As the UK transitions towards a greener energy future, renewable energy suppliers and industrial consumers must navigate a complex cost landscape.
Connecting wind and solar energy to the National Grid incurs multiple charges, which vary significantly based on location. This article provides an authoritative breakdown of these costs, quantifying them where possible in £/MW, and analysing the regional disparities that impact both generators and industrial consumers.
Costs for Renewable Energy Suppliers
Renewable energy generators must account for several financial obligations when connecting to the grid. These include:
-
A) Transmission Network Use of System (TNUoS) Charges
TNUoS charges are levied by National Grid ESO to recover the costs of maintaining the high-voltage transmission network. The charges are region-specific, with northern and Scottish generators facing significantly higher costs due to the longer transmission distances to demand centre’s in the south.- Scotland: Generators can pay between £5.00/MWh and £7.50/MWh.
- Northern England: Costs range from £2.50/MWh to £4.50/MWh.
- Southern England: Charges can be as low as £0.49/MWh.
- Some regions, particularly in southern England, may even receive credits (negative charges) of up to -£9.00/MWh.
For example, a 100 MW wind farm in North Scotland could pay over £37.5 million annually in TNUoS charges, while a similar project in Southern England could pay under £5 million or even receive net payments for contributing to the energy balance. -
B) Distribution Use of System (DUoS) Charges
DUoS charges apply when generators connect to the local distribution network rather than the national transmission network. These fees are managed by regional Distribution Network Operators (DNOs) and vary significantly based on location.- North Scotland: Highest charges, often exceeding £50,000/MW/year.
- Southern England: Some of the lowest charges, potentially under £10,000/MW/year.
- Time-of-Use Impact: DUoS charges also depend on peak (Red) and off-peak (Green) periods, with Red period charges up to 10 times higher than Green periods.
-
C) Connection Fees
One-time connection charges depend on whether a project falls under the “shallow” (direct connection) or “deep” (network reinforcement) cost model:- Shallow Costs: Typically range from £100,000 to £2 million per project.
- Deep Costs: Can exceed £10 million for major network upgrades.
-
D) Compliance Costs
Generators must meet regulatory and technical standards, including:- Grid Code Compliance (£10,000 – £50,000 per MW).
- Ancillary Services and Frequency Response participation fees.
- Licensing and Contracts for Difference (CfD) participation costs.
Costs for Industrial Consumers of Green Energy
Industrial consumers purchasing green energy through the National Grid also face a range of charges:
-
A) Network Costs Passed Through to Consumers
- DUoS and TNUoS pass-through charges: Large energy consumers in northern Scotland may pay over £55/MWh in combined network costs, while consumers in the South East may only pay £20/MWh.
- Balancing Services Use of System (BSUoS) Charges: These fluctuate but typically range from £2.50/MWh to £4.00/MWh.
-
B) Policy and Environmental Charges
- Renewables Obligation (RO) costs: £5-7/MWh.
- Contracts for Difference (CfD) Levy: £2-4/MWh.
- Capacity Market Charges: £2-3/MWh.
-
C) Wholesale Energy Costs
- Green energy procurement costs: £50-70/MWh depending on PPA agreements and location.
-
D) Regional Breakdown of Total Costs for an Industrial Consumer (Estimates in £/MWh)
|
Region
|
TNUoS + DUoS
|
BSUoS
|
Policy Costs
|
Wholesale Green Energy
|
Total Cost (£/MWh)
|
|---|---|---|---|---|---|
| North Scotland | 55.00 | 3.50 | 10.00 | 60.00 | 128.50 |
| North England | 40.00 | 3.00 | 9.00 | 55.00 | 107.00 |
| Midlands | 30.00 | 3.00 | 8.00 | 52.00 | 93.00 |
| South England | 20.00 | 2.50 | 7.00 | 50.00 | 79.50 |
The cost of connecting and consuming green energy in the UK is highly location dependent. Renewable generators in the north face significantly higher TNUoS and DUoS charges, while industrial consumers in these regions pay higher pass-through network costs. This pricing structure presents challenges for the economic viability of renewable energy projects in remote areas and affects the competitiveness of industrial businesses seeking to use green energy.
To address these issues, the UK government and Ofgem are considering reforms, such as modifying the TNUoS charging model and investing in transmission upgrades. However, until significant changes are implemented, regional cost disparities will continue to shape the economics of renewable energy in the UK.
The post Green Energy Transmission Costs in the UK first appeared on Haush.