Grid transmission charge reform could save consumers £16 bn
Three firms behind some of Scotland's largest offshore wind farms have warned that the industry is in 'significant and immediate risk' due to punishing grid costs.
But, they point out, according to new analysis, reform of the transmission charging system could save billpayers £16 billion.
A new report from Aurora Energy Research, commissioned by companies and published ahead of a key decision on changes from the energy regulator, Ofgem, shows that investment in the industry could be protected through reforms to the transmission charging system.
The trio of companies - Ocean Winds, Northland Power,and West of Orkney Windfarm - collectively through their projects generate enough power for a third of the UK's homes.
Adam Morrison, UK Country Manager at Ocean Winds, said: 'The magnitude and volatility of transmission charges are harming existing Scottish projects and undermining investments which will be vital for Clean Power and Net Zero ambitions.
'Amid a rapidly changing energy market, the UK has to reckon with the fact that the charging methodology is broken as it is pulled in directions it was never designed to go.
'Most importantly, the system bares a hidden cost to billpayers of billions of pounds of unnecessary subsidies for projects not burdened by these locational prices.
The report assesses what are called Transmission Network Use of System (TNUoS) charges, a levy on generators which was designed for an era when gas dominated the UK power market, and which incentivised the building of generation projects near major cities in England but penalised generation in remote areas, particularly Northern Scotland.
The three companies are warning that the system undermines UK Government plans to build huge wind projects off Scotland's northern shores, creating a signal not to invest.
Winds of Change on offshore wind and transmission charging (Image: Derek McArthur) Existing projects, they note, are also under threat as the volatile charges can erode as much as half of their value, an impact which is only likely to worsen, as the report warns that Northern Scotland transmission charges are expected to climb by 100% within five years without intervention.
As the Aurora Holdings Research report puts it: "The divergence of... TNUoS charges across regions has increased significantly in recent years and is expected to rise further over the next decades with TNUoS increasing in Scotland and decreasing in the South of Great Britain. This uncertainty disadvantages Scottish wind farms, increasing their cost of capital and opportunities to secure debt financing, increasing their bid prices in contracts for difference auction."
Claire Mack, chief executive of Scottish Renewables, said: "Scotland's abundant natural resources should make it the home of the UK's biggest and most productive renewable energy projects but our outdated transmission charging rules, designed over 30 years ago, are unbalancing how the modern-day electricity network should be paid for which is negatively impacting the development of major sites.
"These charges are both volatile and unpredictable, unfairly penalising Scottish projects by tens of millions of pounds every year."
The analysis by Aurora Energy Research highlights that this transmission charging means a 1 GW Northern Scottish project would cost one billion pounds more through its life to run compared to an equivalent in Southern England.
Ofgem is deciding on a 'cap and floor' model in coming weeks to mitigate the costs and many voices within the renewables sector are calling for change.
READ MORE:
'Quite simply,' said Ms Mack, 'the UK Government will not meet the targets set out in its Clean Power 2030 Action Plan without the abundance of wind power generated around Scotland and it must work with Ofgem to urgently implement a 'cap and floor' model for transmission charging that alleviates these costs and keeps projects on track.'
An Ofgem decision to back a reform proposal - known as CMP444 WACM 1 - would save billpayers £16.2bn between 2028-2050, according to the data, which reduces Scottish Transmission Charges by 59% and mitigates subsidies.
The report sets out that transmission charging is having a bearing on billpayers due to its combination with the 'pay as clear' model of the contracts for difference (CfD) process which grants the same price to all projects on the basis of the highest successful bid.
Transmission charges push up the costs of Scottish projects, and therefore CfD prices - southern projects unaffected by transmission charges do not need the same level of CfD, but still receive it.
Emanuele Dentis, Commercial Manager at Northland Power commented: 'The investment signals are just inconsistent at the moment. Ofgem has greenlit billions of pounds of transmission investment works in Northern Scotland, without recognising that – without reform – these works are too expensive for generators to pay back. It's like building brand new motorways that too few users are going to use because the toll is too expensive.
'In the meantime, projects in the Southern England are paid (rather than pay) transmission credits. This was historically justified as an investment signal to minimise transmission costs, but this system is simply incompatible with renewable energy deployment, whereby generation is most efficiently produced where natural resources are strongest.
'We are in support of a regime that redistributes transmission charges costs more fairly, is better aligned with other locational incentives such as option lease fees and the contracts for difference (CfD), and delivers on the government's Clean Power 2030 targets and beyond. CMP444 WACM 1 and CMP432 are the best tools in the short term to kickstart this reform.'
A Department for Energy Security and Net Zero spokesperson said: 'Our priority is to expand Britain's energy infrastructure to get more clean, homegrown, electricity onto the grid and protect billpayers from volatile fossil fuel markets.
"We continue to work with Ofgem to ensure an update on transmission is provided as quickly as possible and ensure that any proposed changes to transmission network charges continue to support investment in clean energy projects across the country, while delivering value for money for consumers.'
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Sunday Post
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The Herald Scotland
2 hours ago
- The Herald Scotland
What is life like in Scotland's most 'popular affordable town'?
Earlier that afternoon, around two and a half miles away in the Macedonia area, Scott Hume is drinking tea in the sunshine outside of his new, temporary flat. Dandelion clocks the size of baseballs rise up from the unkept garden in front of the brutalist concrete cube of the council property. The retired army veteran, 59, narrowly escaped placement in a homeless hostel by the council. It came down to the wire, but a veteran's charity stepped in at the last minute. They helped him secure the temporary council flat in three hours, he tells me. He moved in last night. The idea that Glenrothes is the 'most popular affordable town for families' is a lie, Hume claims, his tone indignant. 'This is a bad place to try and get accommodation.' Welcome to Glenrothes (Image: Gordon Terris/Herald&Times) Scott Hume in his rented accommodation (Image: Gordon Terris/Herald&Times) The affordable tag was placed on the town in the heart of Fife by Zoopla in early May. The property website measured affordability by looking at the ratio of average three-bed house prices in locations across the UK, compared with average earnings in the local authority area. The popularity ranking was based on the average number of Zoopla listing views for a typical three-bed home in each area, with the research based on the first quarter of 2025. Glenrothes topped the list (which was dominated by Scotland and Wales) with the average price of a three-bedroom home listed as £136,900 and the house-price-to-earnings ratio at 1.8. Wishaw, in North Lanarkshire, was second in Scotland and fifth on the list with £168,600 for the average three-bed and an earnings ratio of 2.1. Leven, a seaside town in Fife where a three-bed is £164,600 on average, came in at third for Scotland (eighth in Britain) with an earnings ratio of 2.1. 'The willingness of many to consider different regions or compromise on property features further highlights the adaptive strategies families are employing in today's market,' said Richard Donnell, executive director at Zoopla. READ MORE: Glenrothes 'UK's most popular location for family house-hunters' Glenrothes is within commuting distance of several Scottish cities. It's just over 30 miles to Edinburgh, and a train from nearby Markinch Station will get you into the capital in just under an hour. By car, you can commute to Glasgow in about an hour, Perth in 40 minutes and Dundee, about 35 minutes. Family house hunters and first-time buyers from the city might migrate to a commuter town like this, where they can stretch their deposit further and get more space for a growing brood. 'We came from Kirkcaldy, but we liked this area better than some other areas,' Mounsey says. 'It's quieter and it's very handy to everywhere.' The commute from Glenrothes to Edinburgh Airport, where she works, is only around 40 minutes, she adds. Basically, the same time it took from Kirkcaldy with traffic. Mounsey's fiancé is training to be a police officer. They don't know where he will be stationed yet, but the ease of access to the motorway means they do not have to worry too much about it. 'We would like something bigger, maybe when we do start a family,' she says. 'Maybe just a slightly bigger garden, but we're not fussed about leaving here.' 'In Glenrothes, you get a lot more for your money than in cities,' explains Dylan Kimmet, a local property partner at Purple Bricks. 'You'll get more garden space, a bit more room. I think overall it's quite a nice place to live. It's got a really good community vibe and a lot of people know each other on a community level.' Kayla Mounsey in her Bellway home (Image: Gordon Terris/Herald&Times) Bellway advertisements (Image: Gordon Terris/Herald&Times) A general view of Glenrothes (Image: Gordon Terris/Herald&Times) Glenrothes was Scotland's second new town (Image: Gordon Terris/Herald&Times) Glenrothes was designated as one of Scotland's first post-war new towns in 1948, with most of its housing built by the Glenrothes Development Corporation and later managed by Fife Council. From the 1950s through the 1970s, large council estates were built in areas like Auchmuty, Macedonia, Pitteuchar, and Collydean, their curved roads complemented by the clean lines and flat roofs of modernist housing. At the time, renting your house from the council was commonplace. But by the 1980s, the attitude towards council housing shifted. Margaret Thatcher's Right to Buy scheme, founded on the idealisation of home ownership and the ideological idea that it would shrink the need for social housing, forever changed the make-up of towns like Glenrothes. As in many other places, it created a two-tier housing market that separated new homeowners with equity and renters grappling with a dwindling supply of housing options within their means. Now, 10 years on from when the SNP ended the Right to Buy scheme, its legacy still haunts those who were left behind. The affordability touted by Zoopla's figures makes sense on paper, but when I put this to people in Glenrothes, many asked, affordable to whom? Inside his new temporary flat, veteran Scott Hume explains he has been struggling to access accommodation in the town since the breakdown of his relationship during the pandemic. His things are piled around him, brought over from his former flat with the help of the Armed Forces charity SSAFA. Hume retired from the army in 1996 but has kept close links with the Services. Scott Hume has kept close links to the army after retiring (Image: Gordon Terris/Herald&Times) A playful grin flashes across his face when his satirical t-shirt is pointed out (it reads, 'Royal Engineer (Rtd) – responsible adult supervision is required at all times.'). He's a proud man, but the distress of coming so close to being placed in a homeless hostel is ever-present behind his eyes when we speak. Last February, Hume fell off a roof. The accident left him with a disability, unable to work and with new accessibility requirements for accommodation. 'Being out of work destroyed me,' he says. But his journey through the housing system started four years prior, this is just the latest knock in his quest to find a home. When Hume first reached out to the council for help with accommodation, he says he was advised to secure a private let and told the waitlist was 'about 16 months'. As part of Fife Council's Covenant Commitment, the local authority allocates a minimum of 40 properties annually to Armed Forces personnel. But this is 'ideally at the point when they leave the forces,' according to Gavin Smith, Fife Council's access service manager. Hume says: 'After 16 months, I inquired about it and [they] said, 'you're not on the list, you've got a roof over your head'. So, I was stuck then,' he says. His private rental was around £500, and Hume enjoyed a good relationship with his landlord. But a few years after he moved in, Hume's landlord broke the news that she had to sell the flat so she could retire. She gave him as much notice as she could, around 15 months. The last time he had to look for a flat, Hume says there were 'hundreds' on the private market. 'Now you're lucky if there's a couple.' And the rents have jumped from £500 per month to between £750 and £850 for a flat the same size. 'That's not affordable,' he adds. Glenrothes is close to Scotland's major cities (Image: Gordon Terris/Herald&Times) He and his landlord have been navigating the Scottish Government's eviction process since. Landlords must go to the First-tier Tribunal to legally evict a tenant, and the whole process can take weeks or months. But councils do not treat someone as 'homeless' until they are formally evicted, leaving vulnerable people like Hume in limbo. 'How long is temporary? Not knowing is worse than anything,' he says. He claims the temporary council flat is costing £623 a fortnight, £1246 per month. "The council's rent policy is reviewed annually, but the costs of temporary accommodation are higher than standard council rents,' says Smith. 'Where households have no choice but to enter temporary accommodation, we'll make arrangements with them to pay what they can afford based on an income and expenditure calculation. We always try to ensure that people aren't negatively financially impacted because of homelessness and charges.' Hume's landlord, who didn't want to be named, says the decision to sell up was not one taken lightly. The stress of making someone homeless is clearly eating her up. 'It's not as stressful as the risk of being homeless, obviously,' she says firmly. I ask her what she thinks has been the biggest contributor to the housing crisis. 'Right to Buy,' she replies quickly, acknowledging that is how she came to own two properties in the area. 'If you look online at what's to rent in Glenrothes for the price, they're like pigsties,' she says. 'It may be, in comparison to the rest of Scotland, a relatively so-called 'cheap place to live', but I would say rents are quite high for the standard of the properties.' 'Glenrothes is by no means a mecca for getting a house,' she adds. Glenrothes (Image: Gordon Terris/Herald&Times) Kayla Mounsey with her dog (Image: Gordon Terris/Herald&Times) 'When the Right to Buy came on the scene, it allowed people who had council homes to buy them at a heavily discounted rate,' explains Dr Kim McKee, a professor of housing and social policy at the University of Stirling. 'But the issue was that we never really replaced these homes. We lost tens of thousands of homes in the social rented sector in Scotland, but we've not replaced them.' Mortgages became more affordable during that period, and home ownership boomed. But in the last 20 years, Dr McKee says, the private rented sector has grown exponentially. 'If you look back 20 years ago, the private rented sector was mostly for students, and perhaps migrants and professionals who had to move around for their jobs. But that's not the case now. 'It's now housing a really wide cross section of society, with one in seven households in the private rented sector, and that's one of the real difficulties. The affordability of rent is very different between social and private, but you also have different housing rights in terms of security of tenure as well. It's very difficult for people.' The three leading contributors to the current housing crisis are fallout from the Right to Buy scheme, a broken allocation system for social housing, and a lack of investment in new council houses. 'In the 1980s, it was pretty common to rent from a social landlord,' Dr McKee explains. 'Big urban centres house a lot of the population, but now it's more difficult to access social housing if you're not coming through the homeless system. If you're applying for a general waiting list, you can wait a very, very long time.' 'It's very difficult for people, they're stuck,' she adds. 'They're languishing on temporary accommodation lists and often the only option they have is to rent privately, which obviously, budget-wise, can be more expensive for them than renting from a social landlord would be.' Those who do not have the means to save for a deposit are shut out of the housing market. Bad credit, precarious work, disability and rising rents can make climbing the property ladder inaccessible to many. Wider shifts in the economy related to the cost of living crisis (rising energy bills, inflation, surging cost of food) have also contributed to the trade-offs young families are making to stretch their budgets. Hence, the uptick in first-time house hunters seeking out communities like Glenrothes. Peter Gulline, 59, moved to Glenrothes aged 13. The Conservative politician was elected councillor of the Glenrothes North, Leslie and Markinch Ward in 2022. He says wherever new housing estates are built, the properties are always 'gobbled up'. A lot of the market is people in Glenrothes moving to another property, he claims. The current strain on services is temporary. 'We just have to get through this hiccup of everything being really, really busy and weather the storm,' he says. The private rental market has also 'gone through the roof', but councillor Gulline does not see that as a 'bad thing'. He does not agree that the Right to Buy scheme has contributed to the housing crisis. 'People say we've lost 40,000 houses because they were sold off,' he says. 'Well, actually, we haven't lost 40,000 houses. We've lost the responsibility of having to maintain 40,000 houses, but they are still houses. 'There is still somebody living in them. They've not been bought, bulldozed and replaced with a car park.' He describes the wait for social housing as a game of snakes and ladders when I ask about the backlog for council homes. 'Everybody thinks there's a list. And the list has got 17,000 people on it,' he says. 'There are actually multiple lists.' He rattles off some of the categories: homelessness, disability, domestic abuse, and prison leavers. 'It's not a list that you just crawl up. It's a list you can move up and get knocked down a couple of pegs if people come along that had more justification.' Marissa MacWhirter in a Glenrothes park (Image: Gordon Terris/Herald&Times) The town is known for its public art (Image: Gordon Terris/Herald&Times) As far as Gulline is concerned, 'Glenrothes is a fantastic town for families.' It's easy to navigate, it has plenty of decent schools, there are lots of parks and green space, and clubs and activities for the young and old. The administrative capital of Fife, the town also boasts the largest shopping centre in the council area (Kingdom Shopping Centre) and decent transport links from the bus station. The number of outdoor artworks dotted around town, the carefully landscaped roundabouts, and the spring flowers blooming from every public space give Glenrothes a wholesome community feeling, even for those just passing through. The town, like many in Scotland, is caught between two narratives. Its affordability gives many the chance to get on the housing ladder and provides young families with a safe, quiet community in which to raise children. But the housing crisis has made the security of home ownership increasingly out of reach for many. Fife Council acknowledges the 'extreme pressure' it's under to meet housing needs in the crisis. The local authority has created the Fife Housing Register, a shared list providing a single access route to available homes, in partnership with local housing associations. "We're actively reducing waiting times for those assessed as statutorily homeless as part of our short-term housing emergency response, though challenges remain, especially for larger families and those with specific health or disability needs,' says the authority's housing access service manager. 'Precise information about housing prospects is difficult to provide. We understand the uncertainty this creates and remain committed to supporting applicants through the process." I ask Hume how he feels about his new temporary accommodation. 'I've got no storage, but it's better than a hostel,' he sighs. Marissa MacWhirter is a columnist and feature writer at The Herald, and the editor of The Glasgow Wrap. The newsletter is curated between 5-7am each morning, bringing the best of local news to your inbox each morning without ads, clickbait, or hyperbole. Oh, and it's free. She can be found on X @marissaamayy1
