Electricity News

Wednesday 03 March 2010

The proposals could have seen Scottish generators pay higher balancing charges

Scottish Energy minister Jim Mather yesterday (March 2) welcomed Ofgem's decision to veto a proposal to charge Scottish electricity generators more to use the grid, but the regulator has said that it has not ruled out the idea.

Mr Mather said that the decision not to go ahead with the locational Balancing Services use of system charging was "welcome evidence that Ofgem and others are listening and realise that renewable generation in Scotland should not be penalised."

Mr Mather said that the proposal could have seen Scottish generators, particularly those producing renewable energy, paying more because of their remote locations.

Currently, generators pay a transmission charge that increases with the distance away from the major population areas in the UK, which the Scottish government claimed meant Scottish generators produced 12% of UK generation, but accounted for 40% of the transmission costs.

The Balanced Services proposal would have also seen a replacement of the uniform charge all UK generators pay National Grid to keep the system balanced with regional charges. It was made in response to National Grid's rising constraint costs, where has to compensate generators if it does not have the grid capacity to off-take their electricity.

Scotland's high proportion of renewables and finite grid capacity could have seen it attract more of these constraint charges.

Mr Mather said that this decision was good news for Scotland's expanding renewables industry.

"With our vast natural resources, we can be the clean, green energy powerhouse of Europe," he said.

However, a spokesman for Ofgem said that the regulator had rejected the proposal on technical factors but had by no means discarded the idea of locational balancing charging.

"There's merit in it. We're not against the idea of balancing charging as a concept if National Grid were to develop an alternative way of doing it. It has not been ruled out."

Scotland

While Mr Mather was pleased with this decision, he was adamant that more needed to be done on grid connections and transmission charging to get a "fairer deal" for Scotland's generators.

The current approach for charging for connection and use of the grid is a "significant barrier to encouraging renewable development," he said.

Mr Mather added the Scottish government was working with Ofgem, the National Grid and the Department of Energy and Climate Change (DECC) to ensure that new renewable projects are connected as quickly and efficiently as possible.

"More needs to be done and we continue to press for a level playing field and other necessary changes to the GB energy regulatory framework that help Scotland deliver a low carbon, sustainable, clean energy future," he said.

"We must reinforce our grid network to connect and transport the huge amounts of renewable energy that Scotland can produce. And we are working to ensure the transmission charging regime and the costs of managing grid constraints are fair and equitable for all generators, regardless of where on the grid they connect.

"Having accepted the argument that constraints costs should not be targeted at Scotland, we will now focus on pressing Ofgem and National Grid for a fairer deal for Scotland on transmission charges."