Transmission charges pose no risk to Viking windfarm, insists chairman

Viking Energy chairman Bill Manson has dismissed suggestions the windfarm project is at risk of being killed off by high transmission charges.

It follows publication of a report by energy regulator Ofgem on the latest stage of Project TransmiT on Friday which opted to impose higher charges on projects in the Scottish islands than those on the mainland.

Ofgem wants to ensure the cost of transmitting energy through expensive undersea cables is not borne by consumers and has rejected calls for a more geographically equitable charging system.

In a statement today, six days after publication of the report, Mr Manson said: “Rumours are rife that Project TransmiT will kill off Viking and nothing could be further from the truth. We have always been very cautious about our financial projections. This will be a major investment for Shetland and we’ve carried out financial modelling to cover all bases. The range of figures suggested by the report are all within the range of what we have used in our projections.

“I know the level of transmission charges has long been a source of irritation in the islands and Viking Energy has been one of many campaigning against an outdated system which did not reflect the need to harness some of the best wind, wave and tidal resources in the UK which are located around Scotland’s islands.”

But the outcome of Project TransmiT is not unexpected and has been taken into account, according to Mr Manson. “We’ve always assumed in our financial modelling that we could face very high levels of charging.

“In reality these results are well within our range of estimates but the fight is still far from over. We will continue to argue that something has to change if the government wants to harness the islands’ outstanding wind resource.”

Viking Energy will be involved as Ofgem, National Grid and the Scottish and UK governments seek to create an “improved” charging regime.

The statement said Viking’s projections had assumed transmission charges might be significantly above £100 per kilowatt, much higher than the charge currently being discussed which could be between £80 and £90.

It said transmission charges were clearly a major cost for the project, but all the figures publicly quoted about the possible financial returns from Viking Energy had been modelled on the basis of high levels of charging. Under current arrangements electricity generators are charged at different levels which reflect their proximity to large populations. As a result, higher charges are paid by those producing electricity in the more remote rural areas.

Mr Manson continued: “In the time I have been involved in this project, the estimates for future projected transmission charges have been higher than £100 per kilowatt, so the figures now being suggested are better. I believe the project remains a very solid financial investment based on these charges.”

Meanwhile Chris Bunyan of the Windfarm Supporters Group said: “Despite the negative publicity about the electricity regulator’s report on the charges for connecting renewable energy projects in Scottish islands to the National Grid, it is in fact good news.  

“The proposed charges are still too high and discriminate against Shetland, Orkney and the Western Isles, but they make the Viking Energy investment look more attractive, not less.

“The proposed charges are nearly half what Viking Energy has been using when drawing up its investment plans. This could mean more money for the charitable trust.”

He said Ofgem’s proposals would mean a charge for renewable energy in Shetland of £70 per kilowatt, although this was up for discussion and the Scottish government and all political parties believed it was too high and discriminatory.  

“When looking at the costs of the windfarm Viking Energy has been using estimates of up to £127 per kilowatt.  So even if the proposed unfair charges do not change, it does not have an effect on investment plans – except to probably make them even more attractive.”