Major review of electricity transmission charging welcomed in Shetland

A major review into the cost of transmitting electricity around the country, announced today by energy regulator Ofgem, was warmly welcomed by windfarm developer Viking Energy and MSP Tavish Scott.

Companies behind remotely-located renewables projects have long complained that they are discriminated against under the so-called locational pricing system, which according to figures released by Highlands and Islands Enterprise last year charges power generators close to major population centres as little as £7 per kilowatt hour. Viking Energy has been quoted more than £100 per kilowatt hour by the National Grid.

The review, named Project TransmiT, was announced at Ofgem’s annual board meeting in Glasgow and will consider whether the current charging regime can support the move towards less carbon dependent power generation.

A spokesman said: “The electricity and gas grid charging regimes have served customers well, for example, by encouraging power generators to locate close to where electricity is used. However, Britain is facing an unprecedented challenge as it moves to a low-carbon energy system and new kinds of generators such as wind and wave power stations have less flexibility on where they are sited. This is an important issue for Scotland as many low-carbon generators choose to locate there because of the favourable geographic and weather conditions.”

Aaron Priest, project manager for Viking, whose windfarm plan for Shetland depends on a 200-mile interconnector between the isles and the Scottish mainland, said: “Everyone, including Ofgem, acknowledges Shetland has among the best wind and marine energy resources in Europe. A fit for purpose regulatory framework, to ensure the connection of those resources, is now long overdue.

“The draft charges we potentially face are the highest in the UK and several times that of even the north of Scotland [£23 per kilowatt hour]. Yet our project would deliver more units of cleaner greener electricity to consumers throughout Scotland than building the same windfarm anywhere else.

“This review could begin addressing the fundamental conflict that exists between two national policies. On one hand there is a policy to encourage generation next to big population centres. This made sense when electricity was largely produced from fossil fuels. On the other hand we have a major national drive to develop sources of renewable energy against the backdrop of the European Union’s binding renewable energy target for the UK.

“The UK must produce 15 per cent of all its energy (electricity, heating and transport) from renewable sources by 2020. However, the best sources are in the more remote and sparsely populated parts of the country. Shetland has one of the best wind resources in the world.

“If the UK is going to have any hope of achieving its ambitious renewable energy targets, which are necessary to move towards a low-carbon future, then we need to unlock the incredible potential of places like Shetland. The existing charging regime is a major barrier.”

Mr Scott said: “This Ofgem review at last recognises that the levels of transmission charges are fundamental to the future of renewable energy in Shetland. If we are to see the commercial wave generation off Shetland’s west coast, it will only happen if the cost of exporting power to the centres of population in the UK is affordable. The review must therefore look at how best to move the country’s energy industry away from nuclear to clean, green power.”

Alistair Buchanan, Ofgem’s chief executive, said: “The electricity and gas grids play a fundamental role in meeting this huge challenge. Project TransmiT will consider whether the way in which grid costs are shared between users needs reforming.”