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Energy / Ofgem decides ‘efficient cost’ of interconnector project

A photo of the Kergord converter station construction site taken in November last year.

THE COMPANY building the 600-megawatt Shetland interconnector, as well as the Kergord converter station, will be able to recover £642 million of the project cost from UK consumers – £33.6 million less than SSEN-Transmission had asked for.

In a decision note published on Tuesday, energy watchdog Ofgem said that following consultation it had carefully reviewed the company’s submission and was satisfied to provide the company with a total capital cost allowance of £641.8 million.

One of the regulator’s key roles is to protect consumers from high energy prices while also overseeing the transfer to net-zero.

Ofgem also ruled that the Shetland link needs to be completed no later than 31 December 2024 as otherwise penalties would apply.

SSEN Transmission welcomed the decision saying the Shetland cable, in combination with the existing Caithness-Moray HVDC link, represents the most significant investment ever in the electricity transmission network in the north of Scotland.

Ofgem reduced the requested allowance for general project risk, Covid risk and Brexit risk by £30.3 million, while the remaining £3.3 million relates to planning, consent, engineering and construction.

In breaking down the £3.3 million figure Ofgem said it was prepared to grant just £400,000 of the £900,000 requested for hot meals served to the workforce in Shetland.

They also declined to grant £600,000 incurred from the purchase of land to establish access to the Upper Kergord site due to delays caused by VEWF [Viking Energy Wind Farm] to be included in the allowance, saying that it “should not be borne by consumers”.

Managing director of SSEN Transmission Rob McDonald said: “We welcome Ofgem’s decision, which recognises the clear consumer benefits associated with our robust, competitively tendered procurement exercise.

“Upon completion, the Shetland link will enable up to 600MW of clean, renewable electricity, to connect to the GB energy system, making a critical contribution to decarbonisation goals as we continue to deliver a network for net zero emissions.

“It will also support Shetland’s future security of supply with clean, green electricity, reducing reliance on thermal power stations and further supporting decarbonisation goals.”

Meanwhile, Scottish Power and National Grid have agreed to pay a £158 million “redress package” for a two-year delay (2017 to 2019) in the Western Link project, a subsea cable designed to transport green energy from Scotland to England and Wales.

There is ongoing local concern over the reliability of a single subsea cable connecting Shetland with the UK from 2024 following reports of outages and faults on the Western Link cable.

However, during a visit to the Kergord construction site earlier this year, project director John Scott responded to questions from Shetland News on the matter, saying: “In our experience with the Caithness to Moray cable – the most directly relevant one, which we installed in 2018 – we had no issues at all with the cable being damaged or being out of service.

“[We have] 99.8 per cent availability of the link; not just the cable, but all the hardware at both ends.”

Lerwick Power Station will remain on standby, should the cable fail, until at least 2035.