Scotland's green future at risk from discriminatory grid charges to power firms

There are concerns that the current charging system discriminates against energy operations in Scotland as the calculations are linked to their distance from big population areas.

Currently the Beinneun wind farm in the Highlands, pays £5.54/MWh, while an equivalent wind farm - Pen y Cymoedd - in Wales, will pay £2.80 per unit.

A survey of industry stakeholders found that 93% supported reform of the regime to support the tough Scottish and UK emissions targets as Glasgow prepares to host the UN Climate Change Conference (COP26) in Glasgow in November.

SSEN said that "with Scotland boasting the greatest wind resource to meet the UK’s net-zero targets, this creates a huge barrier for further low-carbon investment, despite great support for further deployment through UK and Scottish government policy".

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Their study also found that 84% of renewable industry stakeholders felt that the charging system acts as a barrier to the delivery of their renewable projects in Scotland."

SSEN said it had been contacted by three Scottish local authorities who expressed "deep concerns" over the current high costs in Scotland and highlighted that this it was an issue that has been raised for many years, with no progress made.

"Concerns were raised around Transmission Network Use of System [charges] acting as a barrier to renewable developments utilising the natural resources of Scotland to progress to Net Zero, alongside the economic gain that can be achieved from the deployment of renewables," SSEN said.

The Scottish Government’s climate change plan aims for net-zero emissions by 2045, with interim targets that include a 75% reduction from 1990s emissions levels by the end of this decade.

Last month the UK government set what it called the "world’s most ambitious climate change target" into law to cut emissions by 78% by 2035 compared to 1990 levels.

This amounts to a 60% reduction on today’s levels.

It is accepted that hitting the targets would require more renewable electricity, low-carbon heating, electric cars and, for many, cutting down on meat and dairy.

TNUoS charges are meant to recover the cost of installing and maintaining the shared electricity system in England, Wales, Scotland and Offshore.

While the infrastructure of the electricity transmission is owned by three companies including SSEN, the job of moving the power through the network is undertaken by the National Grid.

The National Grid then passes on the costs of doing that through charges to the three companies.

The National Grid says the charges vary by location, to reflect the the costs of a customer’s use of the transmission network using a formula approved by the industry regulator Ofgem. They take into account levels of demand and the amount of electricity generation.

In its discussions with SSEN it said that the higher costs for generation in Scotland, reflects is the result of having to transport electricity further including to large areas of demand in the south of England.

SSEN says that its discussions with stakeholders showed that charging should should not be based on location and that a full review of the charging mechanism is required.

Andrew Urquhart, head of whole system at SSEN Transmission, said: “Our generation customers and wider stakeholders have been consistently telling us that charges for transmission access in the north of Scotland, as well as uncertainty about future charges, are acting as a barrier to the commercial viability of renewable energy projects. This, in turn, is making it difficult for us to determine system investment needs for our transmission network.

“It is clear from our analysis and engagement to date that there is overwhelming support for TNUoS reform and that urgent action is required to address current barriers in the context of the climate emergency.

"Given the level of concern raised by our stakeholders, we hope the feedback outlined in our report will help to encourage action on the need for an urgent review of the current regime to support the UK’s ambitious net-zero targets and green recovery goals.”

Morag Watson, director of policy at Scottish Renewables, said the regulations which govern how the electricity network is paid for are "out of date and do not reflect the need to meet net-zero in the most efficient way possible".

She said: "A worsening of this situation currently looks likely to occur though this decade. That would make the development of the renewable energy projects which Scotland needs to supply its energy and drive economic growth less likely, at a time when those projects are more urgently needed than ever."

Discussions with economic development agencies also discovered concerns nothing has been done to address the charges issue.

SSEN said they expressed disappointment that large scale renewable energy schemes did not progress, "losing out on jobs, skills training, supply chain opportunities, and believed that TNUoS played a role in this".

SSEN said that the National Grid agreed that TNUoS is difficult to predict, and indicated that there is benefit in reviewing the underlying charging principles and methodology.

"It was noted it is important that any review considers the impact that the methodology has on consumers as well as on the system as a whole," said SSEN.

The analysis of the view of onshore and offshore wind and solar developers consulted with said there was an agreement that the charges could be "the blockade that deters reaching Net Zero".

The consultees told SSEN: "The barrier to the deployment of renewables has a negative effect on the delivery of associated social and economic benefits for local communities."

They said that Scottish renewable generators are at a "significant competitive disadvantage in subsidies, due to the decreasing cost of renewable energy and the cost of TNUoS increasing".

The International Energy Agency (IEA) has predicted a major surge in CO2 emissions from energy this year, as the world rebounds from the pandemic.

An independent Climate Change Committee (CCC) analysis accepted by the UK government says low-carbon investment must scale up to £50bn a year in the UK. But it adds that in time fuel savings from more efficient equipment will cancel out investment costs.

The CCC believes around 1% of GDP - national wealth - would need to be spent on shifting away from fossil fuels over 30 years.

SSE Thermal and Equinor yesterday unveiled plans to jointly develop a new low-carbon power station at Peterhead, which could become one of the UK’s first power stations equipped with carbon capture technology.

Ofgem and the National Grid were approached for comment.