Alex Salmond has been thrown an unexpected lifeline by the UK Government in his campaign to stop the National Grid imposing punitive charges which threaten the future development of renewable power by Scottish electricity companies.
A six-month consultation by the Department for Energy and Climate Change (DECC) in London has concluded that connection charges should be levied evenly on all developers regardless of where they are located or the difficulty of connecting.
If implemented, this policy would mean that remote sources of alternative energy — such as the Highlands — would not face the current high connection costs which threatened to make many of Scotland’s wind farms unviable.
The new move concerns charges which are levied on power-project developers for connecting their scheme to the electricity grid and managing the workings of the network.
The development comes on the eve of a significant meeting called by Jim Mather, the Scottish Enterprise Minister, aimed at defusing the growing controversy over National Grid charges.
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The announcement is significant because Scottish power companies and the Scottish government have been arguing that the same principle — called “socialised charges” — should be applied to the costs of transmitting electricity over the grid.
Currently, Scottish electricity generators face much higher transmission charges than their counterparts south of the Border. This is because National Grid operates a regime — called “locational charging” — aimed at encouraging generators to locate closer to the UK’s major electricity consumption centre in the South of England.
The Times revealed last week that National Grid is considering doubling or even trebling these charges in the North of Scotland because of the high costs of connecting the rapidly expanding renewable-power industry.
These intentions prompted Ian Marchant, chief executive of Scottish and Southern Energy (SSE), to reveal that he is contemplating legal action to stop any further increases in transmission charges.
He and the rest of the industry argue that big increases are liable to make many renewable projects — wind farms on and offshore, wave and tidal-power projects — uneconomic. The First Minister agrees, claiming that the charges are “discriminatory” to Scottish producers.
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But the announcement by the department run by the Energy and Climate Change secretary, Ed Miliband,’ has added weight to the case. It said: “Our analysis suggests that the socialised cost model is the one most likely to deliver our renewable energy and other climate change and security of supply policy objectives.”
The decision was welcomed by ScottishPower and SSE who have been battling against National Grid proposals, believed to be supported by energy regulator Ofgem, to shift charges levied for managing the grid from their present socialised basis to a locational basis.
Because Scottish producers are particularly affected by management problems relating to interconnectors which send electricity to England, the companies say this would add “tens of millions of pounds” to their costs.
The DECC announcement appears to have seen off this threat, although the companies believe they still face the threat of much heftier transmission charges. They will be at a meeting with Ofgem and National Grid on Monday where Mr Mather hopes to begin resolving the issue.
But last night National Grid’s determination to stick with locational charging appeared unweakened. A spokesman said that DECC’s consultation “does not cover any changes to the locational element of transmission charges. We understand the Government remains supportive of a locational element to the charge.”
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A Scottish government spokesman said it “welcomes the work to deliver better grid access for new renewable projects in Scotland ... It is essential that good renewable projects in Scotland can connect to the grid. But when these projects do connect, they will still face high locational charges that discriminate against Scotland.
“This needs to be addressed to ensure renewable energy from Scotland contributes even more to meeting both UK and European renewable energy targets.”