ENERGY regulator Ofgem has approved Scottish and Southern Electricity Networks’ (SSEN) proposal to contribute towards the cost of the long-mooted interconnector between Shetland and the Scottish mainland.
The proposal would see SSEN Distribution provide a material financial contribution of £251 million towards the proposed 600MW subsea transmission link.
That contribution is based on the value of services that a link – estimated to cost around £709 million – would provide to SSEN’s distribution customers on Shetland.
SSEN said the cable would “secure Shetland’s future security of supply at the lowest cost to consumers, saving around £140m when compared to the cheapest alternative market-based solution”.
The energy giant has been working to identify the future security of supply solution for Shetland for a decade in anticipation of the closure of Lerwick Power Station, which is nearing the end of its operational life and is expected to cease full duty operations in 2025.
The interconnector allow the import and export of energy and it would pave the way for large wind farms to be developed in Shetland by connecting the isles to the national grid. It has been dependent on the 103-turbine Viking Energy project going ahead.
Earlier this year the wind farm failed in a bid to win government subsidy, meaning that SSEN – which is behind the proposed cable through its transmission arm as well as Viking – was asked by Ofgem to submit revised proposals for Shetland’s energy needs.
The team behind Viking Energy said it welcomed Ofgem’s decision, saying that a timely decision on the energy company’s contribution was “critical to allowing the project to move forward”.
The wind farm partnership said it now “awaits Ofgem’s decision on the revised Needs Case for the transmission link, expected in the coming months, in order to progress Viking Wind Farm in line with its planned build programme”.
In response to Ofgem’s decision on the financial contribution to a cable, SSEN Distribution will also now progress preparation of the Shetland standby arrangements which will complement the transmission link.
SSEN said the decision was a “critical step forward in securing the network investment required to meet Shetland’s future energy and economic needs”.
It added that the decision provides Shetland’s renewable developers the “clarity they require about their future network charges, helping them make necessary financial investment decisions and provide the evidence required by Ofgem for the regulator to approve the proposed transmission link to the Shetland Isles”.
Colin Nicol, SSEN’s managing director for networks, said: “We welcome today’s decision by Ofgem to approve our whole system solution for Shetland, which is a positive step toward meeting Shetland’s electricity needs at a much lower cost to energy consumers than alternative options.
“The proposal will support future security of supply as well as unlocking Shetland’s renewable potential. Once built, the transmission link and the low carbon output from renewable generators on Shetland will also help support the electricity needs of Shetland’s oil and gas industry and its wider economy.
“Our transmission business will shortly re-submit to Ofgem an updated Needs Case for the Shetland link and we look forward to working with Ofgem and Shetland developers to progress this proposal in a timely manner.”
It is expected that if the proposed 600MW cable link is approved, for 17.4 per cent of the time, supply on the island would need to be directly supported by imports via the transmission link.
Ofgem said the next steps for the regulator is to consider any revised final needs case submissions for Shetland.
“While we will endeavour to consider any potential revised Final Needs Case submission as soon as practicable, the length of the review and decision-making process will be affected by the quality of the information and analysis we receive and the robustness of any case put forward,” it said.
If it approves a final needs case for Shetland, Ofgem would then undertake a ‘project assessment’ process to determine the efficient capital costs for the project.
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