"Ofgem is trying to implement outdated policies designed for an energy market landscape that no longer exists"
Banks Renewables one of the largest independent renewable energy generators in the UK, and a founder member of the Independent Energy Generators Group (IREGG), adds its voice to industry calls for locational penalty grid charges in Scotland to be reviewed in order that the UK can hit its net zero targets
Richard Dunkley, managing director, Banks Renewables writes about grid charges in Scotland:
“Ofgem’s latest grid charging were conceived and developed several years before the Government’s 2050 net zero target was announced in the summer of 2019. Yet two and a half years on from the UK’s Net Zero commitment, Ofgem’s regulatory framework for network charging is still unaligned with it.
The Prime Minister’s announcement this autumn that all UK power generation should be generated by clean energy by 2035 sets the bar even higher in terms of the transformation needed to low carbon power generation. In even starker terms, it also highlights the incompatibility of Ofgem’s approach with the needs of the UK climate change policies. The Government has now raised the bar for success even further, before Ofgem had even aligned itself with the previous benchmark.
Essentially, Ofgem is trying to implement outdated policies designed for an energy market landscape that no longer exists. The consequence is that at a time when the vast bulk of government policies recognise the need to boost the rate and scale of deployment of renewables (particularly onshore and offshore wind), so that the UK can achieve its net zero target, Transmission Network Use of System (TNUoS) charging adds substantial costs to renewable deployment and acts a barrier to its deployment in the places where it is most cost-effective.
"Transmission Network Use of System (TNUoS) charging adds substantial costs to renewable deployment and acts a barrier to its deployment in the places where it is most cost-effective"
The TNUoS charging regime is particularly stymying the deployment of both offshore and onshore wind in Scotland. It is counterproductive. If it is not amended soon there is a risk that both the Department for Business, Energy and Industrial Strategy (“BEIS”) and Ofgem will end up looking pretty silly. The urgent need for significant wind deployment now is obvious and pressing and these charges are effectively blocking it in the places that are the windiest! The seeming inability of Ofgem to be nimble and adjust to the fast-moving decarbonisation net zero agenda could prove to be one of the most significant barriers to the UK’s net zero success.
In my view, this is not the fault of Ofgem per se, but a consequence of a regulatory framework that has complex decision making processes that have changed little since the privatisation of Central Electricity Generating Board in 1991.
"In the year the UK hosts COP26, Ofgem and BEIS need to urgently reform these TNUoS charges so they are not a serious and unnecessary obstacle to the UK’s journey to net zero"
I do not pretend to have all the answers. Energy is complex and complicated and is a social good. It needs strong regulation. Historically, significant changes in energy legislation and regulation take the best part of a decade to implement. Net zero targets, designed to ensure our planet does not heat up more than 1.5 degrees centigrade by 2050, no longer afford our politicians and energy regulators the luxury of such time.
Decisive strong and nimble leadership is urgently needed from our regulators to enable the renewable deployment that the UK (and indeed the world) needs.
Ofgem and BEIS need to prioritise net zero above all else in the next few years. To do this they both need to recognise the need for swift effective decision making – and be prepared and able to take action quickly.
In the year the UK hosts COP26, Ofgem and BEIS need to urgently reform these TNUoS charges so they are not a serious and unnecessary obstacle to the UK’s journey to net zero”.
- What? Transmission Network Use of System (TNUoS) charges recover the cost to the National Grid of installing and maintaining the onshore and offshore transmission system in England, Wales and Scotland
- Who? The National Grid levies these charges on generators based on a methodology approved by ofgem
- When? Triad periods occur between 1st November and 28th February each year (the key winter months) when demand on the National Grid is at its highest
- How? The charge is calculated using a methodology based on a model of the network and the connection type and capacity of your generator. It is an attempt to be cost reflective but leads to significant costs for Scottish renewable generation
- Effect? These high TNUoS charges in Scotland are a significant disincentive to deploy more renewable energy generation in Scotland – where the wind profile is excellent for onshore wind. Essentially TNUoS charges are “many, many times higher in the north of Scotland than elsewhere in GB.” For example Beinneun wind farm in Scotland, pays £5.54/MWh in TNUoS charges compared to Pen y Cymoedd wind farm in Wales (which is of similar size to Beinneun), pays £2.80/MWh
About Banks Renewables
- Banks Renewables is part of the Banks Group, a family firm founded in 1976, based in Durham, Leeds and Hamilton
- Our development team works with landowners to take renewable and flexible energy projects including onshore wind, solar and battery storage projects from inception to completion, handling all aspects of the planning and delivery process
- Development with care is at the heart of everything we do and we develop all our sites in close consultation with the local community
- Banks Renewables was incorporated in 2006
- Banks Renewables currently own and operate 223MW of renewable energy generation
- Banks Renewables has over planning permission for 200MW, with further 347MW in the planning system
- Banks Renewables has achieved a reduction of 620,000 tonnes of CO2 from operational projects to date
- The 547MW we have in various stages of the planning and build out process is enough to provide electricity for around 400,000 homes or a city larger than Leeds
- Banks Renewables has developed 14 onshore wind farms
- We have secured planning permission for 14 windfarms and currently operate ten onshore wind farms across Scotland and the north of England with a combined installed generation capacity of 223MW
- We have also obtained planning permission for two solar arrays and are developing other renewable and flexible energy projects throughout the UK
- We are members of RenewableUK, Scottish Renewables and the Independent Renewable Energy Generators Group (IREGG)