Select Committee on Environmental Audit Memoranda


APPENDIX 14

Memorandum from Scottish and Southern Energy plc

  Scottish and Southern Energy (SSE) is the largest renewable generator in the UK and we currently produce over 40 per cent of the renewable output in this country. Although we have contributed to the Electricity Association's submission to this inquiry, (see Appendix 9) we would wish to direct you to two particular areas of concern.

  Within the main Government policies currently being developed as part of the Climate Change Programme, Climate Change Levy (CCL) and the Renewables Obligations, there is a stated intention to include existing hydro under 10MW as "qualifying" renewable generation. This means that it will be treated the same as other renewables. However Government policy assumes that output from hydro stations over 10MW is economic. This leads them to conclude that the current levels of output from over 10MW plant will be maintained as part of meeting the overall target, without the need for any subsidy.

  This is not a sensible assumption. Most of the over 10MW plant in the UK is owned by ourselves and is relatively old and in need of significant refurbishment expenditure. Without this, the plant will become increasingly unreliable leading to reduced output and eventual station closure. However at forecast electricity prices it is currently not economically attractive to invest in this refurbishment, particularly for plant in the 10-30MW range. Without some entitlement to qualifying renewable status, it would be more attractive for us to spend shareholder money building new wind generators than refurbishing such hydro stations. If this was the result we judge that output from our existing hydro stations could halve within ten years. This would reduce renewable output by 1600GWh and need around 800 new windmills just to replace the lost output.

  A second area of particular concern relates to the attractiveness of wind patterns in our area. Given this, we expect a disproportionate number of renewable generators to seek connections to our electricity network in the North of Scotland. Clearly such generators will wish us to connect them expeditiously and cheaply. However in many of our rural areas very large amounts of capital investment may be required to upgrade our network to accommodate them. We believe new renewable generation should pay the full cost of any necessary upgrades—otherwise the cost will fall on other customers in our area. It would be very unfair if new renewable generators received a subsidised connection as well as a subsidised price for their output.

  We are currently working with the Scottish Executive and OFGEM to try to develop a fair solution to this connection cost issue. However we would draw the Committee's attention to the fact that in many areas where siting renewable generation would appear particularly attractive, there may be high local infrastructure costs which need to be considered.

January 2001


 
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