New Trade Rules May Stifle Scotland Renewables

Renewable electricity projects in Scotland are under serious threat because changes to the electricity trading arrangements will introduce a punitive levy on generators north of the Border, it was claimed recently.

Alex Salmond, the Westminster leader of the SNP, claims proposals by the electricity regulator Ofgem will also undermine the economics of key Scottish power stations such as Longannet and Peterhead.

Under the Energy Bill, which will go through its final parliamentary stages tomorrow, new British Electricity Trading and Transmission Arrangements (BETTA) will be established with the aim of introducing effective wholesale competition and making industry pay the costs of delivering electricity over long distances.

But the SNP claim the system, which was designed to assist generators and the consumer by sharing charges to transfer electricity to the national grid, could end up costing the Scottish generators at least Â£8 million a year.

Under one proposal being considered, a generator in the north of Scotland would have to pay up to Â£20 per kilowatt more than one in south-west England, resulting in a Â£1 million surcharge on a 50 megawatt wind farm in Caithness compared with one in Cornwall.

A major wind farm such as the proposed offshore 1,000 megawatt Beatrice development in the Moray Firth could end up paying Â£20 million more than one in the south-east under the proposals, the SNP claim.

Last night, a spokesman for Ofgem defended the proposals, saying that the SNP should not just look at one aspect of charging in isolation. He said: "Through BETTA lots of other charges are going to be changed, including connection charges being reduced and interconnector charges being eradicated.

"As a whole this will therefore bring net benefits to Scottish generation and, more importantly, allow complete access to the English markets for Scottish generators, especially since Scotland is going to make a big drive for renewable generation. For this it must have access to wider markets and this is what BETTA gives."

He added: "It is also good for Scottish customers, because reform of the transmission charges mean that, whereas now English customers benefit from the electricity that comes from Scotland and donÂ’t pay anything towards it, that will now cease."

Ofgem expects prices in Scotland to reduce by about Â£13 on average per domestic customer per year, or approximately 5 per cent of an annual domestic bill.

But Mr Salmond, who will tomorrow present his partyÂ’s proposals to amend the Energy Bill in the House of Commons in a bid to protect Scottish interests, criticised Ofgem.

He said: "This mumbo jumbo from Ofgem is nothing more than a cover for a subsidy for the south while Scottish generators are asked to pay through the nose for the privilege of producing electricity.

"How dare these biased boffins attempt to undermine the economics of Peterhead, the most efficient gas station in the whole of Europe, and sabotage hopes of great offshore wind projects such as Beatrice? It doesnÂ’t appear to matter that wind farms built in Caithness, as opposed to 20 miles from London, run at 20 per cent more efficiency. It is not market economics. It is prejudice and biased economics."

A spokesman for Scottish and Southern Energy said: "[We] are very concerned that the pricing methodology in the new UK-wide transmission system should not penalise Scottish electricity generators. There is a risk some current proposals could do this and we believe it is vital the government, Ofgem, Scottish Executive, National Grid and Scottish electricity generators work together to secure an outcome which is fair and reasonable and does not discriminate against efficient electricity generation in Scotland."