Northern Scotland is home to a significant proportion of GB renewables, particularly onshore wind capacity. The region is also likely to be a leader in new capacity developments and we are working directly with a number of developers looking to finalise new subsidy free projects here. Under subsidy schemes, there is also a pipeline of over 800MW of Remote Island Wind (RIW) projects looking to develop in the Scottish Isles under the Contracts for Difference (CfD) scheme.
The motives for these developments are well established: favourable load factor conditions, typically cheaper land costs and a more sympathetic planning environment than in England continue to appeal to developers. However, for both existing and new projects, network charging can dampen this locational optimism.
The significant amounts of generation in Northern Scotland are located away from areas of demand, typically the south and south-east of the United Kingdom. This contributes to a much higher Transmission Network Use of System (TNUoS) bill for projects in this region, with the locational elements of charging methodologies effectively calculating that the power here has “travelled further” to reach where it is needed. As an example, the TNUoS charge for a typical intermittent renewable generator in zone 1 in North Scotland for 2019-20 is £19.03/kW, compared to -£2.50/kW in zone 24, Essex and Kent i.e. a payment.
The distance also contributes to a more physical problem of constraints on the transmission system. Typically, it is often more cost effective and safer for National Grid to balance the system through paying Scottish wind generators a constraint payment to lower or totally stop output and instruct another asset closer to the source of demand to turn up.
All other things equal, the more wind added to the system located away from demand, the greater the cost of these constraint payments to help balance the system. This is reflected in Balancing Use of System (BSUoS) which recovers the cost of system balancing and has been rising in recent years, currently sitting close to £3.0/MWh as a monthly average.
BSUoS has also impacted embedded generators in Northern Scotland. Whilst typically an embedded benefit, the large difference between generation levels and demand at the distribution level Grid Supply Points (GSPs) sees BSUoS often “flip” to become a charge for generators located in GSPs where embedded generation is greater than demand. This can happen in other regions too, such as with solar penetration in the South West, but our analysis shows that on a monthly basis only Northern Scotland sees consistent BSUoS charges for embedded generators. In the last year, our analysis suggests that onshore wind generators in Northern Scotland have seen BSUoS go from a small net positive benefit of £0.10/MWh for May 2018 to a near £4.0/MWh charge by March 2019.
This effect is often compounded by the periods in which these wind generators are running and the GSP is exporting. Higher wind output tends to correlate with periods of higher constraints and BSUoS charges, so when wind is generating in Northern Scotland and the GSP flips to export, BSUoS charges tend to be higher.
National Grid has developed a number of solutions to this issue, most notably the “bootstraps” with the Western Link HDVC being online since December 2017. However, as our recent Chart of the Week explained, when the link has been offline with a fault constraint, issues have returned. March this year saw a record £30.9mn paid out in Scottish constraint payments, coinciding with issues and outages on the western link.
While both the Target Charging Review (TCR) and Network Access and Forward Looking Charges (NAFLC) Review may change what signals network charges send to the market in future, there are also current modifications which could potentially impact Scottish generators. Peak Gen power raised CMP315 in April this year, which looks to amend the expansion constant aspect of the TNUoS charging methodology. If approved, it would increase the locational proportion of TNUoS charging and lead to greater differences between Scottish generators and those further south. The impact assessment provided indicated an £8/kW rise in TNUoS for a typical offshore wind farm Scotland by 2022.
However, out of these system issues does come opportunity. National Grid has launched a pathfinding project with the aim of creating a long-term commercial product to manage network constraints, noting the issues it sees in Scotland. Scottish Power’s development of the 50MW battery at Whitelee windfarm gives a good indication of how co-location and storage assets in Scotland may access this potential product, help mitigate constraint issues and enable further renewables development in the future.
We will be covering network issues as well as the latest regulatory and policy updates at our Scottish Generators Forum on 30 July in Edinburgh. If you are interested in attending please get in contact with Richard Wetherall: R.Wetherall@cornwall-insight.com.