Offshore wind growth in Scotland ‘threatened’ by rising transmission costs

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A new report has laid bare the impacts of higher transmission costs faced by Scottish offshore wind turbines, compared to projects in southern Britain.

The research, commissioned by the Scottish Offshore Wind Energy Council (SOWEC), was carried out by independent consultancy ITPEnergised and uses the latest national grid ESO forecasts for system load transmission grid utilization.

While loads are already highest in the north of Scotland and lowest in the South West of England, the report says loads in some areas are set to double, complicating the challenge for projects to reduce the cost of energy, compete for government grants and attract continued investment in the sector.

The difference in loads between the highest and lowest tariff zones is also expected to double from 2016/17 to 2026/27, from £23 to £48 for each kW of capacity connected to the transmission network.

This will see the annual charges for a notional 1GW project ranging from over £33m in the North West of Scotland to a ‘negative charge’ of -£9m in the South West of Scotland. England in 2026/27.

Translated into the impact on the cost of each energy produced, assuming a constant load factor of 51%:

  • The impact of the charges on the cost of energy would be between £7.43/MWh and -£2.04/MWh, a difference of £9.47/MWh.
  • The maximum difference between potential ScotWind and Crown Estate Leasing Round 4 projects is £8.36/MWh.
  • The system’s transmission network usage charge would cost eligible Scottish projects to bid under the fourth round of Contracts for Difference (CfD) allocation between £0.96 and £8.09 per MWh more than projects off the east coast of England.

By comparison, successful offshore wind projects in the 2019 CfD allocation round achieved strike prices of between £39.65 and £41.61 per MWh, meaning that transmission costs represent up to 20% of project offers in the worst affected areas of Scotland.

While National Grid ESO has yet to publish forecasts for beyond 2026/27, the report highlights that further increases in the differential between North and South are expected, making Scottish offshore wind projects increasingly costly over time and increasing the costs of existing projects.



SOWEC Industry Co-Chair Brian McFarlane said: “On the eve of the ScotWind results, we can see a once-in-a-generation opportunity to build a Scottish supply chain to support the rapid growth of the offshore wind that it will stimulate.

“The industry is working hard to invest in Scottish suppliers, ports and communities, but rising transmission costs mean the offshore wind industry in Scotland faces an uphill battle to stay competitive with the rest of the UK. United to enable the realization of these significant benefits.”

Guy Madgwick, managing director of Red Rock Power and chairman of the SOWEC developer group which coordinated the report, said: “The report makes it clear that Scottish offshore wind projects are not competing on a level playing field when bidding for CfD.

“The level of royalties now threatens to limit investment in Scottish offshore wind, which will in turn impact progress towards Scotland’s and the UK’s net zero targets.

“Ofgem is currently considering options to reform transport charges and we urge the regulator to recognize the damage caused by the current system and significantly reduce the difference in costs between the northern and southern parts of Britain.”

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