SSE plans to push ahead with ‘smart grid’ for isles despite missing out on major grant

Scottish and Southern Energy hopes to proceed with plans to transform Shetland’s creaking electricity grid into a cleaner “smart grid” despite narrowly missing out on the prize of a £24.4million grant from electricity regulator Ofgem.

The company said tonight it would work with Ofgem to identify alternative sources of funding to allow work to begin on the project – which aims to treble the amount of renewable power from heat and wind within three years as well as cutting the amount of polluting diesel fuel burnt by the power station by £2.6 million a year – early next year. A decision is due shortly on a separate bid to the European Regional Development Fund.

SSE was competing for a share of the £500 million Low Carbon Networks Fund held by Ofgem, which aims to help get the UK grid into shape for a future powered by renewable energy. The bid also involved the council, Shetland Charitable Trust, Hjaltland Housing Association and other local organisations.

SSE intends to develop an innovative £51.6 million system for Shetland to cope with fluctuations in electricity demand and in future wind power supply by storing lots of energy to stabilise the grid.

It will mean potential small-scale wind-farming entrepreneurs in Shetland earning feed-in-tariffs within just three years instead of having to wait on the possibility of an interconnector coming in 2015 or 2016 if the Viking Energy windfarm goes ahead.

As The Shetland Times revealed recently, energy storage will be done through centrally controlled “smart” water and storage heaters in 1,000 Shetland homes as well as other experimental schemes such as a giant 1 MegaWatt battery which, if successful, might be expanded to 10MW at a later date.

Customers using the new “smart” heating would be paid around £250 a year for agreeing to help in the experiment while the owners of small commercial premises might get up to £12,000 a year.

Stabilising the grid would allow up to 10MW of extra wind power to be connected into the Shetland system. SSE has previously said that does not include the 6.9MW produced by the three-turbine Gremista windfarm proposed by it in partnership with the council and Shetland Charitable Trust. However, the documentation with SSE’s bid to Ofgem incorporates the Gremista output within the extra 10MW.

SSE has insisted the windfarm will not feed in to the grid and will simply heat a 4MW water tank to supply an extended district heating scheme in Lerwick.

In the Northern Isles New Energy Solutions (NINES) scheme SSE also plans to explore capturing the enormous amounts of heat lost from Lerwick Power Station through its chimneys and as hot water from cooling its generators, which goes into the sea.

The company told Ofgem it could save millions of pounds a year by using less fuel at the power station, reducing operating hours by 29 per cent. For the atmosphere it would mean 25,432 fewer tonnes of carbon dioxide emissions each year.

Under the first phase of NINEs, Shetland could have gone from having seven percent of its power from renewables like the Burradale windfarm and the district heating to becoming one of the first parts of the country to reach the UK target of 25-30 per cent renewable-powered by 2014.

According to SSE, once phase one and two of the new grid were completed it would enable Shetland to source all its power at times from zero-carbon sources.

In remarks contained in the SSE statement, SIC convener Sandy Cluness said: “We have supported this project from the start, knowing it will bring great opportunities for Shetland. We hope to hear within the next couple of weeks that our bid for complementary ERDF funding has been successful and the NINES project can get up and running and start bringing direct benefits to the islands, including allowing more local community renewable schemes to gain access to the Shetland grid, and helping prevent fuel poverty.”

Frank Clifton, Scottish Hydro Electric Power Distribution project manager, said: “This is a project that will revolutionise the way the Shetland network operates and make it fit for a low carbon future. We aim to make Shetland’s network a blueprint for the rest of the UK.

“Trusting the bid for ERDF funding is successful, we’ll be starting work early in the new year, with one of the first things we do being to organise an event so that anyone with an interest in the project can come along and find out all about it.”

Ofgem’s award of £62 million for the first year of the fund, revealed on Sunday, will benefit four projects in England and Wales but none in Scotland. There were 11 bids in total.

Although the NINES bid did not win a share of the payout this time, Ofgem and its expert panel commended its high standard and said they were keen to see ideas from it and other unsuccessful projects included in future applications.

Ofgem and the panel concluded that what would be learned from the NINES project would not be immediately applicable to other power networks in the UK. However, Ofgem added: “SSE is required in any case to come forward with a proposal for meeting the energy needs of Shetland. Funding arrangements are already in place for this purpose. It is possible that many of the ideas in NINES may inform that proposal.”

UK energy companies are expected to spend £32 billion on “pipes and wires” over the next 10 years to reduced carbon pollution from the energy sector.