Hansard

I thank the Scottish Government for securing today’s debate on project transmit and the minister for his opening remarks. It is fair to say that my colleagues and I have some fundamental concerns about the Scottish National Party’s approach to energy, but today we want to put the focus on agreement rather than on disagreement. In particular, we, too, want the Scottish Parliament to unite in sending a strong message to the electricity regulator, Ofgem, on transmission charges: to treat Scotland and its islands fairly and to support the expansion of the renewables industry in this country.

Later this month or early next month, Ofgem will reach a decision on the various options that are open to it on electricity transmission charging. Project transmit is the independent review that has been commissioned by the energy regulator to lay out the choices that are before us. It has been asked to balance the move to renewables against security of supply and against cost. Ofgem states:

“The aim of Project TransmiT is to ensure that arrangements are in place that facilitate the timely move to a low carbon energy sector whilst continuing to provide safe, secure, high quality network services at value for money to existing and future consumers.”

No one believes that the status quo is a viable option. The current transmission pricing regime was designed for an entirely different mix of electricity generation that was dominated by traditional energy sources including coal, gas and nuclear power. The further generators were from where electricity was needed, the more was paid to transmit the electricity. Given that greater distance pushes up the cost of transmitting electricity, not to mention the inefficiency and resultant energy loss of doing so, there is a certain logic in the current system of charging. Where that logic breaks down is in how that pricing system discriminates against certain areas of the UK, such as Scotland, and in the barrier that it creates to the development of renewables.

Coal, gas and nuclear power are, to some extent, transportable sources of energy that can be taken to centres of population and industry; renewables sources—wind, wave and tidal, in particular—cannot. Furthermore, renewables generators tend to vary in their use of the transmission network; for example, in demanding greater access when the wind blows. If we genuinely want to move to greater use of renewables and to a lower-carbon economy, the current charging formula needs to change also to reflect that variable output from renewables generators.

The good news is that project transmit has clearly identified those factors and has come up with a fairer charging system that will benefit renewables and, therefore, Scotland. It is not an entirely flat pricing system—it is not the postage stamp approach that some people would like to see—but for mainland Scotland, at least, it is a huge step in the right direction. Niall Stuart, of Scottish Renewables, described the proposals as

“a step towards fairer charges for projects on the Scottish mainland”

and said that

“the reforms will encourage rather than block investment in renewable electricity in Scotland”.

Unfortunately, project transmit does not appear to have concluded that the same argument that it accepts for mainland Scotland and even for the Isle of Skye should apply to Scotland’s islands—in particular, Orkney, Shetland and the Western Isles. The methodology that is used to calculate shared transmission charges across most of Scotland has not been extended to the islands, which are treated as exceptions. Niall Stuart has estimated that, under the reform proposals, a wind farm on the Western Isles would pay £77,000 for every megawatt of capacity, compared to the charge of £2,000 per megawatt that a wind farm in the south-west of England would pay. Those figures are similar to the ones that the minister quoted. That could scupper many proposed developments and will have a direct impact on small-scale community-owned renewables, which will not be able to access the grid.

The islands—Orkney perhaps more than anywhere else—have led the way in micro and community electricity generation. The issue for those small-scale projects is not so much the transmission charges as the basic problem of connecting to the network. There are few cables and wires across those more remote areas, and I hope that we all would want a new charging system that would improve access to the grid rather than one that rendered it entirely uneconomic. Our more remote communities are economically disadvantaged and often fragile, but we have the opportunity to secure jobs and generate wealth.

Project transmit did not take community benefit into account, but I hope that Ofgem will reconsider its transmission proposals with a clear eye on the bigger picture. If we are to fulfil our legal obligations for carbon reduction, it is even more important that we make the most of our abundant natural resources and, therefore, that we connect Scotland’s islands to the national grid. If we do not do that, not only would proposed wind farms on the islands be adversely affected, but the charges could also put additional costs and, therefore, obstacles in the way of developing wave and tidal generation. Scotland’s potential in that field is vast, but the technology is also expensive and some way from establishing itself as being proven.

We need to invest in the renewables industry, not to create barriers to its development. The vast majority of projects that involve wind or tidal power are located in the waters around Scotland’s shores and are often adjacent to Scotland’s islands. They will not be able to proceed on any scale without transmission links to the main centres of population elsewhere in the UK.

The difficulty that Ofgem faces is in balancing the country’s—and, indeed, the world’s—need to move away from carbon fuels and towards renewable energy, with managing the costs.

There are unlikely to be many people in Britain at the moment who are not painfully aware of the cost of heating their houses and keeping the lights on. The costs of implementing the findings of project transmit should, and will, be borne by the six big energy companies, but they will in turn pass those costs on to the consumer. Project transmit has ruled out a socialised or postage stamp approach to transmission charging mainly because of cost, but there is surely room for greater equity in its application of a reformed system.

I hope that Ofgem will make more allowance for the Scottish islands, but if costs still act as a deterrent to development, that need not be the last word. The Scottish Government should do what it can using ROC payments. It is already reviewing the renewables obligation system and could do more to support projects and developments on the islands using the powers and charging mechanism that are at its disposal.

I hope that Parliament will unite in an appeal to Ofgem to improve its transmission charging proposals further. Project transmit is a major step forward in encouraging the development of renewable energy and in treating Scottish generators more fairly, but the islands of Scotland need to benefit from a similar pricing regime. There is where much of our renewables potential lies, so we need to approve structures that will allow us to develop that natural resource.

I move amendment S4M-02623.2, to leave out from “continues” to end and insert:

“welcomes Project TransmiT and recognises that the changes proposed to the charging regime are fairer than the current position; notes, however, that these charges will still disadvantage the Western Isles, Orkney Islands and Shetland Islands where there is greater potential for community-owned renewables; urges Ofgem to come forward with a pricing regime that does not penalise these communities, and calls on the Scottish Government to use the current review of Renewables Obligation Certificates to take account of any remaining disparity in grid access costs and to encourage community renewables.”

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