National Grid threat to Scottish renewables

Peter Jones

Punitive new charges proposed by the National Grid could kill off Scotland’s nascent alternative energy industry, The Times has learnt.
Sources within the industry called on ministers at Westminster yesterday to intervene and prevent the substantial increases, described by one authority as “lunatic”.
The proposals could double or even treble the cost of putting power in the grid — which would make many renewable projects, including planned wind farms, uneconomic.
The charges have been devised as a response by National Grid to the big spending required for new transmission lines to transport power from the growing number of renewable generators in the north of Scotland.
They will come as a body blow to the SNP government which regards its alternative energy plans as the key to Scotland’s future economic success.
Alex Salmond has criticised the high charges levied on Scottish wind and hydro power, but to learn that these charges will be increased is set to provoke a confrontation with the National Grid and Westminster. A spokesman for the First Minister said: “The idea that connection charges should increase in the north of Scotland is totally ridiculous, and flies in the face of the need to remove the gross discrimination that already exists through locational charging.
“If there is any truth to this suggestion, we will raise it as a matter of urgency. It is completely contradictory to the need to meet climate change targets, and places serious question marks about whether National Grid should have anything to do with these matters in the first place.”
The controversial £350 million Beauly to Denny power line upgrade, which the Scottish government approved on Wednesday, is only one of the projects needed to transmit the power expected to be produced from renewables.
Last year, an energy industry study group said that another north-south power line running from Beauly to central Scotland and down the east coast would have to be upgraded.
In addition, two sub-sea cables, one running from the Scottish west coast to north Wales and another from Peterhead to Teesside in north east England would be needed at a cost of about £5 billion.
National Grid, a private company regulated by Ofgem, has been looking at how the costs of providing this infrastructure can be recovered from electricity producers and consumers. It has been using its existing pricing, which is already controversial in Scotland because it imposes higher charges on Scottish electricity producers to compensate for the cost of sending power to the main areas of demand in southern England.
Electricity producers in the north of Scotland have to pay £21.59 per kilowatt (kW) to transmit to the grid whereas producers in Cornwall receive a subsidy of £6.68 per kW. The discrepancy arises partly because Scotland produces more electricity than it consumes, but Cornwall has to import electricity. The new price proposals, according to an executive with a wind power company, would raise the cost of transmitting to the grid to up to £50 per kW and in the Scottish islands to as much as £100 per kW. “These are prohibitively high costs which would make some projects impossible.”
He gave warning that uncertainty caused by the prospect of higher charges would be a significant deterrent to wind and wave power projects now at the experimental stage in Orkney.
The major Scottish electricity companies, ScottishPower and Scottish and Southern Energy, are understood to have been told of the proposals. They refused to comment yesterday. But a highly-placed power industry source confirmed the plans, saying: “This is lunatic. We are already facing ridiculously high charges. Now they could double or even triple from 2015.”
Niall Stuart, chief executive of lobby group Scottish Renewables, said that the current system discriminated against generators in the north of Scotland and that the proposals would cause investors to think twice about the north of Scotland. “We would urge UK ministers to look at this in the light of the targets they have set for increasing renewable generation.”
A spokesman for National Grid said that the company published in December indicative figures for taking power from the Scottish islands to the grid which were about £100 per kW. “The islands are not on the grid at the moment and these are purely indicative figures reflecting the costs of connecting the islands to the grid.”
He disputed the figure of £50 per kW for energy projects in the north of Scotland, but confirmed that there was a recent meeting with industry groups which discussed the cost implications of the two sub-sea cables. He said that two extreme cost models had been discussed, one with a zero cost to users and the other which had used a figure of £50 per kW.