The future of Britain's electricity networks - Energy and Climate Change Contents


Supplementary memorandum submitted by Scottish Renewables

  Many thanks for providing Scottish Renewables with the opportunity to give evidence to the Select Committee on the future of Britain's electricity networks.

I am writing to provide the Committee with supplementary evidence on an issue that has emerged after the launch of this timely inquiry and which was touched upon during the sessions of 29 April, 2009.

  The issue is important because the proposed changes about to be discussed in this paper would be a backward step with potentially sufficient impact to jeopardise the UK's ability to respond effectively to climate change and maintain acceptable levels of network reliability and affordability.

MANAGING CONSTRAINTS IN THE SYSTEM

  Currently the Transmission Access Review (TAR), initiated by both Ofgem and the UK Government, is being played out and one of the short-term measures identified by TAR—proactive queue management—is being delivered by National Grid (NG) in Scotland. In Scotland there is a significant connection backlog of renewables projects wanting to connect but currently with a connection date some time off into the future. In response to growing pressure to connect projects that are ready but can't, and TAR's principle objective of providing connections to generators when they want it, NG has identified 450MW it can progress quickly and another 450MW it would like to bring on in a second wave.

Meanwhile the long standing problem of insufficient transmission capacity at the Cheviot Boundary means that occasionally Scottish generators are being paid not to generate and that the derogation from Ofgem allowing relaxed security standards across this boundary has to date allowed more connection in Scotland than normal security standards demand.

  However, the 450MW of renewables generation identified by NG for advancement will add to constraint costs and initially Ofgem thought that this would amount to an additional £100 million per annum.

  Earlier this year Steven Smith, the Managing Director of Networks at Ofgem, mused at our annual grid conference that he was struggling to justify the derogation needed to allow the 450MW to advance on grounds of cost.

  The cost of constraints has been reduced by Ofgem to £40 million but crucially it will not be close to this amount in the first year and possibly up to the full amount in three years.

  Consequently, Ofgem conceded the benefits of advancing the 450MW outweighed any potential costs and said that it was minded to allow the derogation and has recently confirmed that opinion in a decision. However it has required that NG identifies long term measures to mitigate the problem of constraint costs and especially to target costs on those that Ofgem perceives to have caused the constraints. In other words, and as far as Scottish Renewables is concerned, target generation north of the Cheviot Boundary but not demand south of it.

  It is important to note that the constraint across the Cheviot Boundary is a temporary one and the Transmission Operators have an investment plan for reinforcement ready to implement over the next few years. In contrast the proposed modification would be an enduring change.

THE NG RESPONSE

  National Grid has come forward with two modifications that would target the cost of constraints on those that Ofgem perceives to be the cause.

CAP170, if approved by Ofgem, provides NG with the ability to switch off any generator in Scotland and compensate them for lost revenue on a model designed by National Grid. The proposal has not been well received by industry and has faced significant opposition.

  GBECM18 is a modification to the method that calculates charges associated with balancing services. It will target the costs of constraints caused by network "pinch-points" on all generation behind a derogated boundary (where there is a pinch-point and where Ofgem has allowed the relaxation of security standards to allowed more generation to connect) such as the Cheviot Boundary.

  The current model spreads the costs equally across all generators in GB irrespective of location. The current and proposed models will be in addition to transmission use of system charges.

  It is conceivable that generators behind a number of boundaries will face significant additional locational balancing service charges which may cause the suspension of a number of projects. Unfortunately due to the limited consultation time it has been impossible to assess the full impact.

  As in CAP170, the industry has opposed this approach.[115]

SCOTTISH RENEWABLES' POSITION

  We believe that the defect is not with additional generation but a lack of investment in transmission capacity. Constraint costs provide a very useful signal to transmission owners to invest in new capacity. The Cheviot Boundary constraint has been understood for years and it is only following a positive response by National Grid to TAR (ie queue management) that Ofgem has responded in the way that it has.

Ofgem has imposed some urgency behind its instruction to National Grid to consider alternative charging models for balancing services. We believe this to be an unhelpful approach and whilst we accept that there may be an opportunity to consider alternatives to the status quo the rush for change does not allow a proper analysis of the implications of proposed modifications.

  As I said in evidence there are a number of European Directives (current and about to be established) which point towards an approach to charging for transmission that should be proportionate and non-discriminatory, especially to generators in "peripheral regions" or areas of low population density. CAP170 and GBECM18 are likely to be viewed by many in the industry to be in contravention of such directives.

  We hope that the above note is helpful. Needless to say if there is any point that I can clarify please get in touch.

May 2009




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115   Scottish Renewables responses to both can be viewed here: Back


 
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