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Ofgem Approves New £1.2 Billion Scottish Subsea Link and Transmission Charging Reform

15 Jul 2014

Ofgem has given the green light for a new subsea link in the north of Scotland. Scottish Hydro Electricity Transmission (SHE Transmission)’s significant upgrade of the electricity network is a £1.2 billion project. It is expected to connect 1.2GW of new renewable electricity generation following completion in 2018. This will help meet Britain’s renewable target at a lower cost to consumers.

The new subsea link will connect the electricity grid on either side of the Moray Firth. SHE Transmission has already submitted more details on the project, and Ofgem is currently analysing them to check that the spending, technical and delivery plans for the upgrade are appropriate and offer value for money for consumers. If Ofgem finds that the project could be delivered for less, then it will lower the amount of funding allowed to complete it. We will consult on the detail of the funding proposals this autumn.

Ofgem has also announced changes to the methodology for calculating what generators pay to use the electricity transmission network. This change is being made to better reflect the costs that different generators have on the system. It will come into effect on 1 April 2016. Ofgem analysis indicates the changes will lead to a more efficient system which will benefit consumers.

The methodology will retain the locational signal to encourage generators to build as close as possible to where energy demand is. This reduces the need to build costly infrastructure such as electricity pylons. The main update will recognise that renewable generation uses the system less than traditional forms of generation and so imposes lower costs. The change will therefore more accurately reflect the costs that different generators put on the electricity network.

Martin Crouch, Senior Partner, Transmission said: “This is a major step forward for an essential upgrade to the high voltage grid so that more renewable energy can connect to the networks. Today’s decision means that the company can move forward with work on the upgrade. We have already started on the next phase of checking SHE’s spending plans and we will ensure it completes the work as efficiently as possible so that consumers pay a fair price for this.”

Commenting on the plans to change transmission charges, Mr. Crouch added: “The changes to transmission charging are the result of an extensive consultation process and detailed analysis. The new arrangements more accurately reflect the costs of Britain’s diverse energy generation and will lead to lower costs overall for consumers.”

Story appears courtesy of Ofgem.