National Grid (Pricing)

– in the Scottish Parliament on 3rd May 2022.

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Photo of Emma Roddick Emma Roddick Scottish National Party

3. To ask the Scottish Government what assessment it has made of the potential impact on households and businesses in Scotland of the National Grid’s locational pricing system, in light of Scottish Renewables’ reported assessment that transmission network use of system charges make projects in Scotland almost 20 per cent more expensive than equivalent projects in the south of England. (S6T-00680)

Photo of Michael Matheson Michael Matheson Scottish National Party

The issue is reserved to the

Westminster Parliament, and any changes to pricing require policy and legislative changes that are not within National Grid’s control. However, I am deeply concerned by the proposal to move to a locational pricing system and by the lack of consideration that has been given in that work to Scottish Government targets.

In a net zero world, it is counterproductive in the extreme to care more about where generation is situated than about what type of generation it is. It is vital that we deliver net zero at the lowest cost to consumers and that we do so in a way that does not penalise developers for taking forward projects in the best locations.

Photo of Emma Roddick Emma Roddick Scottish National Party

Scotland is a net exporter of energy—we export 18 times more to England than we receive back—and yet there are warnings that National Grid’s new locational pricing system could create a postcode pricing system in the middle of a cost of living crisis. Is the cabinet secretary concerned that the plans could penalise Scotland’s renewables sector when Scotland has the ambition to be the green energy capital of Europe?

Photo of Michael Matheson Michael Matheson Scottish National Party

At this time, when there is a desire to deliver energy security in a way that is compatible with achieving net zero, it is critical to have a charging regime that does not constrain how developments are taken forward. The existing charging scheme acts as a disincentive to investments here in Scotland and makes some developments less competitive with similar projects in other parts of the United Kingdom, so any tweaking of the system, which is what the potential change would involve, could act as a further disincentive to projects being developed here in Scotland. That would be absolutely counterproductive to reducing energy costs at the same time as meeting our net zero targets.

Photo of Emma Roddick Emma Roddick Scottish National Party

Given that we are in the midst of the cost of living crisis and that many households—particularly in my region, which is the Highlands and Islands—are already struggling, does the cabinet secretary agree that the UK Government, which holds the key levers of power on the issue, must urgently step up and do more to help those who are hardest hit by energy grid charges?

Photo of Michael Matheson Michael Matheson Scottish National Party

Renewable energy, and wind energy in particular, produces one of the lowest-cost forms of electricity. Alongside the wider benefits that can come from that and alongside developments such as hydrogen energy, we need to capitalise on the position and maximise potential areas of development. That is exactly what the Scottish Government is seeking to do, and it is important that regulators and the UK Government do not introduce any scheme that will constrain the maximisation of potential opportunities here in Scotland.

I assure Emma Roddick that we will continue to press the UK Government on the issue. We have discussed it with National Grid’s chief executive and expressed our concerns about the proposal and the lack of consultation and engagement with the Scottish Government, given the direct impact that the proposal could have on our net zero targets and energy policy. I assure members that we will do everything that we can to ensure that Scottish renewable energy projects receive the level playing field that they deserve with projects that are being taken forward across the rest of the UK.

Photo of Maurice Golden Maurice Golden Conservative

In terms of TNUOS charging, the Scottish National Party has consistently argued that Scottish consumers should pay more to subsidise energy generators—primarily multinational companies. The most recent targeted charging review of transmission demand residual partially addresses that aspect, which means that every Scottish consumer will pay more.

The floor approach that has been suggested to the forward-looking charge would result in an overall decrease in TNUOS charges for typical domestic customers—apart from those in Scotland. The Office of Gas and Electricity Markets notes that charges in north Scotland will be higher than current charges, given the assistance for areas with high electricity distribution costs scheme.

I have asked this before. Does the cabinet secretary agree with flooring the forward-looking charge at zero—yes or no?

Photo of Michael Matheson Michael Matheson Scottish National Party

It is quite interesting listening to Maurice Golden literally setting out the utter failure of the United Kingdom Government to address the transmission charging costs regime that has been penalising Scotland-based projects for an extended period of time. There is no reason why the member should not be able to understand that the industry has been complaining about the issue for many years, but what have we got from the National Grid? A proposed tweaking of the system that is meant to make it appear as though it is dealing with the issue but which could potentially make things even more difficult for Scotland-based projects.

We need a process that ensures that the charging regime is based not on location but on the type of energy that is produced. The systematic failure of the UK Government to address that issue over an extended period of time has continued to disadvantage projects in Scotland. Further, adding in a bit of nuclear has pushed up the costs for taxpayers across the country, who are paying more for their energy as a result.