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Meeting of the Parliament 18 April 2012

18 Apr 2012 · S4 · Meeting of the Parliament

Item of business

Project Transmit

Watt, Maureen SNP Aberdeen South and North Kincardine Watch on SPTV

Almost two years ago to the day, the Parliament backed a motion that highlighted the threat that locational transmission charging poses to developing greater low-carbon power supplies and called for a review of the charging regime to take place. Two years on, we have the recommendations that Ofgem is edging towards.

The alterations to the transmission charging regime will mean that generators are charged by output rather than capacity, which could reduce costs for some renewables generators by up to 60 per cent and could lead to lower bills for consumers, but there will be no fundamental overhaul of the locational principles that underpin the system. Any move to reduce costs for renewable energy companies in Scotland is positive, but the opportunity for positive reform is in danger of being missed.

In the debate two years ago, I pointed out that it cannot be right that Scottish generators produce about 12 per cent of the UK’s electricity but pay about 40 per cent of transmission costs. The system of charging—or subsidising—producers on the basis of their location to encourage them to locate as close to the south of England as possible is an anachronism. It was designed for an era in which a small number of big power stations provided the UK’s electricity, rather than an era of renewable energy, which by its nature is inevitably more geographically dispersed.

If the only factor that was in play in designing a system of transmission charges was the cost of grid infrastructure, locational pricing might make some kind of sense. However, that is not the reality of where we are today. Scotland and the wider UK have ambitious carbon emission reduction targets to meet that require significant growth in renewable energy. Economic opportunities from developing and installing renewables technologies can also provide a significant boost to local and national economies.

Taking those factors into account and designing arrangements that facilitate a move to a low-carbon energy sector is what project transmit is supposed to be about. Transmission charges should reflect those wider priorities and avoid becoming a barrier to renewable energy development, as is currently the case. A postage stamp approach, where all generators face flat rates to use the national grid regardless of their location, is portrayed by some as being radical and undesirable. Yet it is a fact that that is the norm across Europe, with the vast majority of countries charging by how much power companies generate, rather than by where they are located. I cannot believe that it is beyond the wit of man to come up with a fairer and more equitable regime that benefits all the country.

Although limited progress towards a fairer charging regime is better than no progress at all, Ofgem’s move towards ruling out a flat rate of charge is disappointing. The case for a flat charge has not diminished. I hope that the Scottish Government will continue to make the case for such an approach and that it will have the backing of the whole Parliament in doing so.

14:41

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Meeting of the Parliament 18 April 2012

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