United Kingdom

United Kingdom

Grid subsidies in Scotland misguided -- Regulator warns government

The new chairman of Ofgem, Britain's gas and electricity regulatory body, Sir John Mogg, has hit out at government plans for extra subsidies for renewable generators located in remote areas of Scotland. The government has revealed that it is considering an amendment to its energy bill -- currently going through the upper house of parliament -- to reduce transmission charges for renewables "in peripheral areas."

To help meet its renewables targets, the government is keen to reap the wind potential of some areas of Scotland with a high wind resource and where projects are less likely to encounter opposition, but which are subject to the highest transmission charges.

But Mogg dubs the move "unnecessary and misguided" and an unwelcome move away from cost reflective charging. A great deal is already being done to encourage renewables, he points out. "The Renewables Obligation alone is worth around £45 extra for every megawatt hour of electricity produced. This is providing additional financial support of at least £485 million to the renewables industry this year alone."

Mogg receives tentative support from the British Wind Energy Association (BWEA), which concedes that "some anomalies" need to be resolved. "We note Ofgem's position and believe that the development of renewable energy should not and need not incur unnecessary excessive costs to the electricity consumer," responds the association. But it adds that Ofgem's concerns may be premature and appear to focus more on the principle than the actual cost. "The precise levels of the transmission charges have not yet been finalised and as Ofgem indicate in their statement are likely to be small," says BWEA.

The amendment would result in some Scottish renewable energy generators receiving a subsidy that other renewables generators elsewhere in the UK and even in Scotland would not, says Mogg. Cost reflective charging is one of the cornerstones of the restructured electricity market. "The government's ideas [for remote area renewables subsidies] sit uncomfortably with the new European Electricity Directive which aims to promote competitive energy markets," he adds.

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