Viking seek answers as uncapped charging scheme threatens plans

By RYAN TAYLOR

THE HEAD of Viking Energy has called for “crystal clarity” over how much the windfarm company will have to stump up to transmit electricity through a sub-sea cable to the UK mainland.

Project manager Aaron Priest said this week that the company urgently needs to know what trans­mission charges from Shetland will be before the “potentially lucrative” industry reaches its potential.

The future of the windfarm proposal for the Lang Kames was cast into doubt when late last week the government withdrew plans to place a cap on transmission charges.

The company hopes to connect Shetland to the UK grid using a 550 MW cable which – once installed – will allow the windfarm to export power to the mainland.

Currently, the charging mechan­ism works against the development of windfarms in rural areas.

Energy regulator Ofgem says the fees are set by National Grid to reflect the real cost of transmitting electricity to the market, meaning it works out much cheaper to transmit energy from areas near population centres than here.

The Westminster government had planned to help places like Shetland by putting a cap on transmission fees.

Its Department for Business, Enterprise and Regulatory Reform (BERR) commissioned a report from consultants IPA Energy and Water Economics to establish whe­ther the cap, known as an s185 scheme, should be put in place.

In the end, the consultants deci­ded windfarms like Viking Energy’s are potentially lucrative enough to not need the subsidy at all.

Mr Priest said the level of charging for Shetland hadn’t been made clear.

He is preparing for urgent talks next month with government offi­cials to put forward Viking Energy’s case.

“Transmission charging is one of the challenges we face, and whether we need a cap still remains to be seen. A lot of key arguments the consultants have used are open to challenge.

“Charges for islands are steeped in uncertainty. We just have to make a cool, calculated decision after the different elements are taken into account. Transmission charging is a key element, and if it’s uneconomic or it is unclear, the project can’t go ahead.

“It’s something we require crystal clarity on. It’s an over-reaction to say it will be the downfall or making of Viking Energy. It’s another challenge and something we need to work at.”

One of the things Viking Energy could ask civil servants to look at is the rising cost of raw materials for the cable, brought about by rising inflation over the last couple of years.

“What we will be arguing is it’s not possible to reach a judgement on capping now against a moving background. It’s too early to say whether transmission charging is a show-stopper or not. What we do require is some clarity, and a need for the government to retain some flexibility.”

Media reports have suggested Viking Energy could potentially face charges of up to £82 per kilo­watt of electricity – although the figure would drop to around £25 a kilowatt if the cap was in place. Mr Priest said those figures had only been estimates based on certain assumptions, and could be described as no more than a “cost indication”.

He said the company would be pressing ahead with plans to apply for planning permission together with Scottish and Southern Energy for the development by November this year.

Viking Energy director and Ler­wick North councillor Allan Wishart, said he was still “relaxed” about the charges.

“There has been uncertainty about the connection, and how it’s going to be handled, for some time.

“I know there is a strong element in the Scottish government that are very keen to see the cable connection paid for on a ‘postage stamp’ basis, meaning one price for all areas.

“There is quite a long way to go. That is one of the things we have to figure out before we make a decision one way or another. I’m still relaxed about it. It’s just one of those things where we have to see what happens.”

A spokesman for the Scottish government said it, together with Scottish Power, Scottish and Southern Energy and the Scottish Renewables Forum had already presented an “unanswerable case” to Ofgem for fairer charges.

“Scotland is united against the National Grid’s electricity trans­mis­sion charging regime which works against the development of clean, renewable energy in Scotland,” he said.

“There is no justification for charg­ing a power station in Lon­gannet £33 million when it would pay – not charge – an equivalent power station in London £13 million.

“Similarly, Peterhead would be charged £30 million while a power station in Seabank, in the southwest of England, would be paid £3.05 million. We will continue pushing our case for Scotland until we have removed this unnecessary barrier to clean, renewable energy. “This includes pushing for sen­sible arrangements for grid access and management. We will soon pro­pose to Ofgem an alternative regime which they could implement.”

But in a letter to last Saturday’s Scotsman, Ofgem’s chief executive Alistair Buchanan said two separate independent studies into whether it was “economically justifiable” for the government to discount trans­mission charges found it was not, because returns to potential investors in renewable energy on the Scottish islands would be so high.

“Ofgem calculates that existing subsidies for renewable energy already constitute eight per cent of consumers’ bills,” he said.

“In the current climate of spiral­ling energy bills, you may like to consider whether consumers should be asked to pay more to subsidise profitable energy companies.”

A spokesman for the Westminster government said there was “no case” to proceed with a section 185 for Shetland, or Orkney – although there may have been a marginal case for a scheme in the Western Isles.

Shetland MP Alistair Carmichael warned the government decision could “kill stone dead” the develop­ment of renewable energy in the isles.

He called for Mr Buchanan and UK energy minister Malcolm Wicks to meet with Northern Isles poli­ticians and discuss the government’s decision to scrap plans for the cap.

“This decision is a major U-turn on the part of the New Labour government at Westminster and one which could kill stone dead the development of renewable electricity generation in the northern isles.

“While the energy minister has talked a good game on renewables at his first major test he has failed in industry miserably.

“The regulator, Ofgem, has never liked the idea of putting a cap on renewable charges. It was to the government’s credit that they were prepared to create the power to place a cap on the charges.

“There is no point, however, in having such a power if they are not prepared to use it.

“It is now essential to get every­one round the table to sort this out. That is why I am seeking a meeting with the energy minister and the chairman of Ofgem.

“The government has got to ex­plain if it really does want to see re­newables developed in the Northern Isles or not. If they do, then Ofgem has got to explain why it is so determined to thwart government policy.”

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A WEST Mainland councillor has called on the council to do its utmost to promote renewable energy generation in the isles.

Responding to a report before last week’s development committee, which highlighted a host of small-scale projects which are being developed, Frank Robertson said it was “one of the most significant” pieces of work that would come before the council because energy “is going to determine how, when [and] probably where people live”.

Mr Robertson paid tribute to the scheme in Foula, which will supply the island with 24-hour power for the first time, incorporating micro hydro and solar technologies and paid for through external funding, and said that Shetland had to continue working to find ways of developing marine power and possibly tidal power at Sullom Voe in the future.

“We have the potential to power the whole of Scotland, with Orkney,” he said. “We have to look at getting ourselves self-sufficient as soon as possible. We have one generation to get it right.”

The report, co-written by business development official Maurice Henderson, stresses that there are a number of “cutting edge and highly innovative” projects being developed to benefit from Shetland’s wind, wave and tidal resources.

The council is committed to pursuing policies designed to decrease its carbon dioxide emissions by 30 per cent by 2020.

Aside of the controversial Viking Energy windfarm proposal, developments include a project by Hjaltland Housing Association to build two “unplugged” hydrogen fuel cell houses in Eshaness, in partnership with the PURE energy centre in Unst. Builders are due on site later this year and they will be the world’s first unplugged hydrogen houses.

There is also a proposed project which would allow the council to run its incinerator and recycling plant at the Greenhouse Base from wind power, with excess power supplying heat to the district heating scheme. It could cost up to £3m but there are a number of UK, Scottish and European funding mechanisms which the project could qualify for.

During a broad discussion on possible ways of making Shetland greener, councillor Betty Fullerton suggested that it might be possible to make some grant funding available so that new build houses can be as green as possible. Rick Nickerson responded that in the current financial climate it might be more appropriate to consider a loan scheme for micro renewable technologies.

Councillor Alastair Cooper said he would “like to see energy in Yell Sound harnessed for the good of the community” and called for an update on progress in renewable energy schemes every two cycles, which was seconded by Mr Robertson.