OFGEM Ofgem consults on Shetland and Western Isles links (1998T)
March 19 2019 - 3:00AM
UK Regulatory
TIDMSSE
RNS Number : 1998T
OFGEM
19 March 2019
OFGEM
Ofgem approves Shetland link and would support alternative
Western Isles link proposal that provides better value for money
for consumers
Ofgem is minded to approve a proposal by Scottish and Southern
Energy Networks (SSEN) to build a 600MW subsea electricity
transmission link from Shetland to mainland Scotland.
The link would allow new wind farms on Shetland to export
renewable electricity to the rest of Great Britain and help ensure
security of supply on the islands.
SSEN estimates the link would cost around GBP709 million and
would be completed in 2024. Ofgem is consulting on approving the
link subject to SSEN demonstrating, by the end of 2019, that the
Viking Energy Wind Farm project planned for Shetland has been
awarded subsidies through the UK Government's Contracts for
Difference (CfD) auction. This would protect consumers from the
risk of paying for a link that it is bigger than needed.
Ofgem is minded to reject SSEN's separate proposal to build a
600MW transmission link to connect the Western Isles to the
mainland based on two Lewis Wind Power wind farm projects being
awarded subsidies through the CfD auction because of the risk of
consumers paying for a significantly underutilised link
Ofgem would instead support an alternative proposal that more
appropriately protects consumers from the additional costs of
funding a potentially significantly underutilised link. This could
be either a 450MW or 600MW transmission link depending on any
revised proposals SSEN put forward.
SSEN's initial estimate for the proposed Western Isles 600MW
link put the cost at around GBP663 million, and would be completed
in 2023. SSEN's equivalent initial estimate for the 450MW link put
the cost at around GBP617 million.
Ofgem estimates that the costs to consumers of building the
Shetland and Western Isles links could be reduced significantly.
Ofgem plans to reduce costs by seeking to replicate the outcomes of
competition. The regulator is minded to use the 'Competition Proxy'
model, setting the revenue that SSEN can earn from building and
operating these links based in part on the regulator's experience
in cutting the costs of connecting offshore wind farms to the grid
by tendering the ownership of these links.
Ofgem regulates network companies including SSEN, which is a
subsidiary of SSE. All energy consumers pay for the cost of
investment in new capacity through their energy bills and the
regulator ensures that it obtains the best deal possible for
them.
Ofgem will make a decision on the business case for the Western
Isles and Shetland links in mid-2019. It will confirm whether it
will use the Competition Proxy model at the same time.
Notes
1. Final Needs Case consultation - Western Isles: The Lewis Wind
Power wind farm projects have an estimated capacity of 340-369MW,
depending on planning consents secured.
2. Final Needs Case consultation - Shetland: The Viking Energy
Wind Farm project has an estimated capacity of 412-457MW, depending
on planning consents secured.
3. Ofgem decided to use the 'Competition Proxy' approach for
National Grid to deliver the upgrade needed to connect the new
Hinckley Point C nuclear power station.
4. In December Ofgem published a consultation on the regulator's
proposed changes to SSEN's plan to build a transmission link to
connect Orkney to mainland Scotland. The consultation closed last
month and Ofgem will announce its decision in due course.
Further information
For media, contact:
Claire Duffy: 0141 331 6390
Media out of hours mobile: 07766 511470 (media calls only)
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END
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