The financial risks of pursuing the Viking Energy windfarm have reduced with the interconnector cable from Shetland becoming cheaper and requiring less public money to be put up as security.
A change of plan by National Grid means the 600 MegaWatt Shetland subsea cable will not travel to the Scottish mainland alone but will connect instead into an offshore transmission hub off the Moray Firth, shared by many other large renewable power generators, including offshore wind and wave farms from Orkney, the Pentland Firth, the Moray Firth and the giant Beatrice offshore windfarm.
Viking does not have to contribute towards the £300-400 million cost of the cable, which will be paid for by UK electricity users. But it is required to underwrite the financial risk to National Grid in case it pulls out after having booked a connection.
But such is National Grid’s confidence now that large renewable projects will all go ahead once they get government approval it is proposing to slash the size of the guarantee required by developers to just 10 per cent of the cable cost, once development consent is gained.
It is even looking favourably at a special new “island-friendly” rate of just five per cent. That could mean Shetland Islands Council being exposed to a maximum guarantee of £7.5-10 million, matched by Scottish and Southern Energy.
Currently the council has a guarantee to hand over just under £1 million of the £1.9 million spent so far by National Grid but that will rise dramatically if real work on the cable gets under way. Under the existing underwriting system that liability could potentially run into the hundreds of millions.
The new arrangement would mean the council having to put up a fraction of the public funds it previously expected to. It provides the guarantee even though it is Shetland Charitable Trust that is the shareholder in Viking.
National Grid’s proposals were outlined by its electricity portfolio manager in Scotland, Martin Moran, at today’s Dynamic Shetland conference on renewable energy, held in the Clickimin Centre and attended by over 160 delegates.
Viking’s local project manager Aaron Priest described the 95 per cent concession as “incredibly important” if it comes to pass.
However, the main barrier to the export of power from Viking remains the cost of transmission to customers. The regulator Ofgem is still looking at options to replace the current system which penalises remote generators by basing the charge on the distance the power travels.
The Scottish government has been lobbying on behalf of the renewables industry to switch to a so-called postage stamp regime under which distance would incur no surcharge. Ofgem is expected to reveal its decision in the spring.
During his presentation at Dynamic Shetland, Mr Moran said he believed there was “a great will” to make Viking and the interconnector happen and he believed Shetland would in future become “a huge hub” for wind, wave and tidal power.
Opponents of the Viking windfarm will have been disappointed to hear that gaining government consent for a big renewables project almost guarantees it will go ahead. That could mean there is no turning back if the Scottish government gives the windfarm the green light in the coming months. The last big decision for islanders may not be Yes or No to Viking but merely whether the community stays aboard as 45 per cent shareholder or sells out to the highest bidder.