Written evidence submitted by EDF Renewables (NRG0003)

EDF is the UK’s largest producer of low carbon electricity.

As a key part of EDF, EDF Renewables is one of the UK’s leading renewable energy companies, specialising in wind power, solar and battery storage technology. Working closely with its research and development division, it is developing future innovations, including hydrogen technology. We’re also investing in decarbonising the UK’s transport sector and developing vital power infrastructure for charging electric vehicles.

Across the UK, EDF Renewables has 14GW of projects in some form of development across all technologies and has more than 600 people; over 240 of which are based in Scotland.

In Scotland, EDF Renewables UK currently has 11 onshore wind farms in operation and one in construction. This in addition to its flagship Neart Na Gaoithe offshore wind farm in construction in the Firth of Forth, due for completion later this year.  This amounts to around 530MW in operation and at least 1.5GW in planning and development.

EDF UK With over five and a half million electricity and gas customer accounts, including residential and business users, EDF aims to help Britain achieve net zero by building a smarter energy future that will support delivery of net zero carbon emissions, including through digital innovations and new customer offerings that encourage the transition to low carbon electric transport and heating. EDF also operates low carbon nuclear power stations and is building the first of a new generation of nuclear plants.

Scottish Affairs Committee questions:

4. What actions should the UK and Scottish Governments take to ensure the necessary generation and transmission infrastructure to support the development of Scotland’s renewables sector?

Scotland is not unique in the challenges it faces in the deployment of generation and transmission infrastructure. However, several challenges are intensified as much of the generation required to deliver net zero (particularly for onshore wind) has been or is currently being developed in Scotland. In order for Scotland to reach net zero and its full potential for low carbon technologies, key deployment challenges will need to be overcome and collaboration between the Scottish and UK Government is key to enable the necessary changes.

Key deployment challenges include the following issues.

Planning delays

• Planning delays are a significant barrier to renewable energy deployment.  We welcomed the Scottish Government’s commitment of 12 month planning timescale in the 2023 Programme for Government. We also welcome the recent consultation between UK Government and Scottish Government on improvements to consenting and reducing the consenting timescales.
• With turbine technology advancing, larger but fewer turbines are needed to generate most efficiently. Planning guidance needs to be updated to reflect this.

Route to Market - Contract for Difference

The CfD scheme has been very successful in reducing generation costs while protecting consumers against high electricity prices. To maximise its effectiveness going forward, our headline recommendations for immediate CfD reforms, that could be implemented for AR7 are:

• Increase CfD duration to 20 years, to further reduce strike prices.
• Provide two additional delivery years for all auction pots and technologies, to maximise project flexibility and manage supply chain delivery risk.
• Increase the solar Target Commissioning Window from 3 months to 12 months, to match all other technologies and reduce risk for larger solar projects.
• Set out a multi-year schedule for future CfD allocation rounds, with target deployment volumes for each technology.

TNUoS charges for generation

• Currently transmission charges, in the form of TNUoS, fail to provide a reliable investment signal as they are not sufficiently predictable. The same is true for transmission losses another important investment signal.
• As a result, the current level of uncertainty in TNUoS charges is unacceptable, risking critical low carbon investment.
• The recent NGESO 10-year projection has reinforced this concern with an unexpected doubling of TNUoS in some locations and significant falls in other areas compared to the 5-year forecast.
• In Scotland this equates to a significant increase in the onshore wind CfD strike price that is required to allow projects to proceed.
• This degree of uncertainty seriously undermines investor confidence and risks an investment hiatus or uneconomic development.
• This is not an issue for the longer term – investment decisions are being taken now to support Government’s 2030 offshore wind targets and 2035 decarbonised power sector target. Urgent action is needed to address this uncertainty.
• We support the latest NESO proposal for a grid code modification, to set a cap and floor on TNUoS charges. This could provide the certainty and stability that developers need, but getting the details right will be essential.
• A longer term, enduring solution for TNUoS charges will be key output from the REMA process.

REMA decision on future market design

• EDF Renewables supports the need for a review of future market arrangements. It is important to consider the full range of options, including zonal pricing in place of the current national electricity market.
• A key concern is that the benefits from introducing zonal pricing are uncertain and subject to many assumptions.
• In contrast, it is very certain that zonal pricing will create significantly greater risks for investors. In response, they will look for higher returns, increasing the cost of capital.
• Modelling studies have shown that just a small increase in cost of capital would cost more than even the most optimistic of benefits from a zonal market.
• Right now, the priority for the electricity sector is to rapidly increase low carbon generation, to deliver Clean Power 2030 and beyond.
• Given that priority, our view is that it is not worth taking the risk of moving to zonal markets. It will have a major negative impact on investor confidence, for uncertain benefits.
• Further support for discounting zonal markets as an option is provided by analysis by EDF and trade associations. This has demonstrated that an enhanced national market can in practice deliver similar benefits to zonal markets, with far lower impacts on investment.
   

5. How can GB Energy, and other ways of backing industry (including funding), most effectively support employment, economic growth and the development of clean energy supply chains in Scotland?

The UK is in a great position to maintain its position as a world leader in renewables, and already has a strong industry with expertise in many areas.

Great British Energy could play a positive role in this. To do this, it needs to focus on the areas where it can add the most value such as by minimising the development risk of projects and increasing community support as projects are built, whilst also providing a refinancing option.

Taking stakes in other homegrown technologies, such as floating offshore wind may not increase deployment speed but could allow Great British Energy to balance its portfolio.

Similarly, a role in emerging green infrastructure like hydrogen or carbon capture would be costly but could lead to returns as these technologies expand over the next decade. A clear industrial strategy is likely to deploy these technologies faster than the addition of capital alone.

We would like to see Great British Energy focus its investments:

• At the development stage to minimise risk, divesting before the Contracts for Difference auction to avoid concerns of ‘double subsidy’.
• At Final Investment Decision, to bring on a partner who can lead community consultation, materially affecting risk profiles of onshore projects.
• At refinancing, helping developers to recycle capital.

Opportunities

We believe that if the focus and remit of Great British Energy is set appropriately, it will provide us with additional opportunities to accelerate the transition away from fossil fuels through closer collaboration.

Great British Energy’s involvement in delivering clean power may also have wider benefits, in areas such as helping to increase community support for projects that it is involved in, reducing development risk. According to polling by Public First, a publicly owned company could be seen as a more trusted body to run community consultation.

6. How should GB Energy work with the Scottish Government and other Scottish bodies to identify appropriate funding and other mechanisms?

We believe that GBE could and very likely will deliver benefits across Great Britain but there is currently only limited obligation to consult on overlapping responsibilities.

There are similar challenges faced across England, Wales and Scotland with different approaches in some areas taken in each. We would very much like to see Great British Energy take learnings from what is working well in each nation.

Crown Estate Scotland

We welcome the partnership between The Crown Estate and Great British Energy, with a focus on accelerating offshore wind deployment.

The details of the partnership are being developed and we recommend early consultation with developers and other stakeholders to ensure we maximise the benefits of this opportunity. There is clarity needed on the role of Crown Estate in devolved nations, such as with Crown Estate Scotland, and the role they will play. Early discussions have taken place on this.

7. What does a just transition look like for workers and communities across Scotland’s highland and island communities, and what role might community energy and community benefits play in this?

A just transition across Scotland must be gradual and robust. The skill and expertise required within renewables are similar to that of the oil and gas sector.

EDF Renewables wants to encourage people to have opportunities stay in their local areas and we are passionate about creating local jobs for local people and maximising the economic benefit of our developments.

Outside of employment opportunities both directly and within the supply chain, communities also benefit from community benefit funds, providing vital funding to a wide range of local initiatives and charities that play an important part in their local area.

Community Energy

Community energy projects can increase support for renewable energy projects. By offering collective ownership, a developer can increase community buy-in which may reduce the risk of objection during consultation phase and can have positive socio-economic benefits by investing back into the communities in which they operate. It also encourages development of renewables closer to communities, which may reduce pressure of grid networks.

However, there are a number of barriers to scaling community energy from regulatory and legal issues to how communities can access funding as well as inconsistent approaches across different regions. Government can play a key role in facilitating community energy, for example by working with all stakeholders on guidance and advice for funding access and reviewing the legal frameworks for investment in community energy. 

January 2025