National Grid PLC (LSE:NG.) has been fined for the two-year delay to the Western Link power cable project which led to renewable generators in Scotland being unable to transport energy they were generating and consumers facing higher costs.
Energy regulator Ofgem said that National Grid and Iberdrola-owned Scottish Power will pay £158mln in redress for delays to the £1.2bn Western Link power cable project following an investigation.
The 239-mile Western Link subsea link from Ayrshire via the Wirral peninsula and through to North Wales is designed to provide 2,250MW of capacity, equivalent to powering more than 2mln homes.
National Grid and Scottish Power engaged a contractor to deliver the contract, which was due to be commissioned by March 2017, but was not delivered until June 2019.
“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”, the regulator said.
This led to National Grid sometimes restricting the output from wind farm generators to protect the electricity system, which Ofgem said led to higher costs for households.
Following its investigation, Ofgem said the power companies did not cause the delay, which arose from problems with manufacturing processes, installing the cables and commissioning tests, but they were ultimately responsible as licence holders.
Most of the redress funds are destined to be returned via reduced system charges for consumers, Ofgem said.
It added that it recognised consumers had benefited by a further £100m because of the companies’ financial management of the project and their contract management strategy.
“To deliver the UK’s climate change ambitions, more of our electricity will come from renewable generation,” said Ofgem director of enforcement and emerging issues Cathryn Scott.
“This is already happening, with offshore wind and other projects in development.”
While Western Link was one of the “vital” projects needed to get green energy to where it is needed, she said these projects “must be delivered on time and to the standards agreed” otherwise licensees will be held accountable.