Due to the enviable wind regimes of the Scottish Isles, wind developers have lodged planning applications for nearly 1000 MW of capacity on the island of Lewis, while proposals are being progressed for a 600 MW project on Shetland and over 120 MW of capacity in the Orkneys. The projects are dependent on high voltage connections with the mainland. Ofgem says the cost of the connections must be minimised if the islands' renewable resources are to be successfully exploited. The best way to do this, the regulator believes, is to open up the ownership, financing, and building of the links to competitive tender. This would be similar to the regulatory approach recently adopted for the financing and ownership of new transmission links for offshore wind farms.
If a competitive approach was accepted, it would be a further departure from the existing framework for investment in the regulated onshore electricity network. Ofgem argues, however, that competition will not only reduce the risk of electricity consumers paying over the odds, but the likely cost savings would result in lower transmission charges for generators which should, in turn, increase the number of island renewable projects connecting to the grid.
Other options up for consultation include allowing the incumbent transmission company, Scottish Hydro-Electric Transmission, to construct the links, for renewable developers to build and own the links, or third parties to own them on a merchant basis.
Ofgem chief executive Alistair Buchanan says the right balance must be achieved between meeting requirements of developers and those of customers: "Competition for new transmission links is new for the UK, although similar approaches have been used in some other countries to build comparable links."
A separate report into options for sub-sea links from the Scottish islands published by Highlands and Islands Enterprise (HIE) and the Scottish Executive warns, however, that a competitive approach to providing offshore links may not accelerate connection of the Scottish islands. The report, Assessment of the Grid Connection Options for the Scottish Islands, says that competition in offshore connections will only lead to cost or time savings if licensees are already highly experienced in delivering offshore transmission projects. This is not the case for the three UK transmission owners.
According to the report, there are few locations on the British mainland for connecting large amounts of wind generation that would not trigger grid reinforcements. By consultants TNEI, it also points out that all the current large island projects are dependent on a long proposed upgrade of a mainland transmission line between Beauly near Inverness in the Highlands of north Scotland and Denny near Falkirk further south, from 132 kV to 400 kV. The consent application to reinforce that line is bogged down in an acrimonious public inquiry. Even if it gets consent, the transmission owners do not expect the line to be completed until 2013. Further mainland upgrades and new build will also be required to facilitate the island connections.
Nonetheless, the report finds that most of the proposed capacity for the islands can be handled without having to upgrade the Scotland/England interconnector. This means that there is little commercial benefit in building long distance sub sea connections into England and Wales. It also rules out links with Ireland due to existing constraints on the Irish network. Less unlikely, it says, is an interconnector with Norway, although there are currently no targeted incentive for renewables there. Furthermore, transmitting power generated mostly by wind would not help with the problems experienced in Norway with balancing supply and demand and could at times pose an additional burden on the Scottish network, it claims.
Short sub-sea cable connections and reinforcement of the onshore Scottish grid are the most viable options at present, the report concludes. For the Western Isles, the fastest and cheapest option would be a 1000 MW high voltage direct current (HVDC) link from Lewis coming ashore at Ullapool; from Shetland it recommends a 600 MW link to Cullen Bay in Grampian, and from Orkney, a 200 MW connection to Murckle Bay, east of Thurso.
TNEI describes the current situation, where uncertainty surrounds the process of gaining planning consent for renewable projects -- and indeed for grid upgrades -- as a "Catch 22 scenario." Developers need confidence that they will have access to the grid, but to take the risk out of investment in grid infrastructure, wind generation developments must be certain. This, claims the report, is acting as a drag anchor on the islands' renewables industry.
Elaine Hanton from HIE says: "This report underlines the difficulty of trying to plan for the longer term use of assets within the current regulatory environment." But HIE is encouraged by Ofgem's consultation on reform of connection regulations, she says. "[We] look forward to contributing to the consultation process to select the most effective way ahead."