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Scotland’s offshore wind industry risks a “stalling of momentum” if developers fail to do better in the UK’s renewables subsidy auction this year, deputy first minister Kate Forbes has warned.
She urged “broader” access for its developers, who argue that bureaucratic hurdles and transmission charges restrict Scottish offshore wind’s competitiveness in the auction. Last year only one new Scottish bidder won subsidies in the auction.
“It was disappointing that not many Scottish developments got through CfD allocations. We want to see more get through,” Forbes told the Financial Times, who added that the UK government had been “responsive” in discussions over the issue.
“I don’t want there to be a stalling of momentum,” she said.
Each year, the UK auctions off government contracts guaranteeing developers electricity prices, known as contracts for difference (CfDs). Ministers are drawing up plans to make this summer’s auction the “biggest we’ve seen so far”, the FT reported last year.
Last year’s auction round only had one successful new offshore wind bidder from Scotland, Green Volt, which is pursuing nascent floating technology, rather than the industry workhorse, fixed offshore wind energy. Two other wind farms in Scotland, which had won contracts in previous rounds, rebid and secured new contracts.
A fifth of the UK’s operational offshore wind farms are in Scotland, with almost half of all projects located north of the border. Two-thirds of operational onshore wind farms are in Scotland and three-quarters of all projects.
But companies seeking to deliver Scotland’s pipeline of 40 gigawatts of offshore wind power said the charges to access the electricity transmission system, lengthy waits for connections to the grid and slow consenting of projects had raised costs and made them less competitive than peers operating south of the border.
“I would like to see a level playing field,” said developer Ocean Wind’s Mark Baxter, who also chairs the Scottish Offshore Wind Energy Council’s developer group.
The UK government, through its Review of Electricity Market Arrangements (Rema), is considering splitting the pricing of the UK electricity market into zones, with differential pricing encouraging generation closer to demand centres, which are predominantly in the south.
Some developers argue that the resulting uncertainty and higher cost of capital would kill off the UK government’s 2030 power sector decarbonisation aspiration.
“The introduction of zonal pricing is a lose-lose proposition which is distracting focus from the urgent need to deliver mission-critical energy infrastructure,” said Perth-based energy giant SSE, which has had a large project, Berwick Bank, trapped in the Scottish consenting system for more than two years.
Instead of zonal pricing reform backed by companies such as Octopus Energy, Scottish offshore wind developers are asking for reform to transmission network charges, known as TNUoS, which they say are higher in the north of Scotland because the fees increase with distance from centres of demand.
“Rema and TNUoS are very material to us and make us very uncompetitive,” said Baxter.
Octopus said instead of the “outdated” energy system designed for fossil fuels rather than renewables, electricity should be sold cheaply or given away to those near sources of generation.
“In this system, all households would see bills drop, with regions rich in renewable infrastructure, like Scotland, seeing the biggest savings,” they added.
Chris Stark, head of the UK’s “mission for clean power”, said the UK government wanted to encourage more renewables in Scotland and was “very confident” the government would end uncertainty by presenting a workable solution to the pricing debate by the summer.
The next 12 months were “utterly critical” to procure enough renewable energy projects to lead the transfer away from gas generation, he said.
The government is considering lengthening the duration that developers receive guaranteed payments and broadening the bidding process to companies that have yet to secure planning consent, he added.
The next auction round, expected in the summer, would have to “absolutely smash it,” he said. “This is how we bring confidence back.”
