Transmission network charge hike labelled ‘catastrophic’

Doubling transmission network charges by the end of this decade would be “catastrophic” for Scotland’s renewable energy sector and will disincentive investment, the industry’s Scottish umbrella body has warned after projections reveal a dramatic increase.

The Electricity Systems Operator (ESO) has announced its projection of Transmission Network Use of Service (TNUoS) tariffs for 2029/30 – 2033/34.

These show that the total revenue expected to be recovered from demand tariffs is due to grow by about £3 billion from current levels to £6.1 billion in 2029/30. These revenues will then fall back slightly but not fall below £5.5 billion for the rest of the five year period ending 2033/34.

TNUoS charges are designed to recover the cost of installing and maintaining the electricity transmission system and apply to generators and suppliers for using the grid.

The revenues will begin to climb in 2028/29 when they are projected to rise to £4 billion, according to the ESO’s figures

The new projections take into account the Holistic Network Design, published by the ESO last year, which laid out a more co-ordinated approach to developing the transmission network.

The ESO says the increased revenue projections reflect the costs of the significant transmission build set out in the HND, driven by the delivery of projects from 2029/30 onwards under Ofgem’s Accelerated Strategic Transmission Investment regime.

“The increased TNUoS charges are recovering the significant investment the Transmission Owners are making today in projects that will deliver from 2029/30 onwards,” it says.

The other element of the TNUos charges, the tariff on generators, is projected to increase by £580 million from next year’s forecasted figure to £1.62 billion for FY29/30 before rising further to £1.93 billion in 2033/34.

Total TNUoS cost for the average end consumer is projected to be £79.45 per household in 2029/30 – an increase of £27.73 compared to the equivalent forecast figure for 2028/29, according to the ESO document.

This equates to an increase of 2.7% on the average domestic electricity bill, or 7.6p per household per day.

However, the ESO says the potential rise in TNUoS costs at the end of this decade will be significantly offset by the savings that consumers will receive from avoided costs arising from having to constrain generation due to inadequate transmission capacity, lower carbon emission and lower wholesale electricity prices.

The TNUoS regime has long been controversial in Scotland due to the costs of transporting electricity from remote locations, where wind power tends to be generated, to the main centres of demand in the southern half of the UK. Responding to the ESO’s projections, Morag Watson, director of policy at Scottish Renewables, said: “The latest projection of TNUoS tariffs is catastrophic for Scotland’s renewable energy industry and says to investors ‘no new projects should be built in Scotland’.

“This is completely at odds with UK and Scottish Government policy, which makes clear that building new renewable generation in Scotland is essential if we are to meet net-zero.

“Projects that are already built or in construction cannot respond to these projections, which will only achieve serve to damage investor confidence at a time where that confidence is crucial.

“TNUoS remains enormously destructive to Scotland’s offshore wind industry and is clearly at odds with everything we need to do to reach net-zero.

“The UK Government and Ofgem must stop discouraging investment in Scotland’s world leading renewable energy industry and instead deliver policy that will allow the sector to play a significant role in advancing the UK’s own climate change ambitions.”