How transmission charging is threatening Scottish offshore wind

Scotland has some of the strongest European offshore wind resources and a proven track record of turning that potential into real projects, skilled jobs and long-term economic value. However, at a critical moment for the sector, the next chapter of that success story is far from guaranteed. 

Rising transmission charges – the fees generators pay to use the electricity network – are continuing to undermine, at an ever-increasing rate, the economics of Scottish offshore wind projects. The challenge is not abstract or long term. Decisions on whether the next wave of offshore wind projects progress, including whether they can compete in future Contracts for Difference (CfD) allocation rounds, will be taken in 2026. Under current UK Government timelines, however, reform to transmission charging may not be implemented until as late as 2029. The level of uncertainty at present is huge and may persist for several crucial years we have ahead.

That timing mismatch matters not only for individual projects, but for Scotland’s entire ScotWind programme, the cornerstone of the country’s next phase of offshore wind development and central pillar of its long-term jobs transition.

Urgent intervention is needed to address this ever-escalating transmission charging issue. For Ocean Winds’ Moray East project, operational since 2021, transmission charges are currently forecast to rise by up to 400% by the end of the decade compared with the assumptions under which the project bid into the CfD scheme. This level of increase erodes value from a project unable to respond to those price signals once built and sends a damaging signal to investors considering future Scottish projects. While the scale of impact varies, rising and volatile transmission charges affect all Scottish offshore wind projects.

This matters because offshore wind projects are capital-intensive and developed over many years, but there is a clear point at which developers must decide whether to continue committing development capital and resources. Those decisions are increasingly being taken against a backdrop of uncertainty over long-term transmission costs, at exactly the point when certainty and market confidence is needed.

With allocation decisions from the current offshore wind auction expected shortly, focus is already shifting to the next round, expected to open in 2026. Whether Scottish projects are in a position to compete in that process will be shaped by decisions taken well in advance of the auction itself. If the uncertainty faced by Scottish projects remains unresolved, there is a real risk of another year – or more – without new Scottish offshore wind projects entering the construction pipeline.

Ocean Winds has direct experience of what Scotland can achieve when the framework is working well and how rising transmission charges threaten that progress. We are Scotland’s largest offshore wind operator, having successfully delivered Moray East and Moray West in the Moray Firth. Together, these projects have supported significant employment and helped grow a strong offshore wind supply chain in the north-east of Scotland.

That supply chain increasingly includes companies with deep roots in Scotland’s oil and gas sector, now applying their skills and infrastructure to offshore wind. Stable and predictable investment conditions are essential if that transition is to continue and if Scotland is to retain and grow its industrial capability.

Looking ahead, Ocean Winds is progressing plans for Caledonia, a proposed offshore wind project in the Moray Firth which is moving through the Scottish consenting process. We are confident in the project and in its potential to deliver clean power, high-quality jobs and long-term economic value for Scotland. However, consent alone does not guarantee delivery. As with other similar stage projects, Caledonia must also be able to move from consent into final investment decisions, and that depends on confidence that the wider policy framework supports long-term investment.

The ScotWind programme represents a major economic opportunity, expected to underpin tens of gigawatts of new clean energy capacity, billions of pounds of investment and a large share of the long-term jobs transition from oil and gas. Projects such as Caledonia can help form the backbone of that pipeline. Whether ScotWind can deliver at scale will depend on a policy framework that supports projects as they move from planning into delivery.                              

The issue is about ensuring the electricity market supports Scotland’s energy strategy, climate goals and industrial ambitions. Rather than penalising projects purely because of location, reforming transmission charging so that it reflects the system-wide value of renewable generation and is consistent with both governments’ strategic objectives, would send a strong signal that Scotland remains an attractive place to invest in offshore wind.

Scotland has the resources, skills and experience to remain a global leader in offshore wind. An electricity market that supports investment in that ambition is critical if the next generation of projects is to move from plans into reality, delivering significant socio-economic, security and environmental benefits that Scotland and the UK needs.

This article is sponsored by Ocean Winds.

www.oceanwinds.com/uk/