ENERGY heavyweight SSE has suffered a big setback in its drive to harness the renewable energy potential of Shetland and the Western Isles.
The Perth-based company has been told by Ofgem to rethink its proposals to develop two electricity transmission links connecting the islands with the mainland.
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The links could take excess renewable energy generated on Scotland’s islands to the mainland.
The blow comes after SSE failed to win support for a key windfarm project on Shetland in the latest official funding round.
Ofgem does not think projects that have been approved or are under development will generate enough power to justify the huge expense of installing the transmission links planned by SSE.
The regulator highlighted concerns consumers could end up paying for significantly underutilised transmission links.
Funding rules allow companies to charge customers an added cost on their energy bills to fund upgrades to the infrastructure.
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Ofgem said it was committed to helping deliver the most effective and fastest route to a net zero emissions economy at the lowest cost to consumers.
It encouraged SSEN to submit revised proposals for both transmission links.
Ofgem put the onus on SSE to establish more certainty for consumers that windfarm projects they are designed to serve will go ahead.
SSE put a brave face on the setback, noting Ofgem’s continued commitment to provide a way forward for both the Shetland and Western Isles transmission links.
The head of the company’s transmissions business Rob McDonald, said: “It is now critical that all parties work together to provide the information Ofgem require at the earliest possible opportunity.
“A successful outcome will depend on renewable developers on both island groups demonstrating that sufficient generation will progress to underpin the transmission investment cases.”
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Ofgem’s decision could raise questions about the support regime for renewables, while stirring debate about who should bear the costs of developing assets.
Private sector players such as SSE expect to generate good returns on their investment in renewables.
Former energy minister Brian Wilson recently noted island projects that have won official support under the Contracts for Difference (CfD) scheme might not be built because they did not generate enough power to justify installing an inter-connector.
Ofgem’s decision regarding the £709 million inter-connector SSE proposed to install off Shetland could put pressure on the firm to increase its total investment.
The regulator had said in March it was minded to approve the link, on the assumption the Viking windfarm planned by SSE went ahead. Viking failed to win CfD support.
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SSE noted yesterday: “The potential that remote island wind developers may be able to progress without a CfD has already been publicly acknowledged.”
The company may be expecting Ofgem to give ground.
Highlighting the broader benefits that Viking could deliver, SSE said conditional approval from Ofgem for a revised inter-connector scheme would provide the necessary signal to encourage it to invest in the scheme.
“Viking can harness the excellent wind conditions in Shetland and play a vital role in contributing towards the UK and Scotland’s net zero targets,” said SSE.
Separately ScottishPower said the Government and regulators needed to let energy companies invest in more infrastructure. Current rules led Ofgem to turn down Scottish Power’s plans to invest £42m to encourage people to buy electric cars.
“Fundamentally, you need to be able to charge your car ....If you don’t build and invest in that infrastructure today, people will never have the confidence to switch,” said ScottishPower’s chief executive Keith Anderson.
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