Market News

 January 24, 2012
Ofgem speeds up £7bn plan to rewire low-carbon Scotland

 Ofgem has kicked off plans to upgrade Scotland's aging grid networks in a bid to accommodate a new generation of renewable energy projects, such as wind turbines and marine energy parks.

The energy regulator yesterday launched a consultation outlining how two separate transmission projects, planned by ScottishPower and SSE, could be funded and delivered over the next decade, boosting Scotland's high-voltage grid infrastructure.

The £7bn proposals will be fast tracked under Ofgem's new Revenue= Incentives+ Innovation+ Outputs (RIIO) framework. This is designed to stimulate the £32bn investment needed to connect new wind farms and nuclear power stations to the grid, roll out smart grid technologies, replace aging networks, and support anticipated increases in energy demand from electric vehicles and heating systems.

ScottishPower's £2.6bn project would allow 11GW of new wind farms to connect to the grid, potentially creating up to 1,500 jobs in Scotland over the eight-year price control period from 2013 to 2021.

SSE's transmission arm, Scottish Hydro Electric Transmission (SHETL), has also had its plans to upgrade the transmission network in northern Scotland fast-tracked by the regulator.

Mark Mathieson, SSE managing director of networks, welcomed the news as a step forwards in a capital investment programme worth between £1.1bn and £4bn.

"The fast tracking of SHETL's business plan means we can now focus on delivery, confident that the required funding is in place, a clear mechanism has been created to deal with the uncertainties of investing over this time frame, and an overall positive investment climate has been established," he said.

The proposals announced yesterday are expected to add an extra 35 pence a year to consumer energy bills during the price control period, said Ofgem.

The watchdog will now consult on the plans until 19 March and is expected to publish its final proposals in April.

Meanwhile, two much larger projects run by National Grid, covering England and Wales, have not been fast-tracked and are now required to resubmit their proposals in March.

An Ofgem spokesman told BusinessGreen that it decided against fast-tracking National Grid's £30bn plans because they were too big an investment to qualify for the quicker planning process.

He also refused to be drawn on possible changes to the subsidy regime if Scotland opts for independence.

"Our job is to protect consumers energy bills; it is really up to politicians to decide that," he said. "We are a creature of statute and it is for parliament to decide how to govern."