New transmission charge forecast will help generators managing cost uncertainty and volatility

Transmission network use of system (TNUoS) charges represent a significant proportion of operating costs for many renewables generators, often exceeding 50% of annual running costs. For some, as recently highlighted by SSE in a recent report and to Members of the Scottish Parliament, they could present a barrier to investment in generation in some areas.

TNUoS charges recover the majority of the transmission network costs according to price control agreed with Ofgem. Large generators (those connected to the transmission system or the distribution system with a Bilateral Embedded Generation Agreement (BEGA), typically above 100MW) pay TNUoS in respect of their Transmission Entry Capacity (TEC) – the maximum amount of power they can flow onto the transmission system. TNUoS costs for generators aim to give a locational signal.

A generator connecting a long distance from demand will require power to be transmitted over a long distance, which in the long-run will lead to a greater need for transmission investment and greater costs on the transmission network. The locational variation in transmission network charges has increased significantly over recent years and is now a material consideration in deciding where to site new plant, as SSE has highlighted. Moreover, the UK Government’s recent commitments to 40GW of offshore wind by 2030 and bringing new nuclear to financial close will lead to major shifts in the way the transmission network is developed over the coming decades.

Cornwall Insight’s Transmission Network Use of System (TNUoS) report uses the latest announcements on development of new plant, and our well-informed view on longer-term developments, to give a credible 15-year forecast of TNUoS charges. It draws out how locational charges could change over a 15-year time horizon, to support developers in their decision making on generation.

The key components of the forecast are:

  • Long-term 15-year forecasts[CN1]: The report provides a long-term independent view beyond the typical National Grid 5-year forecast horizon, supporting investment decisions and analysis.
  • Incorporating key regulatory change: Our independent modelling and subject matter expertise across network charging allows us to forecast and quantify the impacts of key regulatory changes and modifications impacting future TNUoS rates.
  • Data tool and specific analysis: An easy to use tool, allowing you to assess TNUoS costs across different zones and technologies. Our accompanying report provides key insights into the changes and drivers behind costs.

To find out more about the report, please contact James Brabben on j.brabben@cornwall-insight.com or on +44 (0) 1603 542141.

Related thinking

Low carbon generation

CfD Allocation Round 4 – let the competition begin

2022 is set to hold what could be the largest Contracts for Difference (CfD) auction to date, Allocation Round (AR) 4, with government aiming to secure around 12GW of new renewables through the scheme. It will see the re-introduction of Pot 1 technologies (“established” technologies such as onshore wind and...

Business supply and services

Wake-up call: Cost pressure in the GB energy market

This Energy Perspective was published in Issue 791 of Energy Spectrum on 10 January 2022.  The current crises afflicting the energy supply sector, driven by rising energy input costs, are of economy-wide concern. The price of energy has always been an issue of significance for national economic competitiveness, inflation, monetary...

Home supply and services

The risks of short-term interventions distorting long-term incentives in the energy market

Christmas 2021 was not a time of cheer for the energy industry and its customers. There is acute stress on energy suppliers and consumers from current bills - let alone where they may move to in the coming year. And it seems the political and regulatory debate has moved on...

Business supply and services

With great power comes great responsibility – what can be done for customers and suppliers in these challenging times?

Given that the situation in the wholesale markets shows no signs of abating, both the government and Ofgem have a shared responsibility for helping to steward the energy sector through a period of profound challenges for suppliers as well as for their customers. Furthermore, the risk of structural damage to...

Commercial and market outlook

Price cap set for 46% rise for Summer 2022, Winter 2022-23 cap may exceed £2,000

Following further highs in wholesale prices and the costs associated with the raft of supplier failures seen in the last few months, Cornwall Insight is forecasting that the domestic default tariff price cap for Summer 2022 will increase to approximately £1,865 per annum for a typical dual fuel customer, with...

Power and gas networks

New Fault Ride Through compliance arrangements introduced for transmission-connected generators

Ofgem approved Workgroup Alternative Grid Code Modification 1 (WAGCM1) of GC0151 Grid Code Compliance with Fault Ride Through (FRT) Requirements on 5 November. In short, this decision introduces a new, legal process, into the Grid Code – the legal text that governs those connecting to the electricity transmission system -...

Power and gas networks

Location, location: The increasing complexity of embedded benefits

There is growing recognition of the need to reform our current network arrangements to support a more dynamic and flexible electricity system as we undergo the transition to net zero. Among the network elements currently going through a period of review are Distribution Use of System (DUoS) charges, which recover...

Regulation and policy

Just the bill please – who picks up the costs of market exits?

This article is an extract from our Energy Spectrum Nutwood. find out more about a subscription to Energy Spectrum here. Between 9 August 2021 and 19 November 2021, 22 energy suppliers exited the market impacting more than 2mn mainly domestic customers. Supplier exits result in a number of costs being...