Ofgem has been urged to make “bold decisions” to prioritise reinforcement of the grid in areas with a high potential renewable energy yield and ensure transmission charges are equally shared across the UK.
The report of the House of Commons’ Scottish Affairs select committee’s inquiry into renewable energy, which has been published today (17 September), says “urgent investment” is required to reinforce and expand the grid in order to ensure renewable energy generated in Scotland can connect to the UK grid.
The report recommends that Ofgem completes a review of the grid in Scotland by the end of 2022 to implement changes in good time for the Scottish government’s target to cut emissions to net zero by 2045.
This should include the regulator making bold decisions by prioritising reinforcement of the grid in areas where there is potential for a high renewable energy yield.
The short-term volatility of transmission charges is a barrier to the development of renewable energy, affecting confidence in investment and the future cost of project, the MPs conclude.
They warn that Ofgem’s regime of locational transmission charges, which is designed to encourage the development of infrastructure closer to centres of demand, weighs more heavily on developers in Scotland than in other areas of the UK where developers are paid to connect to the grid.
Ofgem’s current review of locational transmission charges is not happening at a “fast-enough pace” but should ensure the financial burden of transmission charges and grid investment is “justly shared” across the UK.
The committee heard concerns, during its inquiry, that some renewable projects in England and Wales have a competitive advantage over their Scottish counterparts, hindering the sector’s development north of the border by undermining investors’ confidence.
In addition, the MPs recommend the UK government specifies that Ofgem must consider the financial burden of grid connection charges on Scottish renewables projects as part of its internal review.
Ofgem should take a long-term perspective of the UK’s transmission needs over the next 30 years, rather than pushing for “short-term, lowest cost” solutions, the report says.
The results of this internal transmission charges review should be published by the regulator as soon as practicable and certainly within the six months.
More broadly, the committee adds its voice to the chorus of calls for Ofgem’s statutory duties to be widened to include the Scottish 2045 and UK 2050 net zero target in all of its decision making.
The report also recommends that guaranteed financial support should be provided by the UK government for development of tidal energy through its regime of Contracts for Difference (CfD) auctions, going beyond its announcement of a £211 strike price for tidal stream technology.
“The UK can become world leaders within the tidal energy sector if the right level of investment is introduced and sustained,” it says.
The committee’s chair Pete Wishart said: “We have identified the need to ensure Scotland is not left behind in the renewables race and nowhere is this more apparent than within the current transmission charging regime. We therefore strongly recommend that Ofgem must now address the issues around transmission charges in Scotland and help us meet net zero. We found this is not justly shared across the UK as it currently stands. Scottish developers must be incentivised not disadvantaged.
“The bold net zero commitments by both the Scottish and UK governments are welcome, but delivery is essential. To meet net zero, the Scottish and UK government must work together to champion the opportunities Scotland offers, and to work with Ofgem and industry to modernise the grid for our low carbon aspirations and tackle climate change.”