A LEADING energy company has warned that Scotland will not be able to scale up wind farms to meet climate targets without an overhaul of charging regimes that “penalises” projects north of the border.
Currently, Scotland is planning or has installed around 740 MW of energy from offshore wind farms.
But the Scottish Government hopes to scale up the infrastructure to between 8GW and 11GW by 2030 – by when a pledge to reduce carbon emissions by 75 per cent of 1990 levelswill need to be met.
SSE has told MSPs that while the ambition from SNP ministers is welcome, charging rates by Ofgem add £3 per MWh as a Scottish “premium” as the power has to travel further to other parts of the UK meaning developers may think twice before agreeing to invest in Scottish projects.
But Ofgem ha stressed that “homes and businesses in Scotland have benefited from lower transmission charges as the power is generated closer to where it is delivered”.
Speaking at Holyrood’s Economy, Energy and Fair Work Committee, Sam Peacock, director of corporate affairs and strategy for SSE, pointed to obstacles stopping the scaling up of offshore wind generation in Scottish waters – highlighting grid charging.
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He said: “At the moment there’s a very complicated Ofgem methodology how you charge wind farms for use of the grid. At the moment it’s heavily skewed towards southern projects away from Scottish projects when the cost in energy terms is about £3 a MWh premium on the Scottish project compared to UK ones.
“You expect an overall project to come in at maybe £40 per MWh. It’s quite a reasonable premium that currently slowing things down.
“If we don’t get a bit of movement with that, you might continue with this world where Scottish projects aren’t winning the auctions. It’s only our SSE seagreen project that won last time.”
He added: “If we can find a way of getting this grid charging methodology changed so Scottish projects aren’t penalised and carry a cost premium against UK projects.
“Then there’s absolutely nothing stopping us delivering on offshore wind. It’s a huge opportunity for Scotland and there’s a bunch of companies like us who are prepared to invest in it.”
Mr Peacock also warned that the expansion of offshore windfarms is being held up by processes taking an average of 11 years.
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Morag Watson, director of policy at Scottish Renewables said the targets are “very realistic” but also pointed to the issue of “getting consents and permissions through as quickly as we can”.
She added: “That 11-year timeframe for offshore would make meeting the targets challenging if we can’t reduce that.“Grid connections and planning permission being the two major bumps in the road that we will need to overcome in terms of putting more generation onto the system. It is doable but certain things will need to change.”
Ms Watson also told MSPs that the number of projects given consent has decreased since a climate emergency was declared in 2019 – while the pandemic has slowed down the approval process with paperwork left “sitting on desks for weeks and weeks” due to a lack of staff.
She added: “What we’ve seen, particularly during the current situation, is because staff in local authorities have been pulled on to other things, because people in the Scottish Government have been pulled on to other things – paperwork will literally sit on someone’s desk for weeks and weeks and weeks on end.
“We’ve spoken about how renewable energy projects can contribute to a green economic recovery.
“If they’re stuck sitting on somebody’s desk, that can’t happen.”
Chris Stark, chief executive of the Committee on Climate Change, which advises UK governments on policy, stressed “the ambition from the Scottish Government is great” but warned “there are still big gaps in how it would actually be delivered in practice”.
He added: “The growth over the next 10 years that they are projecting is achievable but is certainly at the upper end of what I think will come through.”
Mr Stark said the net zero strategy “rests quite largely on electrifying the economy and cleaning up the supply of that electricity over time” adding that “by mid-century across the UK, we’re expecting the demand for electricity will at least double” with use for heating buildings and electric vehicle infrastructure being ramped up.
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Tory MSP Maurice Golden highlighted the grid charging issue and suggested that a rethink may be needed “given the areas where we as a United Kingdom would like to expand, is now in those more remote areas”.
Steven McMahon, deputy director of electricity distribution at Ofgem, told MSPs that “charging reforms is a key part of our programme”.
SNP MSP Gordon MacDonald asked Mr McMahon directly if the system is” going to be a more fair and equitable charging regime”.
Mr McMahon said: “I think, overall, yes.
“If we keep these system costs low, we keep these charges low, there will be benefits to consumers.”
An Ofgem spokesman said: “Homes and businesses in Scotland have benefited from lower transmission charges as the power is generated closer to where it is delivered.
“Scotland is a large exporter of power to England and Wales. But the further the power is transported, the more it costs to deliver it, and some of this additional cost is picked up by generators. These charges help ensure the overall costs of the network are kept down, and allow investors to make choices that lead to an efficient overall outcome.
“Ofgem will continue to listen carefully to industries and other stakeholders’ views as part of our work on network charging reform. We are also working with BEIS to develop a joint Smart Systems and Flexibility Plan later this year.”