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The other north-south divide

Transmission charging must be reformed to allow northern renewable projects to be built, says Adam Morrison. 

Ten years after it was first conceived, the construction of the 950MW Moray East offshore Wind Farm is well under way in the outer Moray Firth.

It will provide low-cost, low-carbon power for almost one million UK homes. The project can fairly be described as a “landmark”.

It has used technological advances to build in deeper waters than any of the 30 or so offshore wind farms built to date, thus opening up accessto a better wind resource than was previously possible. 

This and other technological advances have enabled us to dramatically cut the cost of generating electricity from wind at sea. Moray East will cost £57.50 per MWhr compared with£140 per MWhr (2012 prices) for the neighbouring Beatrice Offshore windfarm which came on line last year.   

This dramatic cost reduction was a result of hard work to cut costs at every point in our supply chain, from design and procurement through to financing, construction and operations.

There is, however, one cost we cannot cut: grid charging or Transmission Network Use of System (TNUoS) charging, to give it it’s formal title.   

In broad terms, this is a historic policy which increases costs to generators according to how far they are from load centres in the south-east of the UK.  The difference or “delta” between the north and the south is increasing over time  (as shown on the graph) while the revenue generated from electricity sales is decreasing as a result of cost reduction.

Under our Contract for Difference (CfD) auction system, only projects bidding the lowest price for power are built. The additional burden that could be afforded when renewable prices were high are unaffordable at the sub-£50 per MWhr price delivered by the last CfD auction.

When renewables were £150 per MWhr, TNUoS represented only about 4% of the cost per unit generated in the north, and could be absorbed. Now renewables are below £40 per MWhr, this has risen to about 17%, making northern projects 17% more expensive compared with projects in the south, with obvious impacts on their ability tocompete.

The CfD auction was initially intended to give tosupport which made the best use of resourcesfrom across the whole of the UK. But astechnology has matured and TNUoS has increased, the CfD auction process will determine which projects are constructed on a geographic basis due to the strength of location signal that TNUoS provides against northerly projects.

TNUoS affects all new generation. New projects in the north, which (like Moray West) have planning consent and are ready to provide benefits similar to those of Moray East are becoming stranded on the drawing board by the TNUoS barrier just because of their location. Reform is needed now to encourage, rather than discourage, the development of renewable resources where they are found.

Adam Morrison is project director of Moray West Offshore Windfarm, and was head of electrical for Moray East Offshore Windfarm.