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Ofgem blocks new power station plans

An image of the new Rova Head power station proposed by SHEPD last year.

PLANS to start building a new 120 megawatt power station for Shetland have been set back by more than a year after the energy regulator rejected a submission by Scottish Hydro Electric Power Distribution (SHEPD).

Last July the utility submitted detailed proposals for a modern “dual fuel” power station to be built at Lerwick’s Rova Head that could be initially run on light fuel, and then on gas piped in from Sullom Voe.

The new power station was to be linked into Scottish & Southern Energy’s “smart grid” project NINES (Northern Isles New Energy Solutions), which aims to reduce demand and allow more renewable energy to be generated locally.

The plan was approved unanimously by Shetland Islands Council’s planning committee in February, after hearing it would significantly reduce the islands’ carbon footprint.

However this week energy regulator Ofgem told SHEPD they had not done enough to prove they had come up with the most economic option.

The regulator wants to limit the cost of producing electricity in the isles as much as possible, to reduce the amount it has to be subsidised by the rest of the country’s consumers.

Shetland’s existing 67 megawatt power station was built in 1953 and is due to close in 2017. It runs on heavy fuel imported to Lerwick as Shetland is not connected to the national grid.

SHEPD now have 12 months to resubmit their bid, which must include a new open consultation and competitive market process to find “the lowest cost and most efficient solution”.

Once submitted, Ofgem will have to assess the application after which there may have to be some kind of competitive tendering process, all of which will take months.

This will be followed by planning applications to the Scottish government, which will also go before Shetland Islands Council.

Head of operations Rodney Grubb said SHEPD were “disappointed” by the decision, but were determined to “work positively” towards producing a new submission.

He said they had analysed more than 20 potential options before proposing the dual fuel power station.

“We believe that our proposals represented the most economic solution for the islands – and the right solution to deliver long term security of supply, greater efficiency and improved environmental performance,” he said.

“In the coming months, we will consult with the community in Shetland and with all our stakeholders to seek views on the full range of options which Ofgem has asked us to seek from the market – and to invite feedback on further solutions.”

In their letter Ofgem said they were not persuaded that SHEPD had “sufficiently tested the market for an efficient and economical solution”, or justified the cost of building their dual fuel power station.

They added that alternatives had not been adequately considered, and the reason for abandoning other options had not been explained well enough.

The Ofgem letter can be found here.

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