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Letters / Another Darien scheme?

In reply to Craig Johnson’s letter How to sustain Shetland (SN, 2 May 2012)

Sustainable Shetland is against the Viking Energy (VE) project as a whole as we believe it is the wrong project for Shetland. But, we also believe that the Shetland Charitable Trust (SCT) puts SCT money at unnecessary risk by their involvement in the scheme. It is hailed as a community project but there has never been any element of community control.

As for Q2 we have answered this many times. We would support a whole mix of renewable energy projects, wind, wave, tidal and solar but these would be schemes, which are sustainable and planned so as not to have any impact on people’s health or destroy our environment.

I assume from your question 3 that you support VE because you think it is going to provide a comfortable lifestyle for your family and the whole of Shetland in the years to come.

I applaud you for this because we both want the same thing. It is just that we approach it from different angles. You think it will make lots of money and I think it could possibly do exactly the opposite. I will tell you why I think this.

The problem is there are too many unknowns and no guarantees that this project will make the profits VE claims. It is very high risk because these profits are based on a number of projections all working out in VE’s favour. One of these is transmission costs. This is the price VE have to pay to export electricity. At present, these costs are unknown. The further a supply is from the market the more it costs to get it there. With more wind farms being built closer to Scotland’s central belt will it be cost effective to drag power from here when there is a ready supply nearer to hand? VE currently have no contracts in place to sell electricity. They will have to compete with other providers for this.

VE do not know the final cost of building the wind farm. However, you can be sure that when a project cost runs to £100’s of millions it can very easily rise by tens of millions. This is mostly money the SCT has to borrow. If you have a mortgage on your house, you will know how much the repayments are. Imagine continually having to make repayments on over £200m if the returns are not as you hoped.

The VE wind farm is very dependent on an artificially high government subsidy continuing for the next 25-30 years.

I would be more confident about the project making money if there were an indication that the subsidy would continue to grow, but the opposite is true. Last year in Denmark, a country which has used wind power for many years, the government finally realised it could not afford to keep paying this “very heavy burden now placed on consumers to support wind power” and announced it would phase out subsidy to onshore wind. They made this decision after increasing concern over the value of money offered by onshore wind.

In January this year, Spain halted its subsidies to all new renewable energy projects. Germany is considering a similar sanction.

On 1st March, this year PM David Cameron admitted onshore wind farms had been “over subsidised and wasteful of public money” and announced that the subsidy would be cut.
Already, in the UK, subsidies to solar power have been cut by 50%.

The Burradale scheme was established before governments woke up to the fact that these massive wind farms are not sustainable in the long term. Because of this, they were able to take advantage of the huge subsidies paid out and the scheme has made plenty of money. I don’t believe this will happen in the future.

In the meantime the headlong rush to fund a project which will use up a third of SCT funds plus having to borrow over £200m more keeps on charging ahead. Scottish and Southern Energy (SSE) can maybe afford to lose £200m but the SCT cannot.

From the headless panic in the SCT in recent days, it would appear that far from being an equal partner in this scheme they have actually been prepared to breach the charities regulator’s rules in their rush to appease SSE. An equal partner should have an equal say on how fast the project moves ahead you would think. If it is an equal and honest partnership agreement then one side cannot, and should not, force the other to do anything. Is that the way this is proceeding?

What happens to the SCT if VE makes huge losses, or the project fails because of regulation, subsidy, engineering problems, and cable problems? The SCT would have gambled and lost the inheritance of, not just the current generation, but also the generations to come.

A recent letter drew comparisons with the infamous Darien scheme. This was a financial gamble taken by Scotland in the late 1690s. It was a project to set up a trading centre in Panama to make Scotland a world leader in trade. It would cost a quarter of Scotland’s wealth but it would be money well invested because it would bring “untold riches”. The investors were convinced it would be a stunning success. It was a catastrophic failure, which almost bankrupted Scotland.

I wish you and your family a happy and healthy future but I am not convinced it will be by investing in Viking Energy.

Andrew Halcrow
Sustainable Shetland
Burra Isle