Community / Charitable trust’s envisaged earnings from Viking wind farm described as ‘significant’ and ‘comfortable’
THERE will be a “significant and regular” return for Shetland Charitable Trust from the operation of the Viking Energy wind farm, trust chairperson Dr Andrew Cooper has told Shetland News.
And the return the trust will make on an annual basis for the lifetime of the project is not coupled to the size of its original investment of just under £10 million, but on the value of the wind farm’s output.
The payments to the trust, likely to start flowing in 2024, are in addition to £2.2 million which will be paid annually by SSE Renewables into the Shetland Community Benefit Fund.
In a wide-ranging interview, the first since he took over at the helm of the trust in 2019, Dr Cooper explained how the decision not to further invest in the 103-turbine project, currently being built in the central mainland, came about.
Dr Cooper said when SSE Renewables decided to go ahead with the project in May 2019 despite not knowing the outcome of the bidding process for government guarantees under the Contracts for Difference (CfD) mechanism, it would not have been prudent for the charity to invest further.
The chairman said because of SSE Renewables’ decision to go ahead at the time it did the trust could not follow as “the risk of the investment” had changed.
A 45 per cent community stake in the project was originally owned by Shetland Islands Council but transferred to Shetland Charitable Trust in 2007.
Dr Cooper said that in any case the sums of money required to invest in the project as an equal partner of SSE would likely have been inappropriate for an organisation such as Shetland Charitable Trust.
In June 2020, SSE Renewables announced that it was ready to invest £580 million into the construction of the wind farm. The building work has been ongoing for the last two years.
The trust will receive a percentage of the value of the electricity produced by the wind farm, an arrangement described by Dr Cooper as a “very comfortable return”.
The arrangement means the trust will benefit from the currently extremely high prices for wholesale electricity should these continue until the end of 2024 when the wind farm is scheduled to become operational.
“Because the decision of SSE to go ahead of the project despite not getting the Contracts for Difference meant the risk of investment changed,” the former GP said.
“We have an agreement that we will get a preferred return on the output of the wind farm.
“A percentage of the output of the wind farm will come to us – and although we can’t say how much that will be, it will give us what is a very comfortable return on what is a £10m investment.”
Dr Cooper was unable to reveal the finer details behind the “complex” formula used to calculate the trust’s share as these have been agreed by both sides as “confidential commercial information”.
A first indication of what the trust’s investment in Viking Energy will actually be worth to the community is likely to be revealed in the organisation’s annual report for the financial year 2024/25.
Dr Cooper added that the arrangement with SSE will provide SCT with a regular income stream and will help the trust to meet its annual commitments of providing funding to a wide range of local charities and organisations.
Two months ago, SSE Renewables was offered a CfD contract of £46.39/MWh for half of the wind farm’s generating capacity.
Meanwhile, the current wholesale price for electricity for next day delivery is in the region of between £200 and £300/MWh after highs of above £500/MWh last month.
Asked if he would like to go back to renegotiate the deal, Dr Cooper said that this was not possible.
“We can’t go back on this. Nothing that has happened since would make it feel we should have done something different,” he said.
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