'Mad' fines of £200,000 jeopardise Scots green energy sector

PLANS to turn Scotland into the renewable-energy powerhouse of Europe are under threat from new rules being proposed by the UK electricity regulator, experts warned last night.

Ofgem is preparing to impose higher charges on electricity generators located further away from large population centres. The move could make some schemes in the Highlands and Islands economically unviable.

Scottish Renewables, an umbrella organisation for the industry, compared the planned charging structure to a "don't build here" sign for the wind-farm industry and the fledging wave/tidal sector.

The Scottish Executive said the suggested scheme would "actively work against" Scotland's burgeoning renewable energy industry and called for a change in the remit of Ofgem.

Ofgem is expected to approve the changes to the cost of connecting to the National Grid, which would make it more expensive for generators located further away from cities and towns. The regulator said this would cut the amount of electricity lost as heat, as it travels along cables, saving 15 million a year and 150,000 tonnes of carbon emissions.

For a large wind farm in northern Scotland, with an annual turnover of 21 million, the connection charges would rise from 60,000 a year to 200,000, Ofgem said.

A Scottish Renewables report, due to be published today, said such a sum represented up to a quarter of the turnover, and developers were already looking at sites in England and Wales rather than in Scotland.

A spokesman for the Executive said: "Ofgem's [proposed] transmission-charging regime actively works against the development of renewable-energy resources in Scotland.

We will press the UK government for a change to Ofgem's remit as we build an energy policy that maximises Scotland's abundant clean, green energy resources."

And the SNP energy spokesman, Mike Weir, said the charges were "ludicrous and discriminatory". He added: "Ofgem has yet again proved it is prepared to undermine the Scottish renewable industries through its mad obsession with the theory of locational charges.

"Scotland has the potential to be the Saudi Arabia of renewable energy, but time and again Ofgem puts obstacles in the way, rather than promoting this vital national benefit. If these ludicrous proposals go ahead then future developments in wind, wave and tidal power may never get off the ground.

"You have to seriously wonder if this is a deliberate ploy to try and make nuclear generation in the south attractive to energy companies."

Jason Ormiston, chief executive of Scottish Renewables, warned of "a significant impact on projects in northern Scotland" if the proposal went ahead. He said: "Ofgem seem intent on sending a signal to the energy market, 'Don't build in the north of Scotland, you're too far away even if you have Europe's best renewable resources'.

"It could potentially lead to some projects, community and commercial ones, not going forward. Ofgem acknowledge that could be an impact.

"I am hearing from my members that England and Wales is becoming a more attractive place to develop renewables. The wave and tidal guys will be watching this very carefully as well. In a world where capital is a very mobile resource, will Scotland be able to attract the investment needed to kick-start the potential of wave, tidal, biomass and offshore wind, or will the Ofgem signpost of 'don't build here' be clear enough to send that investment elsewhere?

"At a time when the UK government's chief scientific adviser has said that climate change is the greatest threat to humanity, here we have the industry regulator penalising renewable electricity generators for generating where the resource is greatest.

"Ofgem want to encourage more generation in the south of England while governments want more renewables to help tackle climate change - this is the proverbial square peg and round hole, and it is time that Ofgem matches its decisions with climate-change policy."

The Scottish Liberal Democrat's energy spokesman, Liam McArthur, called on the Executive to lobby Westminster to ensure that Scottish renewables projects were not put at a disadvantage.

A spokesman for Ofgem said: "There are arguments in favour of it. It reduces the electricity lost in transmission. We have thought long and hard about this issue and, in May, we decided the balance of the arguments was in favour of this proposal. But we will consider these arguments before we make our final decision."

He added that electricity suppliers would benefit from the changes, potentially leading to lower bills: "The bills of customers in the north of Scotland would go down by 3 a year."

Ofgem's consultation closes on Tuesday.

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