Scottish Renewables has called on Ofgem to introduce immediate reforms to network charges to secure Scotland’s role in delivering economic growth and clean power.
The industry body said TNUoS charges, which cover the cost of building, operating and maintaining the UK’s electricity network, are volatile, unpredictable and outdated.
It added that Scottish renewable energy projects are penalised by tens of millions of pounds every year under the current regime, which was designed more than 30 years ago.
Existing Scottish generators have faced £2.9 billion of unforeseen and unavoidable TNUoS charge increases since 2015, and the organisation warned that the system has already prevented projects from securing investment via the Contracts for Difference scheme.
Scottish Renewables has written to Ofgem requesting rapid implementation of interim reforms while a future-proofed charging regime is developed.
Claire Mack, chief executive of Scottish Renewables, said: “In a strategically planned energy system with assets supported by long-term fixed prices, the role of network charging urgently needs to be re-examined to ensure it aligns with future clean energy objectives.
“It has been clear for some time that the current transmission charging regime is not fit for purpose and we have now seen projects, job and supply chain opportunities lost as a direct result. The UK Government and Ofgem must now get on with the enduring reforms that will ensure network charges work effectively within a reformed electricity market to support decarbonisation of the UK’s energy system at best value to consumers.
“We recognise that developing and implementing a comprehensive reform to transmission charging will take time and must align with other, as yet undetermined, aspects of a strategically planned system. However, the UK Government’s 2029 deadline for delivering enduring TNUoS reform comes too late for operational projects which will soon become economically unviable. It also comes too late for new projects which need clarity on the TNUoS charges they will face over their operational lifetime before submitting bids in upcoming CfD allocation rounds.
“Our proposals have been developed closely with the sector and we are calling on Ofgem and the UK Government to urgently give clarity on how these will be delivered in time for Allocation Round 8.”
Simon Gill, of The Energy Landscape and author of the report, added: “Transmission charges have long been a challenge for Scottish generators, but recent forecasts indicate that both the scale of these charges and the uncertainty they create are set to increase significantly.
“For example, charges for generators in the north of Scotland are projected to more than double between now and the end of the decade.
“Projects that are already operational, or close to investment decisions, cannot respond to these changes. Rather, they reduce project value, limit the ability to recycle capital, and increase financing risk at a time when substantial investment is required.
“More fundamentally, in an increasingly capital-intensive electricity system, the current locational approach to transmission charging risks delivering poor outcomes for consumers, as both risk premiums and locational charges are embedded in CfD prices.
“A comprehensive review of how the transmission network is funded is therefore needed. In the interim, fixing TNUoS charges for both existing and new generators would support investor confidence, drive better outcomes for consumers and support delivery of a more strategically planned energy system.”