Without amendments to the current charging regime the potential presented by marine energy development is at risk
It’s been a year since Scottish Renewables published Swimming Against the Tide, our ground-breaking report which highlighted the impact of high grid connection charges on Scotland’s wave and tidal industry. As we approach the conclusion of Project TransmiT, Ofgem’s independent review of charging arrangements, we are preparing to reassess the implications of the current charging regime.
However, it is already clear that the issues surrounding grid charging continue to present a challenge to the industry’s ability to realise the potential investment and development opportunities presented by Scotland’s outstanding wave and tidal resources.
All electricity generators connected to the electricity transmission system pay Transmission Network Use of System (TNUoS) charges, currently calculated according to installed capacity and geographic location. This emphasis on geographic location means the north of Scotland faces the highest charges of anywhere in the UK.
In addition, generators located on Scotland’s island groups are required to pay for the use of subsea connections to the islands when built. Many of the marine energy projects in the Pentland Firth and Orkney waters strategic area (PFOW) are likely to connect to the grid in the Orkney Islands and will therefore be liable for this ‘island differential’. In total, the annual bill for connection charges of a PFOW project at the time of our report would have exceeded £56m per annum.
That figure lies in stark contrast to projects situated in the south-west of England. Due to the location of these projects, they actually receive a subsidy from the TNUoS charging regime through ‘negative TNUoS charges’. Generators in this region were actually paid £7.04 p/kW to use the transmission system in 2011-12. If the PFOW projects were connected in Cornwall rather than Orkney, instead of being charged over £50m a year to connect to the grid, they would have benefi ted from an annual subsidy of £11m.
Yet, with 25 per cent of Europe’s tidal resource and 10 per cent of Europe’s wave resource, Scotland is home to some of the best marine energy sources in the UK. This disparity in charging is clearly highly detrimental to the development of the wave and tidal industry which is anchored fi rmly in the north of Scotland. Since the publication of Swimming Against the Tide, Scottish Renewables has been working closely with our members and Ofgem to rectify this situation by fi nding a solution that will help us unlock the potential from islands such as Shetland, Orkney and the Western Isles where some of Europe’s best natural resources of wind, wave and tide are found.
Since 2010, Ofgem has been conducting an independent review of charging arrangements for the electricity transmission network and grid connection, called Project TransmiT. Yet, two years into the review, we remain deeply concerned that the prohibitively high TNUoS charges for the Scottish islands will not be appropriately addressed. We are represented on the industry panel which is looking at Ofgem’s final recommendations and putting forward a number of technical proposals to ensure that charges are made economic and that they will support development on the islands.
Without such amendments to the current charging regime, we risk failure to realise the huge potential presented by marine energy development in the north of Scotland. Conversely, success could mean some £2.4bn of investment, creating over 2,600 jobs, with much of this benefi t being realised in some of our most remote and fragile communities. A recent study commissioned by Aquamarine Power estimated a 200MW wave farm off the coast of Orkney could generate an average of 52 additional jobs each year in Orkney over a 26-year period. To date, the company has spent more than £3m directly in the local Orkney economy, and has worked with more than 40 local businesses.
During Scottish Renewables’ upcoming Marine Conference, which will be held in Inverness on 18 and 19 September, we will explore how developments over the last year have affected the original figures presented in Swimming Against the Tide, and the implications of this for the industry. It is crucial a solution is found which enables Scotland to continue to remain at the forefront of marine energy development.
Lindsay Roberts is Scottish Renewables’ Policy Manager for Offshore Wind & Marine