The National Grid is facing capacity constraints, particularly in parts of northern England and Scotland. Planned grid improvements such as the Beauly Denny Line have been awaiting planning permission for some time and new connections in remote areas face prohibitive costs to connect to the grid.
In 2001 a Scottish Executive study concluded that Scotland had sufficient renewable capacity to meet up to 75% of the UK's electricity needs. However Orkney and the Western Isles have limited connections to the National Grid and Shetland has none. The cost to connect these three areas to the national grid is estimated to be £630 million1 and the current regulatory regime provides little incentive for network owners to make this size of investment.
In addition the UK electricity trading arrangements favour generators that can deliver predictable volumes of electricity with certainty within half hour trading periods, something that is very difficult for the owner of a wind farm. Failure to deliver can result in punitive charges. The remote wind farms are also penalised by use of system charges that try to reduce transmission losses by favouring generators located close to the major sources of demand.
There is government recognition that a completely liberalised energy market cannot deliver the UK's low carbon objectives. There will have to be changes to make the market more rewarding for renewable generators and some central funding may be required to take the national grid to more remote areas. The challenge is ensuring that lower carbon generation is delivered without affecting the security and quality of supplies and still ensuring that energy prices remain internationally competitive, all primary objectives for the energy regulator, Ofgem.
A recent report by the Sustainable Development commission recommends a new primary role for the energy regulator to include the reduction of greenhouse gases thus aligning Ofgem duty with governments energy and environment policy. It will be interesting to see how the regulator can engage in this role and convince network and grid owners to make the substantial investment required for speculative connection and potentially intermittent delivery/income.
1 Highlands and Islands Enterprise - Assessment of the Grid Connection Options for the Scottish Islands - 27 March 2007
For more information please contact:
RPS London (Cottons Centre) - Planning & Development
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