Disappointment as SIC pulls out of energy project

Shetland Islands Council has ditched plans to install new heating and hot water systems for over 500 council house tenants as part of the innovative Northern Isles New Energy Solutions (NINES) project.

In a statement today, the council said that after “long and careful consideration of the financial implications” it had “regrettably concluded that the project does not deliver on the authority’s current priorities”.

As a result, there is a danger that a sizeable chunk of a seven-figure European grant towards the new heating systems could be lost.

NINES is a pioneering scheme through which Scottish and Southern Energy (SSE) is seeking to adapt Shetland’s local electricity grid so that more of the variable amounts of power that come from wind turbines and other renewables can be fed in.

It includes a giant storage battery next to Lerwick Power station, which has been installed but not switched on due to serious safety concerns, and approved plans for three 121-metre wind turbines at Gremista.

Part of the NINES scheme includes new “smart” Dimplex electric storage heaters, designed to soak up power generated by wind turbines at off-peak times for release when tenants want to use it.

It had been hoped that around 750 Shetland houses would benefit, but the council’s withdrawal means only 234 Hjaltland Housing tenants stand to gain at present. SSE said it was looking at whether private homeowners could get involved.

The council had obtained £1.3 million in European cash towards the new heating systems, but it is possible that two-thirds of that money will now be lost. It is hoped that around a third of the ERDF grant can be transferred over to Hjaltland, but that has yet to be confirmed.

The SIC spent a “significant amount of time” investigating the benefits of replacing heaters and water tanks in 520 council-owned homes.

The council’s development director Neil Grant said it was “not good value” for the council given that a lot of the homes’ existing equipment does not need to be replaced just now. No contracts had been awarded and the only costs the council has incurred have been in staff time.

“With the financial pressures we’re facing, we weren’t able to incur additional costs which would then need to be passed onto the homeowners,” Mr Grant said. “It may be possible for us to engage at a later stage, but it does still need to represent best value for the council.”

It is understood there was a sharp exchange of words between SSE and the council over its decision to pull out. In a statement, SSE said it was “disappointing” that the SIC had ended its involvement in NINES, but said it appreciated the local authority’s continued support of the project.

A trial of the smart storage heating scheme in six Hjaltland Housing Association schemes is now being concluded. SSE said feedback from trial participants had been “overwhelmingly positive, with all households saying they would recommend the system to a friend”.

SSE’s power distribution arm is finalising plans to install the smart heating systems in the 234 Hjaltland properties. It also hopes more houses, possibly privately-owned, could benefit.

“SSE is keen for Shetland to benefit from the 500 systems originally planned for council properties and is developing plans to support the roll out of the systems to a wider customer base including, it is hoped, private homes.

“We hope to be able to announce how private householders can participate in this within the next four months.”

Hjaltland Housing chief executive Bryan Leask said the organisation would definitely be installing the new heaters as part of a planned replacement programme. That could start in March 2013.

“We’re basically asking them to consider a revision of the project on a smaller scale,” Mr Leask said. “If we can get ERDF funding reallocated, that will allow us to do the overall NINES project in terms of cylinders.”

There is no further news on Europe’s biggest battery, the 1MW sodium sulphur unit which has been installed in a specially built large shed next to Lerwick Power Station.

Following a serious fire in a similar battery in Japan last year, SSE decided to wait for the outcome of a Japanese investigation into the incident before commissioning the battery.

The company said it was disappointed that, one year on, the full results of the safety investigation were not yet available. It added it was continuing to consider “a number of options for the provision of large scale energy storage in Shetland”.

Mr Reid said: “NINES continues to offer the prospect of [a] more sustainable solution to Shetland’s energy needs and I’m pleased that several of our stakeholders on the islands – including Hjaltland Housing Association, Shetland Heat Energy and Power (SHEAP) and the developers planning new renewable energy schemes – have made such good progress this year.

“NINES remains on course to allow several megawatts of new renewable energy generation to connect to the grid in 2013 and provide lower cost heating options on the island.”

It is understood that the three large wind turbines planned for Gremista as part of NINES are unlikely to be built before 2014.

Planning permission was granted for the 6.9MW windfarm, to be built at Luggie’s Knowe on Lerwick Port Authority land between the Dales Voe base and the council dump, earlier this year.

Shetland Charitable Trust has held preliminary discussions about whether it might invest in the 6.9MW windfarm, likely to cost between £10 million and £14 million.

Some of the energy produced by the three turbines would be used to heat a new £2 million water tank planned by SHEAP, which runs Lerwick’s district heating scheme.

Meanwhile, SSE said it was working with several local organisations and individuals to investigate the possibility of a “managed connection”. This would allow them to connect new small or medium scale energy generation to the Shetland grid more quickly.

The energy company said it could allow generators to export energy to the network at all times except when the network is under stress – for instance, when wind speeds are high but demand for energy is low, when the generator would be “constrained” or prevented from exporting power.