Reform costs of being a conduit for energy

A radical shake-up of the current system could benefit Scotlands renewables sector. Picture: PA

Which is why a meeting today of Ofgem’s governing body, called the Gas and Electricity Markets Authority (GEMA), will hopefully address this question.

On the table is a radical shake-up of the current electricity transmission system that would benefit Scotland’s thriving renewables sector called Project TransmiT. It has the backing of a range of energy companies and WWF Scotland.

So why the need for change? The transmission system is the “motorway” that transports electricity from where it is generated to areas with high demand. Like a motorway toll, generators such as gas and coal-fired power stations and wind farms are charged to use the network.

The cost charged is calculated through a formula based on the distance between where electricity is being generated and where it is consumed – so this counts against Scotland.

If you generate electricity in the south, where demand is generally high, then you pay less – and can even be paid to use the network if demand for power outstrips supply.

If you generate in areas of low demand, where there is often more supply than demand, then you pay a higher toll.

Initially the system was designed to encourage power stations to be built closer to where demand was highest.

However, times change and, as the UK’s energy mix has been transformed, this charging system has become completely outdated.

Project TransmiT seeks to address this by rebalancing the charges to make them fairer. In the next month we hope to hear on whether the changes proposed will at last be implemented from April 2015.

The timetable has already slipped back from April 2014 and any further delays would prolong the uncertainty generators face. Progress has been hampered by concerns over the practical implications of introducing changes.

However, Ofgem has already indicated its preferred, much fairer solution, so we hope today’s meeting will match the growing appetite for reform and pave the way for Project TransmiT.

• Paul Smith is managing director generation at SSE