Scotland's renewable energy revolution and the UK's drive to net-zero is being stifled by the National Grid – Rebecca Foster
Garbhaig hydropower station is nestled in the rugged north-west Highlands of Scotland. The scheme has a 2KW generating capacity, enough to power around 1,800 homes, and was developed by CRF, my family-run renewable energy business.
The grid connection was complicated due to having to construct a new connection with a distributor to provide line capacity. This cost the project approximately £900,000 – a significant sum for a family-run business. Instances like this are common in Scotland, where the National Grid increasingly needs to be expanded and upgraded.
Renewable energy is often generated in remote locations where the landscape is best suited for harnessing energy. Scotland hosts 85 per cent of the UK's hydroelectric energy resource, largely located in the Highlands.
Essentially, renewable energy is being generated far from the point of use. The remoteness of renewable energy sites is a challenge for developers because this distance translates to higher grid connection fees.
The electricity grid is an essential element to our transition to utilising renewable energy because it enables the distribution of electricity. This relies on a transmission system; which is a network of high-voltage cables that take electricity from where it is produced to where it is used. It enables Britain to heat homes, keep the lights on and charge electric vehicles.
This transmission system also must be able to carry the electricity load. In instances where the existing grid does not have the capacity to carry additional energy, the renewable energy developer is then required to upgrade the network – and such costs are crippling.
In some cases, developers are forced to install renewable energy schemes which only produce what the existing grid has capacity for, leading to missed opportunities for generating larger amounts of energy.
In Scotland, energy companies agree that the National Grid's capacity and ageing infrastructure requires investment. The grid should ensure that renewable energy generated in Scotland can benefit the rest of the UK. The UK’s target to be net-zero by 2050 will only be achieved by utilising more renewable energy sources. Scotland has also pledged to generate 50 per cent of its overall energy consumption from renewable sources by 2030 and move away from our reliance on fossil fuels.
The Electricity Grid (Review) Bill 2022 is in its second reading – allowing for important scrutiny of the UK’s electricity transmission grid. The Bill includes a requirement that the government and regulator Ofgem conduct and act on a review of the electricity transmission grid and associated charges, and incentivise renewable energy generation to maximise energy output. In particular, it would lead to consideration of the abolition of charge differentials based on geographic location.
The current transmission charging rules, which govern how the electricity network is paid for, are restricting the development of renewable energy projects. As new small-scale decentralised energy producers aim to utilise Scotland's renewable energy potential – particularly Scottish hydropower – they are often deemed economically nonviable because they have to foot the bill for connecting to and upgrading the local grid.
As such, there’s a case to be made for the government helping renewable energy developers cover the high costs associated with energy development and distribution.
Greater incentives and support are needed for renewable energy developers. The Feed in Tariff (FiT) scheme, introduced on 1 April 2010, made payments to renewable energy producers for the energy generated. This was useful for supporting new connections.
Qualifying technologies included solar photovoltaic (PV), wind turbines, hydroelectric, anaerobic digestion and micro-combined heat and power (micro CHP). According to the Ofgem data, nearly 380,000 installations were registered with the scheme in its first three years of existence. However, the FiT scheme was scrapped in April 2019, which was arguably premature.
Currently, there are no subsidies available for new hydropower schemes. This is unfortunate, given Scotland's hydropower potential is still in its development stages, with additional schemes possible.
High upfront costs associated with developing a hydro scheme lead to developers taking out long-term loans to cover the cost. Supporting competitive pricing and providing financial certainty over the long-term to low-carbon energy producers is essential. At the same time, the UK government must continue to work towards ending subsidies for fossil fuel companies – which are currently worth around £10 billion a year.
Funding for grid upgrades and abolishing charge differentials based on geographic location would be a victory for many renewable energy developers. This would relieve renewable energy developers from penalising fees which are calculated by how far away the site of energy generation is from where it is used and would assist new renewable energy projects with distributing their maximum energy output.
Given the high costs of developing renewables, another option is to introduce a price floor. A price floor is a minimum price allowed by law, and is set more than or less than the equilibrium price determined by market forces of demand and supply. This would provide renewable energy developers with greater financial stability and investment certainty.
The Electricity Grid (Review) Bill provides a chance to examine what can be done to stimulate renewable energy production.
Currently in Scotland there is an estimated 14.6GW of renewable electricity capacity at various stages of development. Loading the financial burden onto businesses that aim to generate new projects will only continue to stifle renewable energy development and the transition to net-zero.
Upgrading our network will allow for greater energy loads and for new producers to connect, which is key to providing a modernised, flexible, decentralised energy system.
Rebecca Foster is a researcher at the think tank Bright Blue
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