Nearly 30 years after it was established, we conclude that there is a strong case to urgently review the transmission charging regime SSEN Transmission Paper
SSEN Transmission has today, 15th of February, published a discussion paper calling for views on the current Transmission Network Use of System (TNUoS) charging regime, which results in Scottish renewable generators paying significantly higher costs to connect their electricity to the grid than those in other parts of Great Britain (GB).
You can download the paper here:
Example: A wind farm in the north of Scotland pays £5.50 per unit (MWh) of energy, an equivalent wind farm in Wales will get paid £2.80 per unit.
The Paper states that with Scotland boasting the greatest wind resource to meet the UK’s net zero targets, this creates a huge barrier for further low carbon investment, despite great support for further deployment through UK and Scottish Government policy.
Aileen Mcleod, SSEN Transmission’s Director of Business Planning and Commercial, explained:
“Our generation customers and wider stakeholders have been consistently telling us that charges for transmission access in the north of Scotland, as well as uncertainty about future charges, are acting as a barrier to the commercial viability of renewable energy projects.
” This, in turn, is making it difficult for us to determine system investment needs for our Transmission network, whilst also impacting on the energy markets where generators seek to earn revenue.
“The UK and Scottish Governments have put in place ambitious policies and targets to encourage and support greater deployment of renewable energy to meet our emission reduction targets, however the current Transmission charging regime is a blocker to this which raises serious questions about whether it is still fit for purpose in a net zero world.
“We are publishing our analysis to widen the discussion about transmission charging and seek views on potential solutions. Our findings suggest there is a clear case for reform, and we want to hear what others think too.”
The north of Scotland is powered by wind and water. Over 80% of the connected generation capacity is renewable energy. This energy powers all of the homes and businesses in the north of Scotland, and around two-thirds is exported onwards to the rest of GB. SSEN Transmission Paper
Ofgem sets the maximum amount that can be charged each year for use by the 3 Transmission owners:
- In the north of Scotland – SSEN Transmission.
- In the south of Scotland – Scottish Power Energy Networks (SPEN).
- In England and Wales – National Grid Electricity Transmission (NGET).
It is the Electricity System Operator (ESO), regulated by the UK Government, that is the sole user of the transmission network.
The ESO is the sole user of the transmission network and so pays the full charges for that use to the TOs (Figure 2). Currently, this is done by each TO sending the ESO a monthly bill for one-twelfth of their annual allowed charge, which the ESO then pays. Ofgem has recently decided to change how this payment system will work in the future. SSEN Transmission Paper
Tariffs for Generators
There is a system of tariffs:
- Local circuit tariff- generators that are not directly connected to the Main Interconnected Transmission System (MITS).
- Local substation tariff – 10 of these based on voltage
- Wider tariff – 27 based on geographic location
- Residual tariff – common to all generators
Generators are charged based on their declared capacity, known as Transmission Entry Capacity (TEC). Energy suppliers pay TNUoS based on the actual electricity demand of their customers SSEN Transmission Paper
The Transmission Paper includes examples and analysis of the methodology of the charges which it criticises. The Paper says that the system used for imposing these charges is a deterrent to the expansion of renewables and that it ‘discourages’ and ‘penalises’ developing renewables which are located in harder to reach areas – or as they say ‘remote.’
the wider TNUoS charges in the north of Scotland are significantly higher than elsewhere in GB. This is a consequence of a methodology that derives today’s TNUoS charges from the notional costs of connecting new generation in the future. Transmission Paper
Also commenting on the paper, Claire Mack, Chief Executive of Scottish Renewables, added:
“The analysis presented in SSEN Transmission’s paper shows a clear picture of current policy being out of step with future ambition and objectives. The issue of transmission charging is significant not just for our members but also for the future development of renewables projects in Scotland.
“It’s now time for the policies and regulations which underpin electricity transmission to consider not just the location of consumers of energy but also the location of the very best renewable resources in order to build out the projects that will take us further and faster towards net-zero.”
The paper, which is supported by Scottish Renewables and independently verified by Baringa, outlines SSEN Transmission’s findings on TNUoS charging in the north of Scotland, based on stakeholder feedback and evidence from operational schemes.
The paper also explores the issue of TNUoS volatility and unpredictability, which is not unique to the north of Scotland but experienced by all generators regardless of technology or location.
SSEN Transmission supports calls from its generation customers and stakeholders for TNUoS reform and is inviting feedback from all interested stakeholders, for or against reform, to further explore this issue and seek viable solutions to support net zero ambitions.
To share your views or discuss the report in further detail, please contact Andrew.Urquhart@sse.com.