Scotland's renewable plans threatened by grid charge

Published Date: 15 May 2009
By Jenny Haworth, Environment correspondent

SCOTLAND'S future as a world leader in renewable energy and clean power is being "seriously imperilled" by plans for a new grid charging regime, experts have warned.
The proposals could mean power firms in Scotland paying an extra £100 million a year to transmit electricity through the grid, energy groups say.They say the charges will put off power companies from investing north of the Border, hampering renewables development and jeopardising Scotland's ability to meet its ambitious climate change targets.Scotland's potential to lead the way in the development of pioneering carbon capture and storage technology to clean up conventional power stations, could also be under threat if it becomes more attractive for energy firms to invest elsewhere in the UK. The controversy has arisen over charging proposals Ofgem has asked National Grid to draw up to reduce the impact of the cost of transmitting electricity on UK consumers.Under the proposals, energy firms operating in Scotland would have to pay more. Gareth Williams, policy manager at the Scottish Council for Development and Industry, said that the impact would be to increase Scottish generators' costs by up to £100m each year.This would "make Scotland less attractive for investment in renewable generation" and "less attractive for investment in other clean generation," he said. He added that he believed the proposals contravened a European directive that calls for charging regimes to be non-discriminatory for electricity from renewable sources.One energy industry insider said the proposals were "unjust and discriminatory"."We already pay more than our fair share for connection and transmitting power," he said. "The latest proposals from Ofgem and National Grid will make the situation much worse. One of the key principles in a competitive market is you need a level playing field. This will skew that playing field and it effectively undermines the whole operation of the market."Mike Weir, SNP energy spokesman at Westminster, said the charges could threaten Scotland's ability to lead the way in developing technology to clean up power stations."Such a change would seriously imperil the development of carbon capture and storage in Scotland which is crazy given the potential of the plant at Longannet and the use of depleted oil fields off our coast," he said.A spokeswoman for Ofgem said it had asked National Grid to address rising constraint charges costs due to the impact on the consumer."Given the economic climate we are living in, we are very keen that no extra or unnecessary charges should be added to consumer bills," she said.A spokesman for National Grid added: "We would like to emphasise that we were instructed by Ofgem to bring forward proposals to address constraint costs – because obviously Ofgem is concerned about the impact on the consumer."Analysis: Ofgem 'punishment' for green generatorsACCUSED of a "crime" they did not commit, renewable electricity generators in Scotland face a "punishment" that will hit efforts to deliver UK climate change targets.National Grid and the regulator Ofgem have a duty to promote the efficient use of electricity networks in Great Britain. Meanwhile, climate change and the threat of energy insecurity are upon us. The level of planned investment in new renewables in Scotland is more than £15 billion over the next ten years and it must connect so it can sell its power. Unfortunately, there is a big queue waiting to connect.In response National Grid has worked tirelessly to identify renewables generation able to jump the queue. The queue jumpers amount to more than 450MW of capacity in the north of Scotland and will be capable of displacing more than 500,000 tonnes of carbon dioxide a year earlier than anticipated.But the plot thickens. Ofgem has expressed concern about the potential cost of the 450MW. Initially estimated at £100 million, but now reduced to up to £40m,this cost reflects brief periods when there is not enough capacity to accommodate all generation, so some generators will be paid by National Grid to stop generating to ensure that there are no faults on the grid. Ofgem, while giving the go-ahead to the 450MW, has asked National Grid to consider options on how this cost is recovered. At the moment the cost is spread equally across all generators in Great Britain, but National Grid has proposed, after Ofgem prompting, to target the cost on all generation behind any "pinch-points". The grid connection between Scotland and England is one such pinch-point and all existing and new generation in Scotland face higher charges while generation in England will benefit from lower charges.The charge will be volatile from year to year, unpredictable and potentially very high, especially in the north of Scotland. This cocktail leaves investors nervous because uncertainty levels will increase and the case for investment is weakened. This means that the renewable energy industry in Scotland will be undermined when, facing energy insecurity and climate change, we cannot afford it to be.Pinch-points are relieved by reinforcing the grid, but moves to beef-up the cable between Scotland and England have been too slow. However, through no fault of their own, those that produce electricity north of the Border face higher charges. So we plead not guilty and await Ofgem's verdict.• Jason Ormiston is the chief executive of Scottish Renewables, the green energy trade association