Ofgem has rejected plans for an electricity cable between Shetland and mainland GB, because a change in environmental legislation means it is not needed urgently. The regulator said cheaper options could now be employed and would be more flexible to changing circumstances.

The link was required because Shetland’s Lerwick power station will fail pollution standards initially due to apply from 2020. In May this year system operator SSEN approved the new connection, to be built by National Grid and Aggreko, to replace the plant.

However, a change under the EU’s Industrial Emissions Directive, which now has a derogation for ‘small, isolated systems’, means the power station need not close before 2030. Ofgem says that it will be “significantly cheaper” to maintain supplies until 2025 using the existing power station and additional supporting measures.

The regulator also said that the potential to install more wind farms had changed the business case. In October, the government said that wind farms on remote islands such as Shetland could compete for a Contract for Difference in the next auction, planned for 2019. Delaying installation of a distribution link ”allows for the possibility of further savings being realised if a more integrated solution comes forward, notably if a transmission link is needed following the next CfD round,” Ofgem said.