National Grid and Scottish Power have agreed to pay £158m in redress for delays to the Western Link power cable project following an investigation by Ofgem, the energy regulator announced on Tuesday.
Western Link is a massive £1.2bn electricity transmission project consisting of a subsea link between Scotland and Wales, providing an additional 2,250MW of capacity, equivalent to powering more than two million homes.
The regulator said the two-year delay restricted renewable generators in Scotland from exporting electricity to England and Wales, as at times there was not enough capacity to do so.
Because renewable generators in Scotland were unable to transport the energy they were generating, National Grid at times reduced the output from wind farm generators to protect the electricity system, which Ofgem said ultimately led to higher costs for consumers.
National Grid subsidiary National Grid Electricity Transmission (NGET), and Scottish Power Transmission (SPT), part of Scottish Power which is itself owned by Spanish utility Iberdrola, own the licence for the project, and engaged a contractor to deliver it.
The link fell two years behind its expected delivery date of March 2017, to June 2019.
Ofgem said its investigation found that the root causes of the delay were problems with manufacturing processes, installing the cables and commissioning tests, acknowledging that NGET and SPT did not cause or exacerbate the delay.
The regulator did, however, hold NGET and SPT ultimately responsible as licence holders for the delay caused by their supply chain.
It said £15m of the redress package would be paid into Ofgem’s Redress Fund, which is operated on its behalf by the Energy Saving Trust and allowed companies to pay a sum of money to appropriate charities, trusts, organisations or consumers as a result of breaches of licence conditions.
The rest of the redress would be returned via reduced system charges, which are ultimately paid for by consumers as part of their overall electricity bills, meaning consumers would benefit from the redress package through lower bills, 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.”
Scott said “innovative projects” such as the Western Link were “vital” in moving clean energy from where it is produced, to where it is 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.”
At 1139 GMT, shares in National Grid were down 0.28% at 998.4p, while Iberdrola was down 1.37% in Madrid at €9.78.