Memorandum from Scottish and Southern
Scottish and Southern Energy (SSE) is the largest
renewable generator in the UK and we currently produce over 40
per cent of the renewable output in this country. Although we
have contributed to the Electricity Association's submission to
this inquiry, (see Appendix 9) we would wish to direct you to
two particular areas of concern.
Within the main Government policies currently
being developed as part of the Climate Change Programme, Climate
Change Levy (CCL) and the Renewables Obligations, there is a stated
intention to include existing hydro under 10MW as "qualifying"
renewable generation. This means that it will be treated the same
as other renewables. However Government policy assumes that output
from hydro stations over 10MW is economic. This leads them to
conclude that the current levels of output from over 10MW plant
will be maintained as part of meeting the overall target, without
the need for any subsidy.
This is not a sensible assumption. Most of the
over 10MW plant in the UK is owned by ourselves and is relatively
old and in need of significant refurbishment expenditure. Without
this, the plant will become increasingly unreliable leading to
reduced output and eventual station closure. However at forecast
electricity prices it is currently not economically attractive
to invest in this refurbishment, particularly for plant in the
10-30MW range. Without some entitlement to qualifying renewable
status, it would be more attractive for us to spend shareholder
money building new wind generators than refurbishing such hydro
stations. If this was the result we judge that output from our
existing hydro stations could halve within ten years. This would
reduce renewable output by 1600GWh and need around 800 new windmills
just to replace the lost output.
A second area of particular concern relates
to the attractiveness of wind patterns in our area. Given this,
we expect a disproportionate number of renewable generators to
seek connections to our electricity network in the North of Scotland.
Clearly such generators will wish us to connect them expeditiously
and cheaply. However in many of our rural areas very large amounts
of capital investment may be required to upgrade our network to
accommodate them. We believe new renewable generation should pay
the full cost of any necessary upgradesotherwise the cost
will fall on other customers in our area. It would be very unfair
if new renewable generators received a subsidised connection as
well as a subsidised price for their output.
We are currently working with the Scottish Executive
and OFGEM to try to develop a fair solution to this connection
cost issue. However we would draw the Committee's attention to
the fact that in many areas where siting renewable generation
would appear particularly attractive, there may be high local
infrastructure costs which need to be considered.