Wind farms based in remote areas are currently charged at a much higher rate than those based near large cities as it is more expensive to connect them to the national grid. Ofgem has stated that these charges are too high, particularly as wind farms only generate energy intermittently. The new rates aim to reflect this irregular use of the network.
The plans are expected to add £1.60 per year to consumer energy bills, although Ofgem says the changes could save homes £8.30 a year between 2020 and 2030 by enticing developers to build power plants in optimal locations.
Changes will also affect gas and nuclear plants
At present power plants built close to large cities pay much lower rates than those in more remote locations. It is not uncommon for plants near cites to receive financial incentives from the government for selecting an ‘accessible’ location.
The new changes will also impact nuclear and gas plants which do not rely on the intermittent sources to produce energy. Costs of roughly £25/KW for these plants in northern Scotland would be cut to below £19/KW, whereas plants in the Midlands will see charges rise from £1.96/KW to £3.41/KW.
The new rates are expected to be enforced in April.
Measures designed to ‘narrow the difference in generation tariffs’
Speaking on the new rates, Ofgem said: “The aim of this change is to facilitate the timely move to a low carbon energy sector, while maintaining a robust and efficient supply of electricity across Britain’s high voltage network.
“The main update to the methodology is that it would better take into account the type of generator and how it uses the network to transmit power to parts of the network where the demand for that power is situated.
“In doing this, Ofgem considers that the proposed methodology change would better reflect the costs placed on the high voltage system by all forms of generation, including new kinds of generators, located at different points on the network.
“This proposal will narrow the difference in generation tariffs between the north and south of Britain. Tariffs in the north will decrease whilst tariffs in the south will increase relative to the status quo.”