U-turn on charges that threatened to cripple green energy industry 

The energy regulator, Ofgem, has backed away from increasing charges for use of the national grid, which critics claimed would have undermined Scotland’s renewables revolution.

The body had previously suggested it was “minded” to charge electricity producers in remote areas more for connecting to the network.

The measure – intended to reflect electricity lost through transmission down the grid – would seriously affect wind farms and other generators in the Highlands and Islands. After consultants raised questions about the higher charges, Ofgem yesterday put off the decision.

The consultants, Oxera, were appointed by the industry to assess the proposals put forward by major energy firm RWE Npower. But Oxera suggested Ofgem had placed more weight on the topic than was appropriate.

A spokesman for the regulator said: “Ofgem now wants to undertake a review of the analysis and will provide stake-holders with the opportunity to comment on any new findings before a final decision is made in spring next year.”

The issue is due to be raised by the First Minister, Alex Salmond, when he meets Ofgem officials next week.

When electricity flows along transmission lines, a proportion is lost as heat. The further it has to go, the more is lost. Losses in Britain are about £260 million a year and the additional electricity generated to cover this creates 680,000 tonnes of carbon emissions.

At present, the losses are shared by generators and suppliers regardless of their location. RWE Npower has proposed basing transmission charges on location, so those further from the main demand would pay more.

Ofgem estimates annual savings at £15 million, while carbon emissions would be cut by 150,000 tonnes a year.

But the charges would penalise renewables schemes in the Highlands and Islands as they are furthest from the markets in the south of England. They have been dubbed a “tax on geography” by critics who say they could hit hard an area which has the best natural resources in Europe for renewables.

A report commissioned by Highlands and Islands Enterprise (HIE) revealed this week that renewable-energy producers in the region could pay 30 times more to connect to the national grid than counterparts in other parts of Europe.

It also suggested that the measures would breach an EC directive that member states “shall ensure that the charging of transmission and distribution fees does not discriminate against electricity from renewable energy sources, including, in particular, those produced in peripheral regions, such as island regions and regions of low population density”.

A spokeswoman yesterday said: “HIE and its local-authority partners welcome Ofgem’s decision to review these proposals. When combined with disproportionately high charges for developers wishing to connect to and use the electricity grid across the Highlands and Islands, they represent significant barriers to the effective exploitation of the region’s vast renewable energy resources.”

Rob Gibson, a Highlands and Islands SNP MSP, said there was no way that any part of the Highlands and Islands could hope to develop renewable energy production if the charges went ahead.

By John Ross

The Scotsman

15 September 2007