The claim
“We will work to remove obstacles to further investment in wave, tidal and wind generation in Scotland by ending the discriminatory transmission charging regime – a system that sees Scottish generators paying far more to connect to the grid than companies elsewhere in the UK. A generator in Scotland can pay £20 per kilowatt hour while companies in the South of England receive a subsidy.”
Scottish National Party Manifesto 2010
The background
It’s an issue that’s been raised a number of times in the Scottish Parliament and has been spoken about by Energy Minister Jim Mather. The SNP insist higher transmission charges are a barrier to investment in energy and specifically renewable energy in Scotland.
The analysis
The SNP manifesto specifically refers to the catchily titled Transmission Network Use of System charge or TNUoS.
This is a charge paid by generators and suppliers which is used to fund the installation and maintenance of infrastructure like pylons, overhead lines and substations – these are owned by National Grid in England and Wales, and by Scottish Power and Scottish & Southern Energy north of the Border.
The National Grid is contractually bound to charge in accordance with methods set down by Ofgem and the UK Government.
Currently they charge based on location – so generators furthest from the main centres of demand pay more. This is to encourage power generation closest to where it is needed most, to minimise the energy lost from transmission, and to ensure that the network does not become constrained at pinch points.
The SNP point out that locational charging means Scottish generators produce about 12% of UK generation, but account for 40% of the transmission costs, or about £100m per year more than generators in the South. This claim is consistent with figures published by the Parliamentary Office of Science and Technology.
Under this locational method of charging, Scottish generators are being charged more than other regions. In the North of Scotland it costs around £20.07 per kilowatt. In the South East of England the charge is £0.80 per kW and in densly populated areas the cost to energy generating companies can even be negative. For example, in Central London it is
-£6.41 per kW.
Despite consultations the National Grid has announced it doesn’t intend to change this existing locational based approach.
But the National Grid is considering a new pricing policy for wind farms. Currently charges are based on maximum amounts of power being put on to the network at peak times. Wind production is more intermittent than old style coal burning methods, and new charges should account for this fluctuation.
So – as there are a lot of new generation projects seeking connection – this could represent a significant saving for the sector if such a policy comes to fruition.
So does this affect the customer? No. In fact the cost of transmission makes up 4% of customer bills and the Scottish people actually get a very good deal.
This is because customers are charged separately for the delivery of their power. Looking at the same zone again, in North Scotland the cost to consumers is £5.86 per kilowatt hour, in the South East it’s £24.63 £/kWh and Londoners pay £26.75 per kWh.
It all comes down to the cost of transporting electricity – Scottish consumers are likely to be closer to a generator, while those in the south are reliant on energy that has been transported and therefore incur higher costs.
The verdict
Scotland does seem to be getting an unfair deal in the transmission charging policy applied by the National Grid, but planned changes could provide a boost to the Scottish renewable energy sector. On the plus side the charges onpassed to the consumer are significantly lower.
However, the use of the word subsidy is misleading – they are not being subsidised as such, just charged differently.
