This webpage pulls together all of our research to date in one location. Here you will find any papers, videos, FAQ's, news and views, relevant consultation papers and our latest position.
Managed by National Grid as the Electricity System Operator (ESO), and regulated by Ofgem, TNUoS is a charge to recover the cost of the installation and maintenance of the GB transmission network. The ESO recovers the revenue on behalf of all onshore and offshore transmission owners and other network schemes. TNUoS is currently paid by all users of the transmission network; commercial and residential electricity bill payers pay to use the networks to consume electricity and both transmission connected and embedded generators over 100MW capacity pay to use the transmission network to export their electricity. Generation TNUoS is calculated through various factors, mostly location. In general terms, generators located closer to areas of demand pay less, with those in more remote areas paying more to transmit power onto the system. This results in higher costs for the delivery of renewable projects in Scotland compared to other parts of GB, with particular disparity in the north of Scotland which are furthest away from the biggest areas of demand in the south of England. You can find out more about TNUoS on the National Grid ESO's Website.
Evidence shows us that TNUoS charges are indeed many times higher in the north of Scotland than elsewhere in GB. The charges for a single generator can also swing dramatically from year to year and this is near impossible to predict or plan for commercially. The issue of volatility and unpredictability is not unique to the north of Scotland but experienced by all generators regardless of technology or location. This uncertainty increases the risk for generation developments which comes at a cost and we expect this cost ends up on the end consumers electricity bill. Such timing and sizing uncertainty for generation developments in turn creates huge uncertainty for us, as a Transmission Owner (TO), in terms of efficient system planning, as we work to connect the renewable energy needed to support greater electrification in society and deliver a network for net zero.
To respond to our stakeholders' TNUoS concerns, we published our TNUoS Discussion Paper in February 2021 to explore the case for TNUoS reform in greater detail, advocate for the interests of our customers and stakeholders along with providing evidence of the impact. Using the paper as a tool to encourage further debate, we continued to listen and respond to our stakeholders via a range of methods including written responses, calls, feedback forms and through an interactive stakeholder webinar session, which was joined by over 100 participants from developers to local authorities. A full recording of the webinar can be viewed opposite.
Following this engagement, we published a summary report of all feedback received which overwhelmingly supports the need for TNUoS reform. In summary:
It is clear that urgent action is required to find solutions in the context of the climate emergency.
Our TNUoS discussion paper, TNUoS offshore wind addendum paper, stakeholder feedback summary and response to Ofgem's Access SCR consultation can be downloaded below.
We support TNUoS reform because the current TNUoS charging methodology was established nearly 30 years ago and is not designed for an electricity system that will enable a net zero world. We know that in today’s society, in order for us to achieve the necessary low carbon transition, all areas of industry should be enabling not hindering its progress. The outdated methodology of TNUoS results in charges for transmission access in the north of Scotland being many, many times higher than the rest of GB. Alongside this, the volatility and unpredictability of future charges across the whole of GB, are acting as a blocker to the commercial viability of renewable energy projects, particularly in Scotland. This creates huge uncertainty for us, as a Transmission Owner (TO), in terms of efficient system planning as we work to connect the renewable energy needed to support greater electrification in society and deliver a network for net zero.
Over 80% of our engaged stakeholders told us that TNUoS acts as a barrier to the delivery of their renewable projects in Scotland. Our North of Scotland Future Energy Scenarios tell us that we need 20-23GW by 2030 and 33-37GW by 2050 of renewable electricity from the north of Scotland alone, to put us on the correct pathway to net zero. We currently have just over 6GW connected in our network area and there is a clear need to have regulatory policy in place that enables the required development. The current TNUoS charging regime does not send the appropriate signal to enable the capacity required, in fact it does the contrary, blocking the timely development of renewables which will be required to deliver net zero.
We have considered how the current methodology for generation TNUoS effects consumers and believe that the high cost, volatility, and unpredictability is likely to be increasing the cost of electricity bills. Although TNUoS is split into generation and demand tariffs, there is a common misconception that the revenue recovered stops there. Generation TNUoS has to be built into the cost margins and budget of each project, these costs flow through the market to the supplier and eventually are paid for by consumers. This results in consumers paying for both generation and demand TNUoS at one point or another. The volatility and unpredictability of generation TNUoS significantly increases the risk for generators, which comes at a cost. We expect this risk alongside other factors is increasing consumers bills in the long run. Recent analysis carried out by NERA Economics, commissioned by Ocean Winds, shows that by 2030 the volatility of TNUoS alone could increase consumers bills by up to £391m per year.
This is a ‘user-pays’ principle which is ultimately flawed; it is correct that the current methodology results in charges being higher the further the electricity has to travel to reach demand from generation.
This approach seems sensible in theory; however, this is not what happens in practice. Wider TNUoS is forward looking – generators pay, not for their actual use of the transmission system, but based on the notional cost of network investment to connect future generation in the vicinity. As a consequence, charges can either be positive or negative. The majority of generators in the south of GB get paid to use the same cables and wires to deliver electricity, the current charging regime doesn’t stack up as the same investment is needed in the network despite location. This is very different from ‘user-pays’. It is hard to argue that any generator can have a negative use of the transmission system and should therefore be paid.
The current TNUoS charging methodology was established nearly 30 years ago and is not designed for an electricity system that will enable a net zero world. It was devised for a different time and a different electricity system. The dated regulations which govern how our electricity system works don’t support delivery of the UK and Scotland’s collective net zero ambitions. It is making development of the renewable energy projects, which Scotland needs to supply its energy and drive economic growth less likely, at a time when those projects are more urgently needed than ever.
The stability and predictability of the underlying costs of the transmission system (TO revenues) is in stark contrast to the volatility and uncertainty of TNUoS charges. From our analysis, the cumulative allowed revenue of NGET, SPEN and SSEN Transmission has been stable: within 5% of £2.5 billion over the past five years. Ofgem’s assessment for the next five years is for allowed revenue to fall by around 0.6%.
While TNUoS particularly disadvantages Scottish projects, this is not only a Scottish problem. We are already a mass exporter of renewable energy in the north of Scotland, with around two thirds of power generated in our patch exported south. Scottish renewable projects (particularly Scotwind) will be fundamental in helping to meet the UK’s net zero and offshore wind targets – 40GW by 2030, of which 10-11GW is expected to be delivered through Scotwind. It is key to note that evidence supports the fact that TNUoS charges are significantly higher in Scotland, particularly the north of Scotland. For example, while a wind farm in the north of Scotland pays £5.50 per unit of energy, an equivalent wind farm in Wales will get paid £2.80 per unit. The impact of the volatility and unpredictability of future charges are impacting developers across the whole of GB. Some generators in England and Wales see wider TNUoS fluctuate by over 700% from one year to the next.
Analysis undertaken by RUK and RIDG demonstrates that Transmission charges in Scotland are not just the highest in GB, they are the highest in Europe. We need to level the playing field to support home grown, green economic growth. According to ENTSOE the average transmission charge for generators across Europe at £0.46/MWh per year. The average annual charge paid by generators in GB is now sitting at £4.37/MWh. However, excluding GB connection costs this brings the average for GB generators to £2.53/MWh. This coming year, generators in England and Wales will pay an average of £0.49/MWh, but generators in Scotland will pay an average of £6.42/MWh. The average for the most northern region is £7.36/MWh, which represents over 20% of the total levelised cost of electricity (LCOE) for new offshore wind farm sites.
Although the renewables pipeline is strong in Scotland, it doesn’t mean that all those projects will actually proceed / be delivered due to a chicken and egg situation. Developers don’t find out about what their charges will be until they go through the connection process with their projects and even then, future forecasting is uncertain and can make projects commercially unviable. Projects also still need to compete for Contract for Difference auctions – higher TNUoS charges currently make Scottish projects less competitive in this process, with successful projects raising prices for consumers to account for additional cost, and lower priced bidders elsewhere in GB benefiting by being brought up to the cleared strike price. Anecdotal evidence suggests that Scottish developers have to add on roughly £10 per MWh in their bids to combat this increased cost, alongside the volatility and unpredictability of TNUoS – this ultimately ends up on consumers bills.
If you’d like to talk to us or share your views please get in touch using the contact details below: