APPENDIX 8: TRANSMISSION ACCESS PROPOSALS
The industry is currently assessing longer-term changes
to the organisation of transmission access. National Grid told
us that it is developing three proposals (p 129). The first
is to move away from a philosophy of "invest then connect"
to one of "connect and manage". Rather than waiting
for distant reinforcements to the grid to be completed, the transmission
companies would connect a new generator as soon as the local system
was capable of accepting its output. If constraints elsewhere
on the system meant that from time to time the generator's output
could not be accepted, the station would have to be "constrained
off", and would be compensated for the fact that it could
not sell its power.
The second proposal involves the short-term trading
of access rights between generators. This would allow a wind farm
to connect to the system with access rights to sell only a proportion
of its potential output, if that was all that the grid could accept.
If the wind is strong and the wind farm could generate more than
this proportion, it would find another generator (which would
probably have to be in the same area) that was not using all of
its access rights, and buy the surplus. Since the conventional
stations would not all be needed when the wind was strong, there
should in principle be rights available, and this would allow
stations to share transmission capacity.
The third proposal is to bring in a series of auctions
for long-term capacity rights. Ofgem told us that if generators
have to make a clearer financial commitment of their future demand
for capacity, this would give National Grid a lot more information
about generators' demand for access to the network (p 176).
A number of companies commented on this review. A
key concern of EDF Energy is that the Transmission Access Review
primarily introduces measures to improve short term allocation
efficiency which could in turn increase long term uncertainty
for market participants, and undermine long term investment in
both generation and transmission. In the company's view, the core
issue is the scarcity of transmission capacity, and so securing
this capacity and utilising it well must remain the prime objective
of the review (p 174).
Renewable Energy Systems UK and Ireland Ltd argued
that "giving priority access for connection and production
to renewable energy capacity means not doing so for centralised
fossil plant. It is essential to overcome resistance from the
affected incumbents. Renewables must have priority grid access
and dispatch. Shared access rights and flexible security of supply
rules need to be introduced" (p 436).
E.ON argued that the reform of transmission access
arrangements will need to balance the need to connect new renewable
generation and the need to avoid imposing additional costs on
the system by constraining off thermal and fossil plant which
National Grid then has to compensate (p 108). The Renewable
Energy Association argued that renewable generators should be
given priority access and dispatch rights, and that this was likely
to become law under the forthcoming EU Renewable Energy Directive
(Q 161).
At present, if National Grid cannot accept a station's
output because of constraints on the transmission system, the
generator is required to buy back its output in the Balancing
and Settlement Mechanism, the short-term electricity market. A
conventional generator would normally be willing to pay any price
that is less than the costs it would save by not generating (which
would be dominated by fuel costs) in order to buy back its power.
A wind station, however, incurs very few variable costs when it
generates, and gives up income from the sale of Renewables Obligation
Certificates. It might therefore ask National Grid to be compensated
for giving up this income, effectively offering to buy back its
power only at a negative price. In other words, National Grid
would be paying the wind farm not to generate. In such circumstances,
it would obviously be more economic to find a conventional plant
to constrain off instead, but this might not be possible, if none
was in the same (constrained) part of the grid, or all the stations
there were required for balancing purposes. We are therefore uncertain
that priority dispatch rights would have a significant impact
in practice, given the current system of constraint payments.
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