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Council / Viking Energy decommissioning bond agreement ‘should have been in place’ – but isn’t

Photo: Steven Christie

SHETLAND Islands Council (SIC) has defended its decision to allow construction of the Viking Energy wind farm to commence without having agreed a decommissioning bond with developer SSE Renewables.

The move appears to be in breach of a specific planning condition attached to the Viking Energy consent, which says:

“No development shall commence on site until the [Viking Energy] partnership has provided documentary evidence that the proposed bond or other financial provision in is place and written confirmation has been given by the planning authority [Shetland Islands Council] that the proposed bond or other financial provision is satisfactory.”

Agreement of a decommissioning bond is required to be in place for large energy projects to ensure that sufficient funds are guaranteed to allow decommissioning and restoration of the site at the end of the development’s life.

Sustainable Shetland, the group that opposes the construction of large wind farm projects in the isles, said the revelation was another example of poor governance on behalf of the council.

Developers and planning authorities do not necessarily agree on the value and the details of the bond and hence negotiations and independent assessments usually take place to come to a joint position.

This process is still ongoing for Viking Energy yet permission to start construction work of the huge and controversial project was given earlier this year.

Director of development services at the SIC, Neil Grant, said he did not feel the council’s position had been undermined or weakened by allowing the developer to commence construction work prior to an agreement.

And he confirmed that ideally “the bond should have been in place”, before giving green light to construction work to commence, and added that it would take many more months before an agreement is expected.

It appears that both sides have very different views on the value and mechanisms of this particular decommissioning bond, although neither party has released any details due to commercial sensitivities.

However, typical values for recent mainland based wind farm decommissioning guarantees are between £30,000 and £60,000 per installed megawatt.

With construction costs around 30 per cent higher in Shetland than on the Scottish mainland, the decommissioning value could be as high as £78,000 per MW, or almost £35 million for the entire Viking Energy wind farm.

A five-year-old wind farm bond assessment for a single turbine at East Whitelee, part of East Ayrshire Council, estimated the decommissioning cost for 800kW turbine at £110,000.

Grant said it was vital to come to a proper agreement with the developer, as the value and the finer detail of the bond were important for securing the long-term interests of the community.

He added that although it would have been advisable to have the bond in place prior to commencement, he said the council would work with the developer to “achieve compliance”.

Grant said he was confident that the planning authority would come to an agreement with SSE Renewables by working with the developer.

SSE Renewables said it had submitted their proposal last year and discussions were ongoing.

“Proposals for the value and mechanism for the decommissioning guarantee were originally submitted by Viking Energy Wind Farm (VEWF) to Shetland Islands Council in 2019 and discussions have been ongoing since,” a spokesperson said.

“The matter currently rests with the council. VEWF is aware that the council is taking independent expert advice on the terms and nature of the decommissioning guarantee.”

Chairman of Sustainable Shetland Frank Hay said: “We were under the impression that such a bond had to be formally agreed in writing before any construction work would be allowed to start.

“This appears to be another example of the SIC aiding their former partners in the Viking wind farm by not strictly enforcing planning regulations, the formal approval of the bond was a clearly stated condition of the planning consent.

“By allowing construction work to start it is likely that the SIC have weakened their negotiating position and this is, sadly, just another example of very poor governance by them.”