Cold wind blows on Scottish link

Scotland's Isle of Lewis has attractive renewable potential, but no-one wants to pay for the link to access it. Megan Darby reports

Frustration is building on the Isle of Lewis off the coast of Scotland because a proposed undersea cable to link renewable generation to mainland Scotland has been delayed once again. The local authority on the island is even suggesting that SSE be booted off the project and another company brought in to do the work.

Around 300MW of onshore wind has got the go-ahead for Lewis and more is in the pipeline. A 40MW wave generation scheme off the northwest coast – billed as the world’s largest – was approved last month. All these projects are in danger of collapse for want of an essential transmission link between the island and the mainland.

Generating doubts

SSE’s transmission arm is lined up to lay the cable, but is delaying because of uncertainty that the developers will be able to afford to build their projects.

Scottish Hydro Electric Transmission (SHE-T) was due to submit a “needs case” to regulator Ofgem for the £700 million project in March and put out a tender for the high-voltage cable in July. That has been postponed and the link is not now expected to be commissioned before 2017.

Fed up with prevaricating, Western Isles Council leader Angus Campbell is questioning SHE-T’s commitment to the project and has written to Ofgem suggesting the regulator re-tender the scheme.

He accuses the network business of failing to provide “any substantive commentary” on what is needed next, leading to a “lack of trust” among developers. “There are growing concerns in regard to SHE-T’s ability to ever deliver the required infrastructure,” he says.

At the very least, there has been a breakdown in communication. Some of the renewables developers agreed to underwrite the cost of the link on the understanding, they say, that this was all SHE-T needed to make the needs case to Ofgem. They were angry to find this was not the case.

However, re-tendering could delay things further and do nothing to solve fundamental barriers to the project that are beyond SHE-T’s control. “We understand that people are frustrated,” says the company’s communications manager, Morven Smith. “Yes, they have underwritten the risk, but there is still a question mark over affordability.”

High costs

The Scottish Islands have some of the richest renewable resources in the UK, but they also have the highest costs. An analysis by consultancy Baringa for the UK and Scottish governments estimated that, on aggregate, island projects are

£19/MWh to £45/MWh more expensive than their mainland equivalents. The Western Isles are at the higher end of that range.

The single biggest cost element is transmission charges. These have historically incentivised generators to build plants near cities, but that is not an option when it comes to exploiting wind and waves.

Ofgem is reviewing the way it sets charges under Project Transmit and says it will make a decision “in a couple of months”, after detailed work by National Grid. Any concessions to island developers will have to be paid for by higher charges elsewhere.

Gavin MacKay, senior development manager at Highlands and Islands Enterprise, says: “We are just hoping now that the direction of travel is such that Ofgem can have faith in the process and the quality of debate and modelling that is being done and take a fairly brave decision.”

Ofgem has ruled out socialising the charges, however, so it is likely that island generators will continue to shoulder much of the burden of expensive extensions to the grid. They are pushing for government support in the form of revenue boosters or a cap on charges to close the funding gap. Industry body Scottish Renewables is also calling for European Investment Bank funding to develop island grids at low interest.

This article first appeared in Utility Week’s print edition of 7th June 2013.

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