Ofgem announces financial boost for renewable grid upgrades

Energy industry watchdog Ofgem yesterday approved an initial £319m tranche of funding to help energy transmission companies connect six renewable energy projects to the UK's National Grid.

The construction of new links to the high-voltage network is scheduled to start before the end of the fiscal 2010/2011 financial year and will include high-profile projects to hook up wind farms in the Shetland Isles and East Anglia to the grid.

Almost half the funding has been earmarked for transmission reinforcement initiatives in Scotland, in an attempt to prepare the country's grid for a huge increase in renewable energy capacity.

"The funding proposals will enable vital new generation, much of it renewable, to be connected to the grid," said Stuart Cook, the utility watchdog's acting senior partner for transmission and governance, adding that the new investment marked "a significant step towards facilitating the Government’s 2020 carbon emissions reduction target".

Ofgem is also waiting for National Grid Electricity Transmission, Scottish Power Transmission and Scottish Hydro-Electric Transmission to provide it with enough information to decide whether it should approve an extra £764m of investment in further grid upgrades, including proposals for new links between Hunterston-Kintyre and for the Western Isles.

If financing is approved, work on these projects is expected to begin in April 2012. The additional £764m in funding would bring total new grid investments to £1 billion, representing about 20 per cent of the three companies' ten-year investment plan for hooking up renewable sources to the grid.

However, further grid investment is likely to be required and Ofgem reiterated its commitment to investigate further funding proposals as part of its next transmission price control review process, adding that existing price controls have been extended by a year to April 2013 to ensure that the conclusions of the body's network regulation review can be included in the next settlement.