Memorandum submitted by Scottish Renewables
Scottish Renewables is Scotland's leading green
energy trade body. We represent over 240 organisations involved
in renewable energy in Scotland and include many environmental
NGOs in our wider associate membership.
Scottish Renewables believes that the harnessing
of renewable energy sources in a sustainable manner provides a
unique opportunity to not only tackle climate change but to provide
economic benefits to Scotland. Regulatory and public policy on
energy and reducing carbon emissions is vital if we are to send
the right signals to industry and wider society that significant
changes are required to establish a low carbon economy.
EXECUTIVE SUMMARY
1. Strong and long term signals to investors
is absolutely crucial if a fit for purpose electricity network
is to deliver a decarbonised and reliable electricity supply.
2. Scotland's role in delivering the UK's targets
for renewable electricity by 2020 is significant and particular
attention should be placed on delivering this potential.
3. Access to electricity networks remains
the number one barrier to delivering renewable electricity objectives
and action on planning and the regulatory regime needs to be addressed
urgently.
4. Demand side management of electricity
generation requires innovation such as better responses to "peak
demand", better and more extensive storage, and a shift from
transmission to local distribution networks.
5. "Connect and manage" is the
best way to manage temporary shortfalls in transmission supply
and connect generation that is socially and environmentally beneficial.
6. The scale of transmission charging in
the north and islands of Scotland undermines investment in all
new generation, conventional and renewable, and therefore hampers
our efforts to make a telling contribution to climate change and
deliver affordable supplies of electricity.
7. Allow small generators to contract with
Distribution Network Operators (DNO) rather than the transmission
operator and allow the DNO to manage the "interface"
between distribution and transmission.
INTRODUCTION
8. Scottish Renewables, the leading green
energy trade body in Scotland, appreciates the opportunity to
provide written evidence on the fundamentally important issue
of electricity networks in Scotland[111]
and the wider Great Britain market.
9. It is fundamentally important because investment
in any new infrastructure generally enables economic development.
In the case of the investment in transmission networks, especially
in Scotland, it also allows, through the deployment of renewable
electricity projects, an effective response to climate change
and energy insecurity.
10. The Committee poses a number of questions
in launching this timely inquiry, the first of which is the most
important and relates to the Government's vision for electricity
networks. In answering that question I hope to be able to also
provide evidence in relation to the subsequent questions that
the Committee poses.
BEYOND 2020
11. In responding to the "vision"
question it is necessary to have a picture of how energy will
be both used and generated in the UK over time so that electricity,
heat and transport are decarbonised. I am confident that this
will form an important part of your inquiry.
12. This will be subject to some debate and uncertainty
but a strong and long term signal to the investors is absolutely
crucial if a fit for purpose electricity network is to deliver
a decarbonised and reliable electricity supply.
13. The recently published UK Committee
on Climate Change's first annual report describes a UK electricity
supply that is all but emission free and supplying energy for
heat and transport as well as for its more traditional uses.
14. If this is the case then long term investment
and innovation will be required if that electricity supply is
to be both affordable and reliable.
15. Scottish Renewables believes the management
of demand will be crucial. Presently demand is typified by severe
peak and troughs over very short periods and this is likely to
continue until there is investment in innovation in demand side
management.
16. On the supply side this is currently
more actively managed and, in terms of reliability, currently
successfully so.
17. As the generation mix in Great Britain
changes to accommodate more and more renewable electricity technologies
and capacity there should be greater management of the demand
side. This demand side management involves thinking about how
to most effectively respond to peaks and troughs in demand. Responding
to "peaks" might involve powering down non-critical
devices and using back-up technologies such as storage or zero
emission coal and "troughs" using any "surplus"
generation to feed into extensive storage capability to provide
a flexible response in peak periods.
18. The balance may also shift from transmission
to distribution. Whilst there is still a requirement for investment
and innovation in distributed networks there ought not to be significant
barriers to "local" networks feeding "local"
supply to "local" customers. "Local" could
range from larger distributed generation using hydro, wind or
combined heat & power to the domestic where households control
their own generation and demand.
19. However, it should also be pointed out
that I am not trying to articulate a vision of a world with no
transmission networks—these are still likely to be required—but
rather where distributed generation and networks play a more prominent
role in our everyday lives.
DELIVERING 2020
20. That is a long term vision probably
taking us beyond 2020. A recent report by the Electricity Networks
Strategy Group (ENSG), Our Electricity Transmission Network:
A Vision for 2020 has been recently published. This should
be essential reading for the Committee.
21. It outlines the necessary investments in
transmission to deliver 2020 renewables targets. The level of
investment required is significant and, if the target is to be
met, largely in place before 2020.
22. The report describes the investment
needed to deliver renewables potential and offshore wind potential
in the north of England and Scotland and sends a strong signal
to Transmission Operators (TO) what and where they are likely
to invest. It is important therefore that work on these upgrades
and reinforcements should start as quickly as possible. That is
why industry has welcomed the proactive approach taken through
the ENSG and the permissions given by Ofgem to TOs to start preliminary
work on design and planning so that delays to connection are minimised.
23. Whilst we hope that there will be access
to the transmission network available to those that need it and
when they want it this is unlikely to be the case. That means
there needs to be a regime in place that manages this imbalance
in supply and demand.
24. The Transmission Access Review (TAR)
has sought to resolve this issue in a way that promotes the connection
of new renewables generators whilst protecting the rights of existing
generators.
25. This has proved a difficult process
that has placed a significant burden on the whole electricity
sector. The debate has centred on how access rights can be managed
and the costs attributed.
26. The debate has brought the transmission
management model of "connect and manage" to the fore.
Connect and manage is a way to provide controlled access to generators
whilst managing any costs in providing that access. In practical
terms it might mean providing access to all renewables generators
and in times when there is congestion on the networks managing
the costs so that they are minimised and not a significant burden
on the consumer.
27. Whilst the Committee is deliberating,
TAR will start to play out. Connect and manage is not the only
option on the table but it is we believe the best way to manage
temporary shortfalls in transmission supply and connect generation
that is socially and environmentally beneficial.
28. What ENSG and TAR should tell us is
that our long and medium term visions can be bold, inspirational
and responsive to all our needs but ultimately if the rules and
regulations that govern electricity networks are not fit for purpose
we will ultimately be disappointed.
SCOTLAND
29. To deliver 2020 renewable electricity
targets Scotland will be required to lift current installed capacity
of 3GW of renewables to more than 11GW. This 11GW will be around
a quarter to a third of UK requirements and demonstrates the importance
of Scottish renewables generation to meeting the 2020 objective.
30. What is exercising the Scottish renewables
industry now is a combination of severe short term challenges
and long term uncertainty. In Scotland these principally relate
to issues of access to the transmission network and the cost of
using it. We believe the Committee should pay considerable attention
to Scotland because the problems being played out here will be
visited upon the rest of the Great Britain market in the coming
years.
31. In Scotland more than nine gigawatts
(GW) of potential renewables capacity is contracted to connect
to the grid, with more than half having to wait until after 2014
and many beyond 2018. This is caused by an undersupply of transmission
capacity in Scotland and northern England. Some of this blockage
will be removed by the consent and build of the Beauly to Denny
transmission upgrade[112]
and the completion of reinforcements to the Cheviot Boundary.
The former, importantly, will also release further reinforcements
in Scotland allowing more than 5GW of installed capacity to connect.
32. If you apply a planning attrition rate
of 50% to the 9GW mentioned above then these reinforcements will
be sufficient to provide necessary firm access. However, Beauly-Denny
has been a source of significant frustration to the renewables
industry in Scotland. It was first conceived in 2001 and was formally
submitted into planning in 2004. A public inquiry was subsequently
triggered and it was only last month when Scottish Ministers received
the Reporter's opinion. If it is consented this month it will
be completed by 2012 and projects can connect. From conception
to completion it will have taken 11 years—which seems pretty
standard for deployment of new transmission networks across the
UK. This must improve if 2020 and subsequent objectives are to
be achieved.
33. Recently National Grid introduced a
scheme of active "queue management" to ease the Scottish
congestion and has identified 450 megawatts (MW) of capacity that
can connect earlier than currently contracted. In part this is
in response to the Transmission Access Review, a joint initiative
of the UK Government and Ofgem to connect renewables projects
in a timeframe consistent with their project timeline.
34. Scottish Renewables welcomed the National
Grid initiative but recently Ofgem has threatened to block it
because of concerns about high levels of constraint costs predicted
for the GB network. We are frankly incredulous at this turn of
events especially where Ofgem appear to be u-turning on a commitment
it made last year to support the kind of measures identified by
National Grid to connect renewables more quickly.
35. The subsequent debate has seen Ofgem
accept that the cost of congestion is not going to be as high
as first thought and a consensus that higher than usual annual
costs will be temporary whilst the Cheviot Boundary reinforcements
are completed.
36. However, current and future Scottish
generators in the North of Scotland and the Islands face considerable
burdens from the cost of using the transmission network. For many
generators the cost of these charges account for 25% of turnover
(whereas counterparts in the south of England are paid to use
transmission networks) and from year to year the charges are unpredictable
and highly volatile.
37. That is why we, along with the Scottish
Government, ScottishPower and Scottish & Southern Energy put
forward an alternative charging model.[113]
At present the current charging model is supposed to encourage
generation to locate close to demand and is expected to be proportionate
to the cost of running the transmission network. However, the
locational principle is only an academic point for renewables
generators because they can only go where there is a resource
unlike conventional power. Also it is clear that the cost of the
charge is not proportionate to the cost of the impact on the transmission
network of new generation.
38. That is why Scottish Renewables is clear
that the scale of transmission charging in the North and Islands
of Scotland undermines investment in all new generation, conventional
and renewable, and therefore hampers our efforts to make a telling
contribution to climate change and deliver affordable supplies
of electricity.
39. The model currently used is developed
by National Grid and approved on a periodic basis by Ofgem, the
regulator. The new model that we have put forward with our partners
introduces a "postage stamp" approach to charging that
is proportionate, predictable and stable and will do much to promote
new generation in the UK. Importantly this approach will not add
to the cost of electricity to the consumer.[114]
40. It also has the virtue of being inline
with current European thinking which concludes that renewable
generation in geographically peripheral areas must not be discriminated
against in any charging regime. The industry believes that the
current regime discriminates against generators in the North and
the Islands and that Ofgem and National Grid have a strong case
to answer.
THE OFFSHORE
REGIME
41. Scottish Renewables has concerns that
the Offshore Transmission Operator (OFTO) regime designed to deliver
relatively modest offshore wind interest in Round 2 will not be
capable of delivering the step change in delivery required under
Round 3. This is because it does not promote co-ordinated transmission
capability and, therefore, there is the significant risk of an
over-build of offshore networks.
42. Scottish Renewables would like to see a review
of the current OFTO regime conducted after each milestone is reached
in Round 3 delivery.
43. If we can get this right the potential
for European interconnection is greater. The benefits of interconnection
are significant and will allow the UK the opportunity to make
the most of its renewable energy potential.
OFGEM REMIT
44. Scottish Renewables believes that the
Social & Environmental Guidance that has been given to Ofgem
by the Secretary of State for Energy and Climate Change may have
a positive impact on challenging issues of access and charging.
However, if it does not then we believe that Ofgem's remit should
be changed by legislation in Westminster so that it gives equal
prominence to affordability and action on climate change.
DISTRIBUTED GENERATION
45. Often when there is a debate about transmission
issues smaller generators that use the distribution networks are
often forgotten even though many small generators are being forced
to pay both distribution and transmission network charges.
46. Many small generators will be contracted
to use both networks based on their installed capacity because
there is a theoretical risk that some of their electricity will
reach the transmission network. At present many small generators
are paying charges as if they are using both networks 100% of
the time even though only a proportion, and often none, of the
electricity generated will reach the transmission network. Scottish
Renewables promotes the concept of the "gross-net" model
whereby small generators pay for the amount of transmission they
actually use.
47. We also propose, and this has some support
across the industry, to allow these small generators to contract
with the Distribution Network Operators (DNOs, in Scotland: ScottishPower
Distribution; and Scottish Hydro-Electric Power Distribution)
rather than the transmission operator and allow the DNO to manage
the "interface" between distribution and transmission.
48. The DNO "Agency model" would
create one point of connection, contact and charging for all small
scale generators and would incentivise the DNO to actively manage
networks and demand to maximise asset value.
49. This would be a positive shift that
would enable the connection of more renewable electricity generation
and importantly, make it easier for community projects to get
off the ground.
50. Any discussion about the electricity
grid usually boils down to the related issues of access and cost.
Scottish Renewables believes that unless both are resolved in
the way we outline above the Great Britain market is unlikely
to deliver its full renewable electricity potential.
March 2009
http://www.scottishrenewables.com//MultimediaGallery/1f497cc5-a276-4ac2-85bc-a48bd947b1e7.pdf
111 The Committee may find useful a Glossary and Acronym
list published by Scottish Renewables in partnership with Senergy
Econnect as they consider the issue of electricity networks. It
can be found here: Back
112
SSE website link. Back
113
You can view the consultation paper here www.nationalgrid.com/uk/Electricity/Charges/modifications/uscmc/.
The consultation code is GB ECM-17. Back
114
It may also be worthwhile noting that the entire cost of building
and operating the transmission network across the UK accounts
for only 3% of a typical household's electricity bill. Back
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