The Prime Minister has been warned that reforms being proposed to the UK’s power market jeopardises major offshore wind projects in Scotland’s green industrial heartland.
In a letter to the PM, Chancellor and Energy Secretary, Aberdeen
and Grampian Chamber of Commerce said introducing zonal power pricing risks
investment being “cancelled or put on hold” in the North and North-east.
The UK Government is considering introducing zonal pricing - a
reform which would split the UK electricity market into different geographical
“zones” with their own forces of supply and demand - as part of wider reforms
to the UK’s electricity market.
It follows letters from major offshore renewables developers
warning that this would create unacceptable levels of uncertainty which risks
making projects unviable and puts the government’s Clean Power 2030 target out
of reach.
Deputy First Minister Kate Forbes also made an intervention last week warning that zonal pricing could leave consumers without lower bills “and leaving us without jobs that can be created for the energy transition”.
North-east Scotland, which accounts for the largest share of
Scotland’s 45GW of offshore wind pipeline, stands to lose major industrial
opportunity through its introduction.
It comes as the UK Government’s “Mission Control”, the body
responsible for achieving Clean Power by 2030, said in February that £40bn of
investment is needed annually to deliver that target.
The North and North-east already face punishing locational signals
in the existing energy market - such as Transmission Charges - for the build
out and use of the grid, due to its rural nature and being based further away
from power demand hubs.
AGCC warned the PM that introducing zonal would double down on
these locational signals and harm investment. The piece also warned of the risk
for locational signals to drive up the cost of offshore renewable subsidies,
which are ultimately passed on to consumers.
AGCC Chief Executive Russell Borthwick said:
“As well as putting Clean Power 2030 out of reach, zonal pricing
poses serious risk to our major renewables projects and Scotland’s green
industrial future.
“This region already faces unfair locational price signals, and we
recognise the need to evolve the GB Energy market, but zonal is not the
answer.
“We urge the UK Government to instead to consider reforming the
existing market by removing unfair locational price signals.
“This will help ensure a strong, investable renewables system
which is critical to the economic success of this region and the country and
capitalise on its potential to deliver transition opportunities for our skilled
oil and gas workforce.”