Ofgem supports 600MW Shetland subsea transmission link to Scotland
March 22, 2019 – The UK Office of Gas and Electricity Markets (Ofgem) has decided to provisionally 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 enable new wind farms on Shetland to export renewable electricity to the rest of Great Britain and help ensure security of supply on the islands.
According to SSEN estimates, the link would cost £709m and be completed in 2024.
Ofgem is launching a consultation on approving the link subject to SSEN demonstrating that the Viking Energy Wind Farm project planned for Shetland has been awarded subsidies through the UK government’s Contracts for Difference (CfD) auction.
Ofgem has decided to reject a separate proposal from SSEN for 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, as consumers would face the risk of paying for an underutilised link.
Instead, Ofgem plans to support an alternative proposal for either a 450MW or 600MW transmission link in case SSEN puts forward any revised proposal.
Initial estimates by SSEN for the proposed Western Isles 600MW link put the cost at £663m, and would be completed in 2023. Similarly, initial estimate for the 450MW link put the cost at around £617m.
Ofgem said that the costs to consumers of building the Shetland and Western Isles links could be reduced significantly by seeking to replicate the outcomes of competition.
It is keen on using the ‘Competition Proxy’ model, setting the revenue that SSEN can earn from building and operating the links based partly on Ofgem’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, such as SSEN, a subsidiary of SSE.
Consumers pay for the investment in new capacity through energy bills and Ofgem ensures that it obtains the best deal possible for them.
Ofgem will decide on the business case for the Western Isles and Shetland links in mid-2019 and also confirm whether it will use the Competition Proxy model at the same time.