The head of National Grid has denied claims that Scottish Power is being unfairly treated over the transmission connection charges for its Longannet coal-fired power station compared to either other thermal generators in England or to other types of electricity generation.
But the SNP has claimed that National Grid figures showing that a power station in Lands’ End would expect to be subsidised for its electricity have ‘blown a hole’ in attempts to claim that current transmission charges reflect proximity to population centres.
Mike Calviou, Director of transmission network service at the National Grid, said: “Our charges are based on a cost reflective charging methodology which has been approved by the industry regulator OFGEM following extensive stakeholder engagement.
“The evidence of both the amount of existing and new generation is that this is not an impediment to the development and operation of generation in Scotland.”
In a letter sent to Aberdeen renewables energy specialist Peter Dow, Calviou added: “It is important to note that there is currently over 11GW of generating capacity in Scotland, compared to a peak demand of 5.4GW, resulting in an almost 200% ratio of generation to demand.
“In addition, there is around 14GW of generation currently contracted to connect in Scotland, and we are continuing to see further applications come forward. This evidence would indicate that the transmission-charging regime is not a disincentive to developing Scottish generation.
“Given the increasing generation profile, compared to demand, we expect that for the majority of the time to see exports from Scotland to the rest of GB. However, with more intermittent wind generation due to connect, there will be increasing two-way flows between Scotland and the rest of GB. As the generation portfolio changes, the transmission charges will automatically adjust.
“It is true that while there is an excess of generation in Scotland, compared to local demand, then generators in Scotland pay more in transmission charges than those in England and Wales.
“However, it is also true that, for the same reasons, consumers in Scotland pay less given the relatively short distances the electricity has to travel.
“Based on a domestic consumption of 3.8MWh per year, an average Scottish consumer pays around £11 less per year compared to consumers in the south of England, for the use of the transmission network.
“The current charging methodology, approved by Ofgem, ensures that the electricity transmission system develops in the most efficient and cost-effective way for consumers. A locational charging element encourages new power stations to locate where there is higher demand, minimising the cost to consumers of building new transmission infrastructure.
“As part of Ofgem’s recent review of the charging arrangements, Project TransmiT, which comes into effect in 2016, the possibility of flat transmission charges was reviewed. It was identified that socialised charging could exacerbate existing regional patterns of fuel poverty, affecting consumer bills by an additional £4.8bn to 2020. Based on this evidence, the introduction of flat transmission charging was ruled out.
“Through TransmiT, National Grid has worked closely with industry stakeholders to improve the charging arrangements by reflecting the changing way that generators use the transmission system. Although subject to a Judicial Review, the approved changes will look to reduce the average tariff for Scottish generators by around a third.”
Meanwhile, the latest transmission charges that will come into effect in April show that a power station located at Lands’ End would receive the maximum subsidy of £5.80 per KW while Longannet faces charges of £17.15 per KW according to the SNP.
This is despite the fact that Cornwall’s entire population is under 500,000 and Lands’ End is 316 miles away from London. In contrast, Longannet is in the central belt of Scotland and is 421 miles away from London.
Scottish Power has made clear that the burden of transmission charges are disadvantaging Scotland and that Longannet’s future will depend on whether a deal can be reached with the National Grid.
Commenting, SNP candidate for Dunfermline and West Fife Douglas Chapman said: “Supporters of the current transmission charging regime – introduced by Labour – often attempt to justify it by claiming it is to encourage power suppliers to generate close to population centres, and London in particular.
“But these figures make an absolute mockery of that claim. While Longannet is forced to pay a heavy price for the electricity it contributes to the grid, an identical station in rural Cornwall would be receiving a subsidy.
“It makes absolutely no sense and just underlines that there is no logic to the current arrangements that threaten Longannet with closure. “The unfair transmission charging system threatens jobs at Longannet and the long-term development of Scotland’s energy sector. It cannot continue.”
The transmission charges that will come into force in April can be accessed at: http://www2.nationalgrid.com/WorkArea/DownloadAsset.aspx?id=39384