Transmission charging volatility results in net zero risk to offshore wind and higher costs for consumers

SSEN Transmission has this week published some further analysis exploring the impact of the current Transmission charging regime on meeting the UK’s legally binding net zero emissions target; this time focusing specifically on impact for offshore wind developers.

With Scotland boasting the greatest wind resource to meet the UK’s net zero targets, and future Scotwind leasing sites expected to deliver up to 10GW of the UK’s 40GW by 2030 offshore wind target, the findings suggest that the current TNUoS regime is creating a huge barrier for further low carbon investment, despite great support for further deployment through UK and Scottish Government policy.

While evidence suggests that the current regime results in Scottish generators paying a higher cost for use of the transmission network compared to other areas in GB, making projects less competitive in CfD auctions and creating risk to future offshore wind deployment, our analysis suggests that TNUoS is not purely a Scottish issue. The volatility and uncertainty of future charges impacts developers across GB, with the current charging methodology developed at a time when the electricity system was not so focused on renewable deployment to support decarbonisation goals.

This uncertainty creates risk for developers’ commercial decision making, with mitigation measures ultimately ending up on consumers bills through CfD strike prices. Analysis undertaken by NERA Economic Consultants for Ocean Winds estimates that this could represent a total cost to consumers of between £122 and £391 million per year by 2030.

Following the publication of a Transmission Network Use of System Charges (TNUoS) discussion paper in February this year, SSEN Transmission has this week published an offshore wind addendum to its original paper to explore the heightened impact of volatile and uncertain TNUoS charges for this technology. SSEN Transmission would welcome further views from developers and wider stakeholders on the findings, ahead of making final stakeholder-led recommendations on the case for reform in the coming months.

Andrew Urquhart, Head of Whole System at SSEN Transmission explains: “Over 90% of our generation customers and wider stakeholders have told us that change is needed to the current charging regime to deliver net zero at the scale and pace that will be required for our collective decarbonisation goals.

“Our evidence supports this and shows that the outdated locational charging signal, which is unfairly impacting Scottish developers, particularly offshore wind developers who are led by location of Crown Estate leasing sites, is just one part of the problem. The volatility and uncertainty of future charges are equally damaging to UK climate ambitions and impacts projects all across GB, not just Scotland.

“With this uncertainty, comes great risk and cost – risk to green recovery and decarbonisation targets, and increased cost for end consumers as developers look to mitigate the unknowns. We welcome recent confirmation from Ofgem and the UK Government that a regulatory review of the current regime is likely and we hope that industry will be able to inform this. From our analysis, stakeholder feedback, and other recent TNUoS publications from industry, it’s clear that we need urgent reform in the context of net zero delivery.”

 To read the paper and share your views, please click here. You can read more about SSEN Transmission’s stakeholder-led analysis on our brand new TNUoS Stakeholder Advocacy Hub here.