Proposed changes to National Grid access charges could undermine the new nuclear power construction programme according to a study carried out for energy regulator Ofgem.
Subsidies “could be removed”
Nuclear power projects would not be cost effective and would not get built under a scenario in which high transmission charges in Scotland and subsidies in the south of England were removed, according to a draft report.
Ofgem commissioned energy consultant Redpoint to deliver the study under its Project Transmit review of charges.
The review aims to determine whether the charging regime is compatible with a move to low carbon energy.
Under the existing charging regime, energy suppliers’ access charges depend on their location. In practise this means that suppliers in the south pay less than those in Scotland.
Under the “socialised” charging approach, energy providers would pay a uniform charge to connect to the National Grid regardless of location. This would mean that suppliers in Scotland, including wind farm and hydro-electricity generators would pay the same as those in the south.
Computer modelling showed that this approach would make nuclear new build unviable.
Scotland for the changes
Energy lobby-group Scottish Renewables said the proposed reforms would remove a “significant barrier” to investment in clean electricity generation in Scotland.
“It can only help secure progress towards the UK and Scotland’s renewable energy and climate change targets,” said a Scottish Renewable spokesman.
Renewable energy project developers often cite connecting to the grid as one of the biggest challenges for their projects.
In part, this is because the existing grid suits the existing capacity, which is often based around more populated areas. In addition, there is the issue of providing associated connections to more remote projects
Engineers told NCE that they were unconvinced about the validity of the socialised scenario.
“What this doesn’t appear to take into account is the cost of upgrading the national grid [to cope with renewables],” said Ramboll UK director, low carbon design Crispin Matson.
“It’s also not clear that by eliminating subsidies [by making charges geographically uniform] for connecting to the grid in the south of England [where the first new nuclear power station is scheduled to come online], you necessarily rule out the case for nuclear power.”
£200bn bill for energy upgrade
Ofgem estimates the cost of upgrading energy infrastructure − including significant national grid upgrades − to avoid brown outs, to be £200bn. Building extra grid capacity for Scottish renewable energy projects could add to this bill.
When Redpoint revealed its findings to a Project Transmit meeting last month, industry representatives − including energy firms RWE, SSE and ScottishPower, as well as lobby group RenewableUK − expressed reservations.
They argued that diversity was needed in the generation mix; that Redpoint’s findings assumed there would be increased support for renewables projects; and that the report’s assumed level of support for offshore wind “seemed somewhat excessive”.
Ofgem told NCE it would not comment until the Project Transmit study was fully complete. This is expected to be next month.