National Grid Electricity Transmission plc (NGET) and Scottish Power Transmission plc (SPT) have agreed to pay a record redress package of £158 million for delays to the Western Link Project, a major subsea electricity link between Scotland and Wales.
Glasgow-based ScottishPower is owned by Bilbao-based global energy giant Iberdrola.
The settlement follows an investigation by UK energy regulator Ofgem into a two-year delay to the £1.2 billion subsea power cable project.
Ofgem’s investigation found the delay limited the ability of renewable energy generators in Scotland to export electricity to England and Wales, leading to higher costs for consumers.
“Ofgem’s investigation found that the root causes of the delay were problems with manufacturing processes, installing the cables and commissioning tests,” said Ofgem.
“It acknowledged that NGET and SPT did not cause or exacerbate the delay.
“Ofgem holds NGET and SPT ultimately responsible, as licence holders, for the delay caused by their supply chain.”
Ofgem said Western Link was designed to transport electricity, often from green sources like offshore wind, between Scotland and Wales.
It said it provides an additional 2,250MW of capacity, equivalent to powering over two million homes, and is crucial to helping Britain reach its targets of net zero greenhouse gas emissions.
“The two-year delay restricted renewable generators in Scotland exporting electricity to England and Wales, because at times there was not enough capacity to do so,” said Ofgem.
“Because renewable generators in Scotland were unable to transport the energy they were generating, National Grid ESO would have sometimes had to reduce the output from windfarm generators to protect the electricity system.
“This ultimately led to higher costs for consumers.
“NGET and SPT own the licence for the project and contracted with a contractor to deliver it.
“The link fell two years behind its expected delivery date of March 2017 to June 2019.”
Ofgem’s Director of Enforcement and Emerging Issues Cathryn Scott said: “To deliver the UK’s climate change ambitions, more of our electricity will come from renewable generation.
“This is already happening, with offshore wind and other projects in development.
“Innovative projects such as the Western Link are vital in moving clean energy from where it’s produced to where it’s needed.
“However, they must be delivered on time and to the standards agreed.
“Where they are not, as the energy regulator, we will hold the licensees accountable.”
Ofgem said £15 million of the redress package will be paid into Ofgem’s Redress Fund.
This is operated on its behalf by the Energy Saving Trust and allows companies to pay a sum of money to appropriate charities, trusts, organisations or consumers as a result of breaches of licence conditions.
Ofgem said the remainder of the redress package will be returned via reduced system charges.
“These charges are ultimately paid for by consumers as part of their overall electricity bills, so consumers will benefit from this redress package through lower bills,” said Ofgem.
The Western Link joint venture — National Grid Electricity Transmission and Scottish Power Transmission — issued the following statement on National Grid’s website in response.
“Western Link is an example of the innovative infrastructure and bold vision required for Britain to reach its net zero goals, delivering green energy to where it’s needed and enabling a more efficient electricity system.
“Since becoming operational it has allowed the transfer of renewable electricity to supply the demand of more than two million homes every year.
“It’s expected to continue to deliver for decades to come, boosting the UK’s net zero ambitions at the same time as saving money for consumers.
“The scale of the project (262 miles of cable, of which 239 miles is under water) as well as the cutting-edge technology involved meant a complex construction and delivery phase.
“From the outset the joint venture worked hard to protect consumers against delay and deliver the most efficient and economic approach, with the new technology utilized meaning fewer cables were required, minimizing costs and disruption to local communities.
“Despite these efforts, which have been recognised by Ofgem in their investigation — and the fact that the Link was in operation and providing benefit for significant parts of the period identified — the joint venture recognises it is ultimately accountable for the delay and has therefore agreed to the redress package.
“The package includes a £15 million payment into Ofgem’s redress fund and £143 million being returned to consumers in payments through mechanisms outlined in the price control, ensuring NGET and SPT will not benefit from the delay by resetting the allowances received to equal actual expenditure.”