UK Ofgem mulls financing green power grid upgrade
Date: 29-Oct-03
Country: UK
In a consultation document, Ofgem said meeting the government's green energy targets may require significant investment which will have to be paid for ultimately by consumers.
Wind farms, which will supply most of the green power, often have to be built in remote areas to avoid planning problems but these sites have poor grid links which will need to be upgraded. Many schemes are expected to be built in Scotland, far from centres of demand.
"We are seeking views on how to allow transmission companies to start efficiently investing in the transmission network," said Boaz Moselle, Ofgem's managing director of competition and trading arrangements.
"We must make sure the investment is there to meet demand from renewable generators, but equally we do not want customers paying for wires where they are not needed."
The government has a target of providing 10 percent of the UK's power from renewable sources by 2010, up from three percent today.
Ofgem regulates the prices for the three operators in Britain - National Grid Transco (NGT.L: Quote, Profile, Research) , which owns the grid in England and Wales and two Scottish operators, Scottish Hydro Electric Transmission Limited and SP Transmission Limited.
Ofgem said options included waiting until the next price control review, re-opening the price controls for all three companies or adjusting existing controls to cover with investment linked to renewable energy.
The regulator has proposed extending the price controls for the Scottish companies by a year so they expire at the same time as the National Grid's in March 2006.
A recent report commissioned by the government said it could cost as much as 1.12 billion pounds ($1.9 billion) by 2010 to upgrade the grid to cope with up to six gigawatts of wind power in England and Wales and two gigawatts in Scotland.