News / Ofgem strike blow to Viking Energy
PLANS to turn Shetland and Orkney into a green energy powerhouse have been dealt a major blow by energy regulator Ofgem.
The northern isles will have to pay up to seven times more to transmit power to the national grid than mainland generators, an 18 month review has decided.
The decision, which is open to consultation for a further six months, represents a serious setback to plans for Shetland’s 370MW Viking Energy wind farm and Orkney’s marine energy park in the Pentland Firth.
The Scottish government said it shared the industry’s “huge disappointment” that Ofgem had not delivered a solution to support renewable generation in the Scottish islands.
Ofgem’s review of transmission charges Project TransmiT has been looking at how to adapt the current charging regime to help the UK move towards a low carbon energy sector.
Currently power companies generating electricity far from the main population centres pay more to transmit power. Some generators are even paid by the National Grid to transmit across the network because they are so close to London.
In its 69 page review published on Friday, Ofgem said the current system had to change to encourage renewable generation.
However the regulator refused to level charges across the country as it would cost the consumer an extra £7 billion. Capping transmission charges for the islands would also be bad for competition, Ofgem said, while acknowledging it would be the best way to meet UK government climate change targets.
Critics described the position as “unacceptable” and warned that it could affect the economic viability of island-based renewables, though Ofgem denied this would be the case.
Under the proposal it would cost Shetland more than £70 per kilowatt to transmit power from Viking Energy to the mainland, Orkney’s marine park would pay £60, but a Caithness wind farm would pay just £10.
Jeremy Baster, grid consultant to Orkney Islands Council, said the announcement did not come as a surprise as Ofgem believed high transmission charges reflected the cost of connecting islands to the grid. An interconnector for Shetland has been estimated at £300 million.
Mr Baster disagreed that business would still consider developing renewables in Orkney, Shetland and the western isles as a viable option.
“I think it will make people think quite hard about doing projects in the islands and people will consider alternative locations,” he said.
“The Scottish government and local authorities are encouraging renewables, but having these high charges sends out the opposite signal. It’s a serious blow.”
Ofgem has left a window for negotiating some aspects of their recommendation, but their position is unlikely to change significantly.
Scottish energy minister Fergus Ewing said the government would continue to work hard to get the best deal for the islands.
“We share the industry’s huge disappointment that Ofgem has delivered no solution to Scotland’s islands, where there is huge potential to generate clean, green energy that can contribute to Scottish, UK and European targets.
“The Scottish government, together with utilities and developers across the industry, have led the argument for change from the outset and will now press UK ministers urgently to find solutions to unlock the vast natural resources of our islands.”
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