Latest news with #TransmissionNetworkUseofSystem
The Herald Scotland
20-05-2025
- Business
- The Herald Scotland
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.'
The Herald Scotland
25-04-2025
- Business
- The Herald Scotland
Electricity transmission charges spark debate across Scotland
Energy suppliers and generators pay transmission network operators for the right to use the transmission system, which includes the cost of maintaining and building the network's physical infrastructure. They then pass all of these costs on to billpayers. These 'TNUoS charges' (Transmission Network Use of System) total approximately £4.4billion per year. The regulatory background to all of this is complex. Indeed, the Court of Appeal, which has plenty of experience with difficult and complex matters, has described the system as being of 'byzantine complexity'. And this matters, because TNUoS charges raise extremely important questions for renewable energy projects, both now and in the future. The system is designed to ensure that each generator pays a level of TNUoS charges that reflects how much it costs them to use the network, as this incentivises them to use it efficiently. Electricity generators therefore pay a locational charge as part of their TNUoS costs, which reflects the cost of electricity being added to the grid at different geographical points. As a result, a renewable energy project in the north of Scotland, which can generate a lot of energy but is far away from the places where most of it is consumed, might pay more than its counterparts in England and Wales. The rules also include a process to be used when a company wants to change its transmission charges: it has to propose amendments to the underlying regulatory code documents, and these proposals are then assessed by the regulator, Ofgem. Several such proposals are currently progressing through the system. For Ofgem, the decisions are difficult. Amendments can have significant consequences for electricity generators (depending on their business model, type of generation, and physical location), and the regulator needs to weigh up many difficult and competing issues. For example, should charges be even more closely linked to location? This would provide an incentive to shift generation away from areas where grid capacity is low, but in practice that means discouraging new investment in renewable energy projects and potentially even threatening the UK's net zero ambitions. The mere possibility of such changes is already having an impact on renewable energy projects throughout the UK, both those that are planned and those that are already in operation. And generators also face the prospect of another challenging development: wide-ranging changes to the process by which generators can access and connect to the grid. It all creates uncertainty for those developing and investing in renewable energy projects. Ofgem recognises the need for strategic reform to transmission charging, including improvements to the current TNUoS system. It has also acknowledged that charges can be unpredictable, and that this may hinder investment decisions. In May 2022, it created the TNUoS Task Force, with a brief to focus on making transmission charges more stable and predictable. The Task Force has modelled several different options, including both fixing and flexing TNUoS charges, but these ideas have yet to be implemented in a meaningful way. At a time when the focus really needs to be on clean energy deployment, the consistency, predictability and overall fairness of UK transmission charges are issues which need to be resolved in short order if we are to keep progress moving in the right direction. ■ Shepherd and Wedderburn is headline sponsor of All-Energy, the UK's largest renewable and low-carbon energy exhibition and conference, taking place in Glasgow on 14–15 May 2025. Visit the All-Energy hub at
Yahoo
25-04-2025
- Business
- Yahoo
Electricity transmission charges continue to spark debate across Scotland
By Jamie McRorie THE UK has set a legally binding target of achieving net zero by 2050. Doing that will require a significant increase in the use of renewable energy, but the way that generators have to pay for the cost of using the transmission network can be a real disincentive to investing in such projects. Energy suppliers and generators pay transmission network operators for the right to use the transmission system, which includes the cost of maintaining and building the network's physical infrastructure. They then pass all of these costs on to billpayers. These 'TNUoS charges' (Transmission Network Use of System) total approximately £4.4billion per year. The regulatory background to all of this is complex. Indeed, the Court of Appeal, which has plenty of experience with difficult and complex matters, has described the system as being of 'byzantine complexity'. And this matters, because TNUoS charges raise extremely important questions for renewable energy projects, both now and in the future. The system is designed to ensure that each generator pays a level of TNUoS charges that reflects how much it costs them to use the network, as this incentivises them to use it efficiently. Electricity generators therefore pay a locational charge as part of their TNUoS costs, which reflects the cost of electricity being added to the grid at different geographical points. As a result, a renewable energy project in the north of Scotland, which can generate a lot of energy but is far away from the places where most of it is consumed, might pay more than its counterparts in England and Wales. The rules also include a process to be used when a company wants to change its transmission charges: it has to propose amendments to the underlying regulatory code documents, and these proposals are then assessed by the regulator, Ofgem. Several such proposals are currently progressing through the system. For Ofgem, the decisions are difficult. Amendments can have significant consequences for electricity generators (depending on their business model, type of generation, and physical location), and the regulator needs to weigh up many difficult and competing issues. For example, should charges be even more closely linked to location? This would provide an incentive to shift generation away from areas where grid capacity is low, but in practice that means discouraging new investment in renewable energy projects and potentially even threatening the UK's net zero ambitions. The mere possibility of such changes is already having an impact on renewable energy projects throughout the UK, both those that are planned and those that are already in operation. And generators also face the prospect of another challenging development: wide-ranging changes to the process by which generators can access and connect to the grid. It all creates uncertainty for those developing and investing in renewable energy projects. Ofgem recognises the need for strategic reform to transmission charging, including improvements to the current TNUoS system. It has also acknowledged that charges can be unpredictable, and that this may hinder investment decisions. In May 2022, it created the TNUoS Task Force, with a brief to focus on making transmission charges more stable and predictable. The Task Force has modelled several different options, including both fixing and flexing TNUoS charges, but these ideas have yet to be implemented in a meaningful way. At a time when the focus really needs to be on clean energy deployment, the consistency, predictability and overall fairness of UK transmission charges are issues which need to be resolved in short order if we are to keep progress moving in the right direction. ■ Shepherd and Wedderburn is headline sponsor of All-Energy, the UK's largest renewable and low-carbon energy exhibition and conference, taking place in Glasgow on 14–15 May 2025. Visit the All-Energy hub at
