Time to reform unfair grid charging regime

Published on Monday, 09 July 2012 11:10
Posted by Vicki Mitchem

The SNP called for urgent reform of the outdated and discriminatory system of transmission charging – the cost faced by energy producers to connect to the grid – after publication of the latest tariffs revealed that the gap has widened between charges levied in the north of Scotland and subsidies paid in London.

Generators in North Scotland pay £21.96/kW (up from £21.49 in 2011/12) and Peterhead pays £20.11/kW (up from £19.77), while generators in London are subsidised by £13.35/kW – a doubling of the subsidy from £6.85 in the previous year.

The locational charging methodology levies higher charges on generators furthest from the main centres of demand for connection and use of the grid. This favours generation in the southern part of the UK and presents an inbuilt bias in the UK transmission regulatory system against Scottish based generation.

As a result, Scottish generators produce 12 per cent of UK generation, but account for 40 per cent of the transmission costs, or about £100 million per year more than their fair share.

SNP Westminster Energy and Climate Change spokesperson Mike Weir MP said:

"The north of Scotland has Europe's best renewable energy resources, yet the unfair system of locational charging means local generators face the highest charges in the UK - while subsidies are paid to generators in London and the south. It cannot be fair that Peterhead Power Station pays millions every year for the right to produce power while an identical generator in London is subsidised to set up shop.

"The UK Government must deliver a fundamental and effective change to create a fairer charging regime - one that does not penalise generators and developers in the very areas with the best renewable resource. The regulator Ofgem indicated that the system needs reform but has recently been sending mixed signals on the issue. It is imperative that this issue is addressed quickly. Their recent review also delivered no solution for Scotland's islands, where there is huge potential to generate clean, green energy but the charges could make it uneconomical.

"Scotland has some of the best renewable energy resources in Europe, with a quarter of Europe's tidal and offshore wind potential and a tenth of its wave power. That is why the Scottish Government set an ambitious, but achievable, target of the equivalent of all of Scotland's energy needs to come from renewables by 2020.

"But this locational approach makes no sense, and is a barrier to renewable energy generation in Scotland. It is not fit for purpose to deliver a more sustainable, low carbon energy mix, ensure security of energy supply and meet Scottish, UK and EU renewable energy targets.

"Scotland has overwhelming energy potential but our future wealth is being sabotaged by the continued use of these unfair charges which discriminate against Scotland."

Source: ©SNP

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