The National Wealth Fund will provide £600 million in funding to Iberdrola to upgrade the UK’s electricity grid via its subsidiary ScottishPower.
The funding will support, amongst other things, ScottishPower’s development of the Eastern Green Link(EGL) projects 1 and 4.
At the International Investment Summit in October, during which Iberdrola committed to double its investment in the UK through its distribution network operator Scottish Power, the government announced that the UK Infrastructure Bank would become the National Wealth Fund (NWF).
NWF’s investment into Scottish Power forms part of a £1.35 billion financing package led by Bank of America as sole debt arranger, along with BNP Paribas, Caixabank, Lloyds Bank, NatWest and Banco Sabadell as lenders.
The funding, deployed via NWF, will go towards the delivery of seven ‘priority’ transmission grid upgrade projects by Scottish Power.
The National Energy System Operator’s (NESO’s) independent advice to government on achieving clean power by 2030 estimated that up to £60 billion of investment is required to support the increase in renewable energy sources on the electricity grid.
EGL1 and EGL4 will see interconnectors between Scotland and the North-East of England and Norfolk to transport the glut of wind generated electricity in Scotland to other parts of the UK where it is needed.
The transmission boundary between Scotland and England is very constrained, where the grid cannot facilitate transporting the electricity generated by wind power plants in Scotland. This means that often, wind generating stations are paid to power off so that the grid is not overwhelmed.
ScottishPower is aiming to reduce congestion costs by ensuring surplus renewable energy can be redistributed efficiently to meet increased forecast demand.
Alongside the interconnector projects, NWF’s funding will deliver grid upgrades in five ‘key’ locations across Scotland, including new substations, overhead line reconfiguration and the improvement of overhead transmission cables to increase capacity and resilience.
Chancellor of the exchequer Rachel Reeves, who launched the NWF, said the funding is the government’s Plan for Change “in action”.
CEO of NWF, John Flint, said: “Upgrading the power grid is one of the most significant barriers to decarbonising our economy, and the scale of investment needed to address this challenge is substantial.
“Our financing will support some of the most vital grid upgrades that will have a major impact on the transition to a renewables-based electricity system and help address the grid constraints that make electricity more expensive for businesses and consumers.”
NWF’s aim is that its funding will mobilise private finance in support of Iberdrola’s plans to invest £24 billion, through ScottishPower, between now and 2028.
