Three offshore wind developers have warned that high grid charges are threatening the future of Scottish offshore wind projects.
Ocean Winds, Northland Power and West of Orkney Windfarm said the industry faces “significant and immediate risk” under the current transmission charging system.
They have commissioned new research by Aurora Energy Research showing that reforming the regime could save electricity consumers £16.2bn between 2028 and 2050.
The study was released ahead of a decision by Ofgem on whether to back a cap-and-floor model to mitigate the costs.
Under the existing system, generators pay higher charges the further they are from major demand centres, which penalises projects in remote areas such as northern Scotland.
The report warns that transmission charges in the region could double over the next five years, undermining the UK Government’s Clean Power 2030 targets.
Adam Morrison, UK country manager at Ocean Winds, said: “The magnitude and volatility of transmission charges are harming existing Scottish projects and undermining investments which will be vital for Clean Power and Net Zero ambitions.”
He said the system creates a hidden cost for billpayers through subsidies for southern projects not burdened by these locational charges.
Emanuele Dentis, commercial manager at Northland Power, said: “Ofgem has greenlit billions of pounds of transmission investment works in Northern Scotland, without recognising that – without reform – these works are too expensive for generators to pay back.”
He added: “We are in support of a regime that redistributes transmission charges more fairly, is better aligned with other locational incentives, and delivers on the government’s Clean Power 2030 targets.”
Aurora’s modelling shows that a 1GW project in northern Scotland would cost £1bn more over its lifetime than an equivalent scheme in southern England.
The proposed CMP444 WACM 1 reform would reduce Scottish transmission charges by 59% and significantly cut subsidy costs through the Contracts for Difference mechanism.
Claire Mack, chief executive of Scottish Renewables (pictured), said: “These charges are both volatile and unpredictable, unfairly penalising Scottish projects by tens of millions of pounds every year.”
She added: “Quite simply, the UK Government will not meet the targets set out in its Clean Power 2030 Action Plan without the abundance of wind power generated around Scotland.”
Mack called on Ofgem and the government to implement reform and create a stable, investment-friendly environment.
The developers’ projects could generate enough electricity to supply over a third of UK homes.
The research also warns that the charging regime distorts the Contracts for Difference system, as projects with higher transmission costs need higher strike prices, but southern projects receive the same support despite incurring lower costs.
CMP444 WACM 1 is due to be considered by Ofgem in the coming weeks.