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20 August 2007 - Scottish businesses and politicians have lobbied strenuously against proposals by UK electricity regulator Ofgem to increase electricity transmission charges to generators that are located further away from centres of demand - such as the south of England.
Ofgem estimates such losses from Britain's transmission system cost about £260m ($515m) a year and the additional electricity generated to cover these losses creates 680 000 tonnes of carbon emissions annually. Losses are paid for by generators and suppliers - on behalf of customers - but currently the amount each of them pays is regardless of location.
Ofgem recently announced it was "minded to" back a proposal to increase charges to generators located further away from demand, with those located nearer to demand paying less. The opposite would apply to suppliers' charges, and those close to centres of generation - such as Scotland - should pay less.
The regulator argues the scheme would redistribute the costs and losses between generators and suppliers and make the charges more reflective of costs. The estimated annual savings in energy terms would be £15m.
However, the Scottish Council for Development and Industry has warned that Ofgem's scheme would be extremely damaging to Scotland's energy sector - including nuclear and renewables, especially in the north of Scotland.
Alan Wilson, chief executive of the SCDI, said: "The introduction of the zonal transmission loss charges, in addition to the other charges imposed on Scotland-based energy generators, will make it less attractive to export 'clean' electricity from Scotland to the highly populated markets in the south of England. This will mean that the development of renewable projects in optimal, but peripheral, locations would become more difficult to finance, with many schemes unable to proceed."
The SCDI complained that this seemed completely contrary to the Scottish executive and UK government energy policy to address climate change, and a European directive that calls for charging regimes to be non-discriminatory for electricity from renewable sources, including in peripheral areas.
Scottish Renewables has also argued that Ofgem would undermine Scotland's effort in the fight against climate change if it approved plans to reduce the competitiveness of Scottish generation in the UK market.
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