SCOTLAND’S most northerly islands are set for a second major energy boom after regulators rejected subsea cable plans in move that could unlock the huge potential of wind power to sell to the grid.

Shetland’s vast oil fund which was set up in the late 1970’s has a half stake in a planned 103 turbine wind farm on the islands which would raise around £10 million a year for the local community.

The Viking windfarm would generate 450MW of power is capable of supplying power to nearly 300,000 homes.

It comes after plans to serve Shetland’s energy needs with a 60MW subsea cable from the Scottish mainland were rejected by Ofgem following a relaxation of emissions targets and a government pledge to support for island wind farms.

Scottish and Southern Energy Networks – which owns Lerwick Power Station – confirmed that security of supply to Shetland would be guaranteed until at least 2025 through a combination of its Lerwick Power Station plant and “additional supporting measures”.

Ofgem said it would give more details on its decision to reject the power cable bid by National Grid Shetland Link Ltd and Aggreko’s next week.

In July, the EU postponed by a decade the introduction of stricter emissions targets that were due to affect the power station from 2020. It meant Lerwick Power Station, which serves Shetland, could delay decommissioning of the plant – which was due to close in 2021 – by four years.

Also the UK Government confirmed last month that wind farms on remote islands will be allowed to compete in an auction to sell electricity to the National Grid from 2019.

This is seen as a catalyst for a new giant 600MW interconnector cable which can carry surplus power from the turbine site to the mainland – a potentially lucrative development for Viking Energy’s proposed windfarm.

Drew Ratter of Shetland Charitable Trust which runs the island's oil fund said the move could potentially double the amount of cash distributed to local groups every year.

He said: “At present we hand out around £9million but if the windfarm goes ahead this could increase significantly. This is just the start though, there are a few hurdles to clear yet but this is certainly a welcome development.”

Shetland Isles Council development committee chairman Alastair Cooper added: “Whatever size of cable we get for Shetland, I want it to be a cable that can transmit both ways. The problem we had with the National Grid solution was that it was a one-way cable; it could only import, it couldn’t export.”

Viking Energy Shetland’s head of development Aaron Priest said: “We have an endless resource of wind, wave and tide and the Shetland community should get to use it to generate new jobs and income.

“The UK Government’s decision to allow island projects to participate in the next CfD round was pivotal and engagement with government on the detail is ongoing.”