Ofgem gives the nod to Shetland link, aims to reduce costs with ‘competition proxy’

Ofgem is ‘minded to’ give the go-ahead to plans for a 600MW subsea electricity transmission link from Shetland to mainland Scotland to export power from wind farms. But the regulator is consulting on making approval conditional on a Contract for Difference (CfD) being awarded to the Viking Energy wind farm planned for Shetland. The regulator said This would protect consumers from the risk of paying for a link that it is bigger than needed.

Scottish and Southern Energy Networks (SSEN) expects the link to cost around £709 million and be completed in 2024. 

But Ofgem says it plans to reject a separate proposal to build a £663 million 600MW link between from the Western Isles to the mainland. It says that two wind farm projects on Lewis total only 340MW and there is a risk consumers would be paying for a significantly underutilised link. It said it would welcome proposals that did not expose customers to that risk, which might be a 450MW link expected to cost around £617 million.

However, Ofgem says it wants to apply a ‘Competition Proxy’ to the projects, which is says will cut their costs by using experience gained in connections to offshore wind farms and tendering the ownership of the links.

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.

Decisions on a plan for a link between Orkney and mainland Scotland are awaiting the outcome of consultations.

See Ofgem’s announcement here

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