Consumer savings under TNUoS reform proposals report

A new report, commissioned by Ocean Winds, Northland Power and West of Orkney Windfarm, highlights the significant and immediate threat posed to the industry by the levy.

The new data from Aurora Energy Research has found £16.2 billion could be saved in consumer costs through transmission charging reforms, while also protecting vital clean power investments in Scotland.

What are transmission charges?

Transmission charges are levied on renewable energy generators partly to fund the build out and maintenance of the grid but also to send a locational signal to incentivise new generation. The system, which harks back to when gas was the UK’s dominant power source, and generation could easily be located near the demand centres in England.

This signals to developers not to build in northern Scotland, despite being the location with greatest wind power potential. Ofgem, the energy regulator, will decide on the future of this system in the coming weeks.

Why does it matter?

For the consumer: Transmission charges artificially push up the lifetime operating cost for a 1 GW Northern Scottish projects by as much as £1bn. This differential will also mean higher CfD bid prices are required for Scottish projects to proceed. The CfD system means that – if the strike price goes up to cover a Scottish project due to transmission charges, then a southern project also receives that price.

For Clean Power and jobs: As the UK seeks to build gigawatt-scale wind power off its northern shores, this system conflicts with national goals for clean power and lower bills. Scotland is being put at significant disadvantage and existing projects are seeing their value eroded - which will only worsen as northern Scotland transmission charges are expected to double in just five years. These signals are severely harming the Scottish market, and comes as this report highlights vast investment in Scottish renewables is needed to get to Clean Power 2030.

Pushing down transmission charging costs will protect vital investment and consumer costs

In the immediate term, solutions are being considered by Ofgem, including a “cap and floor” model and a revised Security Factor for transmission charges, to mitigate this volatility, as set out in the report attached. The “cap and floor” reform alone could save electricity consumers £16.2bn between 2028-2050, according to the research, which reduces Scottish transmission charges by 59% and mitigates subsidies.

Key statistics:

• £16.2 billion: The cost electricity consumers can save through reform between 2028-2050
• £1 billion: The lifetime cost that a 1 GW northern Scottish project can face due to TNUoS compared to equivalent projects in southern England
• 100%: The expected surge for northern Scotland transmission charges by 2030 without action
• 59%: The reduction in transmission costs which could be realised in northern Scotland
• 6.7GW: The extra capacity of new Scottish projects needed to get to Clean Power 2030