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Ofgem to approve subsea energy link for Shetland but not for Western Isles

Ofgem to approve subsea energy link for Shetland but not for Western Isles

Wind turbines, Arnish, Lewis

Energy regulator Ofgem has said it is “minded to approve” plans for a subsea energy cable between Shetland and mainland Scotland, but plans to reject a similar proposal for the Western Isles.

Costing around £709m, the 600W link would allow Shetland to export electricity from wind farms in the islands and also ensure energy security for Shetland.

Ofgem’s approval is subject to the Viking Energy Wind Farm project planned for Shetland being awarded subsidies through the UK Government’s Contracts for Difference (CfD) auction.

However, Ofgem said it would reject a similar scheme for a £663m, 600W cable from the Western Isles because of a “risk of consumers paying for a significantly underutilised link”.

The proposed link to the mainland was based on two windfarms on Lewis getting CfD subsidies.

The regulator said it would support alternative proposals for either a 450MW or 600MW link that “more appropriately protects consumers”.

Both proposals have been put forward by Scottish and Southern Energy Networks (SSEN).

Comhairle nan Eilean Siar said Ofgem’s conclusion was a “step in the right direction”, but it was “extremely disappointed” that the preference was for a 450MW link.

Council leader Councillor Roddie Mackay said: “The present consultation is a step in the right direction and one that opens potential for significant development opportunity in the islands.  

“I am, however, extremely disappointed at the short-sightedness of Ofgem’s position of being minded to approve a 450MW connection rather than 600MW. 

“I am confident that the present pipeline of renewables projects will quickly fill a 600MW cable and that Ofgem’s fears around 150MW of stranded assets are ill-founded. 

“It will be in the GB consumers interest for a 600MW connection to be built rather than risk the high costs of a second interconnector in a short number of years. 

“I note that Ofgem would consider the case for a 600MW transmission link if consumers were more appropriately protected from the additional costs of funding a potentially oversized link. 

The cost differential between a 450MW connection and a 600MW connection is marginal in the overall connector cost. 

“I would, therefore, urge SSE and LWP to work together to find methodologies to remove the additional costs to give Ofgem the confidence to approve at 600MW.”

Scottish Labour energy spokesperson Lewis Macdonald called on Ofgem to reverse its decision for the Western Isles.

He said: “This initial finding is the wrong one, as it risks preventing the development of the full renewables energy potential of the Western Isles. 

“The wind and wave power potential of the Outer Hebrides is second to none, and there is strong support for renewable energy across the Highlands and Islands.

 “A 600MW capacity link would offer the best means for realising the potential of renewable energy from the Western Isles, to the benefit of consumers across Great Britain, as highlighted by Labour Shadow Chancellor John McDonnell at Scottish Labour Party Conference in Dundee earlier this month. 

 “Ofgem’s initial proposal to limit transmission capacity to 450MW leaves very little headroom for further projects and would frustrate many potential community renewable developments in the Western Isles.”

Scottish Renewables also called for Ofgem to rethink its position.

Senior policy manager Hannah Smith said: “Scotland’s remote islands have some of the best renewable energy resource in the world.

“We welcome Ofgem’s minded-to position on the Shetland interconnector – the lack of which has left promising projects effectively locked out of the energy market for want of a network connection.

“The decision to approve a smaller connection to the Western Isles – which is in an almost-identical situation – does, however, raise questions about whether consumers now and in the future will be denied access to the islands’ potential for low-cost renewable generation.

“Renewable energy development is about delivering environmental, social and economic benefits, so the numbers on this decision are important.

“Analysis by SSEN shows the cost differential between a 450MW and 600MW link is less than 5% of the total cost of the project, but would provide a third more capacity for new renewable electricity generation and deliver an additional 30 per cent of socio-economic benefit to the Western Isles.

“We would urge Ofgem to consider the potential for increased future green energy generation – and the benefits that cheap, clean energy will deliver for consumers – when making a final decision on the Western Isles link and urge all stakeholders to make their voices heard in the consultation process which is now underway.”

Ofgem will make a final decision on the business case for the Western Isles and Shetland links in mid-2019.

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