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Energy / Anxious wait for Ofgem decision following CfD setback

Lerwick power station is set to produce electricity well into the next decade.
Lerwick power station is due to close in 2025.

SHETLAND Islands Council is seeking assurances from Ofgem that the isles’ future energy needs are being properly considered when the energy regulator finally makes a decision on Shetland’s ‘Needs Case’, which is expected to be published later this month.

Replacing the ageing Lerwick power station with a subsea cable to Caithness, including a back-up facility on the islands, is dependent on whether Ofgem approves the construction of a 250 kilometre interconnector, estimated to cost in the region of £710 million.

Scottish Hydro Electric Power Distribution (SHEPD), the company responsible for keeping the lights on in Shetland, would contribute to the cost of the transmission link.

However, at the moment the construction of that 600MW subsea cable depends entirely on whether the 457MW Viking Energy wind farm goes ahead.

With all three consented Shetland wind farm projects (Viking, Beaw Field and Mossy Hill) having failed to secure government subsidy under the Contracts for Difference (CfD) mechanism, there are now questions as to how – and at what timescale – any of the projects can become a reality.

SSE Renewables, the company that runs the Viking Energy project, has said that it is still committed to building the wind farm, but the overall timescale is somewhat uncertain.

Peel Energy, which owns the Beaw Field and Mossy Hill projects, said it is looking at “alternative ways of delivering these wind farms”.

If Ofgem approves SHEPD’s contribution to the needs case, and Viking commits to take its project forward, the transmission link will proceed.

If not, an alternative solution would need to be identified, Scottish and Southern Energy said on Friday.

“Following the outcome of the 2019 CfD auction, in which the main Shetland developer, Viking Energy, confirmed its continued commitment to delivering their project, SSEN now awaits the final decisions from Ofgem on both the transmission link Needs Case and SHEPD’s proposed contribution to the transmission link,” a SSE spokeswoman said.

Shetland Islands Council chief executive Maggie Sandison said: “A new solution for a secure energy supply to Shetland must be identified and implemented by 2025.

“Shetland Islands Council is seeking assurance from Ofgem that their decision on the final needs case for the Shetland transmission project considers the wider impacts and addresses the uncertainty our community faces on its long term energy solution.”

Ofgem said it would not comment until it has published their decision, expected later this month.