Vestas’s move from Campbeltown and National Grid charges

It was revealed today that the Westminster Government has a variable price structure for firms adding power to the National Grid. Windfarms and other renewable energy producers in the Scottish Highlands and Islands are charged sixty pence per kilowatt generated – in a sliding scale that sees rival firms in London and the south east paid eight pence per kilowatt. The UK government insists that this asymmetrical charging makes no difference to the locations of firms developing renewable energy. The industry, however, has serious concerns that it deters producers from setting up in the Highlands and Islands, finding it considerably more profitable to establish themselves in the south east.

While Vestas is a company supplying not power but turbine towers to those who produce energy, there is a question over whether they were reading the runes in transferring from Campbeltown to major development in the Isle of Wight. They may see a much stronger market for turbine towers in the south and south east of England, fuelled by the establishment and expansion of renewable energy companies there, under the more favourable fiscal regime. Without changes in this matter, further doubt has to be cast on the viability of the abandoned plant at Campbeltown. Information we provide below indicates that the legal framework governing these charges was constructed from the start to allow such discretionary changes to be made.

The Executive Summary in a Government statement by the Business, Enterprise and Regulatory Reform Department (BERR) makes it clear that:

‘Section 185 of the Energy Act 2004 gives the Secretary of State the power to adjust transmission charges for renewable generators in a specified area of Great Britain. The power can be exercised if renewable development in that area would be likely to be deterred or hindered in a material respect by the level of transmission charges that would otherwise apply’. It also notes that:

‘The Energy Act power was taken to address concerns that the introduction of a GB-wide cost reflective charging regime for the transmission network on 1 April 2005 might hinder the development of renewable generation in North of Scotland. ‘ We will shortly ad the full BERR Stateent here but the first two paragraphs of the Executive Summary shape the territory:

“1. Section 185 of the Energy Act 2004 gives the Secretary of State the power to adjust transmission charges for renewable generators in a specified area of Great Britain.  The power can be exercised if renewable
development in that area would be likely to be deterred or hindered in a material respect by the level of transmission charges that would otherwise apply.

2. The Energy Act power was taken to address concerns that the introduction of a GB-wide cost reflective charging regime for the transmission network on 1 April 2005 might hinder the development of renewable generation in North of Scotland. ”

See earlier news items on Vestas, Campbeltown and the role of the Westminster Government:

• 15th August 2008 The story breaks
  
• 16th August 2008 Role of UK Government queried
  
• 18th August 2008 Vestas goes to ground in Denmark