National Grid is a glove puppet with Ofgem's hand in the glove puppet."
Meanwhile, the pressure is on to deliver the changes needed. "They are talking about something being implemented by April 2009," says Edge. This would give the industry the confidence boost it needs, he says. "We are just not convinced that there is the leadership there to actually drive though those kinds of changes. Somebody has to take the tiller and push it, and that should be the government."
At the same time the regulator needs stronger guidance from government on its secondary priorities. Edge maintains that Ofgem's interpretation of its remit sees it placing disproportionate emphasis on its primary role of keeping costs to consumers down at the expense of its duties towards renewables and the environment. "We want the guidance strengthened to make it clearer," he says.
He notes that BERR believes the reforms can be achieved through existing industry processes. In the light of Ofgem's penchant for blocking reforms proposed by the wind industry, Edge is not so convinced. Neither is Ormiston. With so many of the industry's proposals for code amendments having failed, he also fears the UK's incremental reform process will be unable to deliver. What is more, he adds, previous transmission reviews have also failed to significantly improve wind's access to the wires. "We do hope the Transmission Access Review will be the last review and will at last deliver," he says.