Ofgem seeks change to transmission charging methods

The Office of Gas and Electricity Markets (Ofgem) is seeking approve a change to the methodology for calculating what generators pay to use the electricity transmission network across Britain. Ofgem is the U.K. government’s regulator of electricity markets.

The proposed charges would come into effect on April 1, 2014. Ofgem said the changes are meant to better take into account the type of generator and how it uses the network to transmit power to parts of the network where the demand for that power is situated.

This would better reflect the costs put upon the transmission grid by all forms of generation, including new power generation technologies, located at different points on the U.K. power network.

The locational element from the existing methodology, whereby generators are charged more the further they are located from demand is retained under the proposals. This is to reflect the cost of running and upgrading the transmission network.

Charges that provide users with efficient signals that reflect these costs will help to promote sustainable development goals and support long-term decisions on the efficient location of generation, according to Ofgem

Industry looked in detail at the effect of the changes for the development of prospective island links (e.g. transmission links to the Scottish Islands). These tend to be far from demand and will impose higher investment costs and transmission charges for generators using these links to transmit power to where demand is located.

The proposed methodology change would factor in recovery of costs of the proposed subsea links, which once built, would enable the transmission of electricity from the islands to the mainland. Overall, the changes would mean that transmission charges would be lower for the Scottish Islands than may have been expected if the methodology was not changed, but still remain higher than the mainland due to the cost of building and running the subsea links.

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