Scottish Renewables, the green energy trade body, has said Ofgem, the industry regulator, will undermine Scotland’s effort in the fight against climate change if it approves plans to reduce the competitiveness of Scottish generation in the UK market.

All large projects and many small ones, including community renewables projects, will face income reductions with increased charges planned by Ofgem, and when combined with increased business rates for renewables, up to a quarter of total annual turnover will go on paying these charges. Meanwhile, generators will be incentivised to locate in the south of England with a range of subsidies, even though the renewable electricity resource may not be so strong and opportunities for deployment are limited.

Ofgem wants to approve plans to reduce the value of every kilowatt hour generated in Scotland by imposing charges for using the National Grid based on a generator’s location and seems to disregard the fact that land owners, communities and developers have little choice where to locate their projects. The ‘zonal transmission loss’ proposal closely follows the introduction of punitive transmission use of system charges and combined they strike at the heart of the competitiveness of generators in the Highlands.

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Commenting on the Ofgem proposals, Jason Ormiston, Chief Executive of Scottish Renewables, said: “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 whilst 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."

He added: “The cumulative effect of a range of regulatory charges faced by industry means that the economics of a number of onshore wind projects in northern Scotland will now become more marginal and it is possible that a number of these will not make it to deployment. Moreover, if these proposals put a Highland project’s feasibility into doubt, the bigger question is what will be the likely impact on new district scale biomass projects, or the nascent wave and tidal energy projects? World-class innovative technologies such as the Pelamis wave machines may struggle to survive in the current market if these increasing cost burdens are allowed to accumulate.

“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?

“Ofgem are clearly creating a one-size fits all policy for the UK and are failing to understand the impact this will have on the north of Scotland. 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."

(CD/JM)