Scotland's revolution in renewable energy could be undermined if areas where the power is produced have to pay unfair charges to connect to the national grid, the First Minister warned yesterday.
In a robust attack on the regulatory system, Alex Salmond hit out at what has been labelled as a "tax on geography" and a threat to an industry which could create 30,000 jobs in Scotland.
He was speaking from the remote Orkney island of Eday where he was officially opening the world's first tidal power test facility, part of the European Marine Energy Centre (Emec).
Mr Salmond also announced that ministers had approved the world's biggest wave energy project near Stromness, where the centre is based.
Between them, the two hydro-electric schemes are expected to generate enough energy for around 3500 homes, and Mr Salmond highlighted "two world firsts for Orkney in one day".
But the First Minister said that while the island community was establishing itself as a world leader in harnessing the power of the sea for the production of green energy, it was suffering because it had to pay more to connect to the national grid.
While the south of England would pay £10 per kilowatt to connect to the grid, Orkney could be charged £100 or more per kilowatt. On top of that, power industry regulator Ofgem is considering a proposal to charge remote generators a fee for the loss of electricity, in the form of heat, as it is fed along cables. It has promised a decision by next spring.
A recent study for Highlands and Islands Enterprise showed that the connection charges for Scottish islands were the most expensive in Europe, 30 times greater than Denmark.
Mr Salmond said the anomalous charges were indefensible, and the Scottish Government was preparing an unanswerable case to present to Ofgem.
"The effect of the charging models is that they penalise areas on the basis of lack of population and remoteness. The more population you have got and the nearer you are to centres of population, the more you get subsidised for connecting to the grid. It is a deficient model."
He said he had met Ofgem officials to discuss the impact of the charging regime. Ministers had made some progress, with Ofgem delaying a decision on the new charges for power loss which would mean even greater costs for remote areas.
But Mr Salmond continued: "I think we have a bit of work to do with Ofgem in terms of getting a realisation that it is a bad idea to have a model of connection that discriminates against the areas that have the biggest potential for power production. We have been pressing Ofgem for a totally new look at this. Ofgem is controlled by the Westminster Government, but is also the regulator. Ofgem's role is to allow or not allow proposals that are made by the National Grid and we are trying to persuade Ofgem not just not to accept the transmission loss model, but also to revise what is acceptable on the fundamental model on grid connections.
"We are swimming against the tide reversing this we have a battle and it is a battle that has to be fought."
Jason Ormiston, chief executive of Scottish Renewables, said: "The wave and tidal sector clearly will only get going if there is a market they can access. That means there needs to be networks or grids to allow them to do that. Currently the charging regime for transmission use is expensive and makes the Scottish renewables industry in the north of Scotland uncompetitive with the industry in the south of England."
Charles Gallacher, Ofgem's assistant director of corporate communications, said Ofgem could not change the regulations, but could only apply them.
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