September 23, 2010

Ofgem to review ‘discriminatory’ renewable energy charge

By Simon Johnson, Scottish Political Editor, Telegraph, 23 September 2010

One of the main barriers to Scotland embarking on a massive expansion of renewable energy could be removed after regulators yesterday announced a review of electricity transmission charges.

Ofgem said it would re-examine whether it was fair companies providing power to the National Grid from remote areas should be charged more than those near population centres.

It costs more to transmit electricity from offshore wind and wave farms to people’s homes, but SNP ministers have complained the charging regime is “discriminatory” against rural areas and renewable power.

Along with the unproven nature and cost of much of the technology involved, it is seen as one of the main obstacles to Alex Salmond’s claim that Scotland can become the “Saudi Arabia of marine energy”.

The review, titled Project TransmiT, aims to ensure the charging regime promotes green energy while keeping transmission costs under control.

Alistair Buchanan, Ofgem chief executive said previous research had “identified the need to invest up to £200 billion to secure low carbon energy supplies for Britain”.

He added: “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.”

Initial proposals from the review are due to be published next spring, with a decision on taking these forward to be made next summer.

Mr Salmond believes renewable energy could eventually provide ten times Scotland’s power needs and argued the current transmission charges make “no sense” and are “indefensible”.

“Scotland has some of the greatest low carbon energy resources in Europe, yet the locational approach sees Scottish generators in the areas of highest renewable resource paying the highest charges in the UK,” the First Minister said.

“This review is a welcome step by the energy regulator towards the more strategic approach that we need if we are to deliver a low carbon economy.”

Niall Stuart, chief executive of Scottish Renewables, branded the current system “out of date”, adding: “The system is purposefully designed to discourage investment in electricity generation in Scotland, and to encourage generation in southern England with no regard to whether power comes from clean or polluting sources.”

Liam McArthur, Scottish Liberal Democrat energy spokesman, said: “If we are to unlock the energy potential in remoter parts of the country and around our coasts, we can no longer afford a charging system that discriminates against development in such areas.”

Lewis MacDonald, his Labour counterpart, added: “Producing electricity is one thing but getting cheaper access to the grid will really help these companies in the long run.”

The Crown Estate announced earlier this year the world first wave and tidal energy projects on a commercial scale are to be built off the Scottish coast.

It announced that 10 schemes capable of generating up to 1.2 gigawatts (GW) of electricity, enough to power 750,000 homes, would be built around the Orkney Islands and on the Pentland Firth.

However, engineering experts have warned that the technical feasibility of delivering the electricity generated in the area to homes will mean it is an extremely expensive source of power.

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