High transmission charges could render the Viking Energy windfarm project uneconomic, according to a UK government report.
The document published by the UK’s Department of Energy and Climate Change considered the evidence for developing renewable projects including onshore wind, wave and tidal, in the island groups.
And while it said renewables projects could create thousands of jobs in the isles it stated: “Under current policy it is unlikely to be economic to develop further onshore wind projects on the islands as returns will not meet the required hurdle rates.”
This could have implications for Viking Energy, which is calling for “swift action” to tackle the barriers to renewables posed by high transmission charges and grid access identified in the report.
Viking Energy board member Alan Bryce said the partnership welcomed the report’s conclusion that onshore wind developments in Shetland have an important role to play in meeting Scottish and UK 2020 renewable energy and decarbonisation targets. But he said the project could not be “taken to completion” unless there was more clarity around grid access.
Mr Bryce said: “Since gaining planning consent, Viking has made good progress, but if we are to secure the best deal for Shetland and investors, it is vital that government, regulators and developers act on the conclusions of this report. Investors cannot take the project to completion until they have clarity around revenues and grid access.
“That would be in Shetland’s interest – but it would also, as the ministers indicate, diversify and broaden the country’s electricity supply.”
Viking Energy Shetland, which is 90 per cent owned by Shetland Charitable Trust, is in a 50-50 partnership with SSE to build the £700 million windfarm, which has consent for 103 turbines in the Central Mainland and a maximum rated capacity of 457 megawatts. As recently as February it said it expected to make £20 million profit annually.
The new report, which questions whether that is possible, had been initiated by Secretary of State for Energy and Climate Change Edward Davey.
He said: “The [UK] government is keen to unlock the potential for the development for renewable energy on the Scottish islands, but it’s vital that projects represent value for money for the consumer.
“The report marks a considerable step in progress towards making decisions about supporting renewables investment on the Scottish islands.”
Isles MP Alistair Carmichael described the report as a significant step towards “freeing up the transmission charging logjam.”
He said: “Local renewable developers have been vindicated in their view that the current set up will not do. I have always believed that despite enormous resistance from officials in government departments over many years.
“Having established that there is a case for island communities to be given a different charging system, the next step now is to continue in our engagement with government to set up that system and to enable the development of renewable energy.”
More on this story in Friday’s Shetland Times.
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