Industry claims that hefty transmission charges are holding back efforts to harness north Scotland’s abundant wind power resources have been rejected by a senior Ofgem official.
A meeting of the House of Commons Scottish Affairs Committee saw a string of witnesses from leading energy companies line up to criticise the regulator’s Transmission Network Use of System charges.
Scottish Renewables chief executive Claire Mack said the regime had been developed 30 years ago and no longer fits with the evolving pattern of an energy system that increasingly relies on renewable generation, much of which is located in more remote parts of the UK like north Scotland.
She said that projects in Scotland are being penalised to the tune of tens of millions of pounds per annum in transmission charges, which she described as entirely counter to both the government’s levelling up and net zero agendas.
The charges, which are designed to reflect the cost of transmitting electricity to customers, are much higher for generation projects in areas far from population centres.
High charges mean it is not worthwhile to even build some projects in north Scotland, which contains the UK’s best energy resources, Mack added.
She was backed up by Lucy Whitford, managing director for UK & Ireland at renewable developer RES, who said the charging regime is no longer “fit for purpose” in terms of delivering net zero.
As an example, she said transmission charges could add £500,000 to the annual costs of running a 22MW wind farm in Argyll.
While developers are keen to develop such projects, Whitford said they may struggle to do so in the teeth of such heavy financial disincentives.
Bless Kuri, head of system planning at Scottish and Southern Electricity Networks, told the committee that reform of the transmission charging regime is “necessary now”.
Steven McMahon, deputy director, electricity distribution and cross sector policy at Ofgem, said the regulator is constantly assessing whether its regimes remain fit for purpose for delivering net zero.
But he said that existing levels of transmission charges will not prevent delivery of UK and Scottish government targets to increase renewable energy deployment.
“We don’t see transmission charges as a barrier to achieving that,” he said, pointing to figures produced by Strathclyde University’s Professor Keith Bell at the previous session of the committee’s inquiry into renewable energy in Scotland.
Bell, who is also a member of the Climate Change Committee, said National Grid figures showed in May that 6.9GW of wind generation is either connected or under construction in Scotland, while a further 11.6GW has been awarded consent.
Any reduction in charges for generators would hit customers in the pockets, McMahon said: “If we reduce charges paid by generators it has to be picked up in bills.”