Transmission charging volatility is resulting in net zero risk to offshore wind and higher costs for consumers, according to a new report from SSEN Transmission.
The report said that, while evidence suggests that the current regime results in Scottish generators paying a higher cost for use of the transmission network compared with other areas in Great Britain, analysis suggests that the transmission regime is not purely a Scottish issue.
The volatility and uncertainty of future charges impacts developers across Great Britain, with the current charging methodology developed at a time when the electricity system was not so focused on renewable deployment to support decarbonisation goals.
The regime is “creating a huge barrier for further low carbon investment, despite great support for further deployment through UK and Scottish government policy”, SSEN said.
“This uncertainty creates risk for developers’ commercial decision making, with mitigation measures ultimately ending up on consumers bills through CfD strike prices,” it added.
SSEN Transmission said it would welcome further views from developers and wider stakeholders on the findings, ahead of making final stakeholder-led recommendations on the case for reform in the coming months.
SSEN Transmission head of whole system Andrew Urquhart said: “Over 90% of our generation customers and wider stakeholders have told us that change is needed to the current charging regime to deliver net zero at the scale and pace that will be required for our collective decarbonisation goals.
“Our evidence supports this and shows that the outdated locational charging signal, which is unfairly impacting Scottish developers, particularly offshore wind developers who are led by location of Crown Estate leasing sites, is just one part of the problem.
“The volatility and uncertainty of future charges are equally damaging to UK climate ambitions and impacts projects all across GB, not just Scotland.
“With this uncertainty, comes great risk and cost – risk to green recovery and decarbonisation targets, and increased cost for end consumers as developers look to mitigate the unknowns.
“We welcome recent confirmation from Ofgem and the UK Government that a regulatory review of the current regime is likely and we hope that industry will be able to inform this.
“From our analysis, stakeholder feedback, and other recent TNUoS publications from industry, it’s clear that we need urgent reform in the context of net zero delivery.”
Scottish Renewables senior policy manager Ben Miller said: “Today’s report from SSEN Transmission highlights how transmission charging currently acts as a barrier to Scotland playing its full part in support of the UK’s ambitious 2030 offshore wind target.
“Scotland’s strong winds, deep waters and offshore expertise mean we have the potential to lead the world in offshore renewables, but harnessing this to its full potential will only be possible by removing the key barrier which the TNUoS Transmission charging regime creates.
“A resolution to this issue is in the hands of the UK government and Ofgem – government must follow through on its commitment in the recent Energy White Paper to reform the governance and regulation of the energy system.”
Scottish Affairs Committee chair Pete Wishart said: “Our Committee welcomes today’s report from SSE, which echoes our report on Renewable Energy in Scotland, that higher transmission charges disproportionately affect Scotland and can hinder the progress of renewable energy development.
“We hope Ofgem takes this report into account when it completes its transmission charges review.”