Massive penalty to export Hebridean electricity 

It will still cost energy companies a huge amount extra to export green electricity from the Western Isles, despite a reform of the national grid charges.

Energy regulator Ofgem insists that the controversial location charging scheme which financially penalises generators sited further away from the end user will remain albeit in an “improved” form.

It means energy firms which create electricity from island wind or marine generators will have to fork out massively more to reach the mainland markets. Windfarms near Glasgow or London will face ineligible costs.

Despite calls to equalise prices, Ofgem said the infrastructure costs required to transmit power to the mainland are very high and this would be reflected in the transmission charges for these generators.

Scottish Minister for Energy Fergus Ewing criticised the outcome. He said: “We have Europe’s best renewable energy resources, yet the unfair system of locational charging continues to result in Scotland facing the highest charges in the UK, while subsidies are paid to generators elsewhere.

“We welcome Ofgem’s recognition that the current system needs reformed and the moves to reduce some of the charges faced by renewables generators. This must happen, and quickly. But we share the industry’s huge disappointment that Ofgem has delivered no solution to Scotland’s islands, where there is huge potential to generate clean, green energy that can contribute to Scottish, UK and European targets.

“It is disappointing that the regulator has left little scope for the islands to get fair treatment through the industry stage of Project Transmit and we will continue to work to get the best deal possible for them.

“The Scottish Government, together with utilities and developers across the industry, have led the argument for change from the outset and will now press UK Ministers urgently to find solutions to unlock the vast natural resources of our islands.”

Martin McAdam, Chief Executive Officer of Aquamarine Power, which is progressing a a 40MW wave energy project off west Lewis which would be the world’s largest fully consented wave farm, hit out at Ofgem.

He said: “This is a real disappointment for all renewable energy projects in Orkney, Shetland and the Western Isles, and presents a real challenge to Aquamarine Power – and the UK’s nascent marine energy sector.

“It is a bitter pill that Ofgem, despite months and indeed years of debate and lobbying, has directed the industry panel (which will work out the details of the proposal) to continue to penalise renewable generation on Scotland’s islands – home to some of the best wind, wave and tidal resources not just in Britain, but in the world.”

He added: “Ofgem has not given any clear figures in its recommendation, but previous modelling suggests an annual charge of £77 per KW, which along with the annual connection costs will equate to over £3.5 million each and every year for our 40MW Lewis project. This is a massive penalty for an early stage technology.

“To put this in context, a renewable energy project the same size in southern England would pay just £40,000 a year. But we cannot choose where the best waves are – we have to put our projects at the periphery of the UK.

“The economics of these first wave energy projects are challenging enough – and we have all the other arms of government, from DECC to the Scottish Government, Marine Scotland and local councils, doing their bit to help this industry get off the ground.”