The proposed Viking Energy wind farm has suffered a huge blow after it failed to win government subsidy.
The future of the 103-turbine, 457MW project has been left in doubt following the news announced this morning (20 September).
It needs the subsidy to go ahead, meaning that the project – which has consent from Scottish ministers – has been shrouded in more uncertainty.
Viking Energy Shetland said in a statement that it was “very disappointed” with the outcome of the CfD auction.
But it said it “remains committed to the project and will continue to work with VEWF [Viking Energy Wind Farm] to explore all possible options to enable the wind farm to be built”.
SSE, which is behind the project, also said it is “committed to delivering” the wind farm.
It said that “central to progressing this project” is the result of Ofgem’s consultation on Scottish Hydro Electric Power Distribution’s proposed contribution towards the new transmission link for Shetland.
The four remote island wind projects that did win subsidy are Costa Head Wind Farm, Druim Leathann Windfarm Limited, Hesta Head Wind Farm and Muaitheabhal Wind Farm. Two are in Orkney and two are based in the Western Isles.
The Viking Energy wind farm has been opposed by many in the isles including the campaign group Sustainable Shetland, and the news will be warmly welcomed by its critics.
Sustainable Shetland chairman Frank Hay said the group was “relieved” Viking Energy was not successful, adding that it could be “time to draw a line” under the project.
It also casts doubt over the prospects of a 600MW interconnector cable to connect Shetland with the Scottish mainland to allow the export of energy to the national grid.
Energy regulator Ofgem previously said it was minded to approve the interconnector if Viking was successful in the CfD.
SSE is behind the wind farm as well as the cable. A convertor station at Kergord is also proposed as part of the interconnector plans.
The link is also necessary for other large wind farm projects proposed in Shetland, like Yell’s Energy Isles and the Mossy Hill project outside of Lerwick.
SSE most recently recommended a “whole system” approach for Shetland’s future energy demand needs once the diesel fuel Lerwick Power Station – which will come into breach of emissions law in around a decade’s time – closes in 2025, meaning that energy could be imported to the isles as well as exported via the subsea cable.
Viking Energy Shetland spokesman Aaron Priest, meanwhile, said in response to Friday’s news: “Shetland needs to reap the benefits of its world-class renewable energy resources.
“Shetland’s economy is over-dependent on oil and gas and has a fundamental need to diversify. Future generations in Shetland deserve the chance to utilise our abundant clean energy resources to create a new industry, jobs and prosperity in this community.
“We want to build a Shetland economy that is truly sustainable”.
SSE Renewables said it is “disappointed it has been unsuccessful in securing a Contract for Difference (CfD) for its Viking wind farm”.
“The auction cleared at strike prices of £41.61/MWh and £39.65/MWh. In keeping with its principle of financial discipline, SSE Renewables’ bid for Viking wind farm in the CfD auction was carefully considered so as not to take on inappropriate risks or accept returns on investment that are financially unsustainable.”
Shetland Islands Council leader Steven Coutts said: “Shetland still has a pressing need to diversify its economy. The development of renewables and the related interconnector remain a vital opportunity for our community.
“The council understands that SSE and Viking Energy Shetland remain committed to the project and will continue to work together to explore all possible options to enable the wind farm to be built.
“We understand that this will be dependent on Ofgem providing clarity on the financial contribution it intends to approve towards the cost of the Shetland electricity transmission link, recognising that an interconnector will be key infrastructure in securing electricity supply in Shetland for decades to come.”
The Viking Energy wind farm plans initially began life as a 150-turbine development in 2009, but that number was subsequently revised down to 127.
In 2012 the Scottish Government granted consent for a 103-turbine farm, and in later years it was confirmed that island renewable projects would be able to bid in the CfD process.
The CfD scheme is government’s main mechanism for supporting the deployment of new low carbon electricity generation, with the aim of reducing the capital outlay for developers while minimising the cost to customers.
The government said it provides projects with a “stable income while protecting consumers from paying increased support costs when electricity prices are high”.
Contracts are awarded in a series of competitive auctions – the lowest price bids are successful, which is said to drive efficiency and cost reduction. Generators sell the electricity they produce on the wholesale market but receive a ‘top-up’ payment over the course of the 15-year contract.
The latest CfD round – the third one so far – was the first to include remote island wind projects. The next round will be in 2021.
A total of 12 projects have received support in the third round, providing a total of 6GW of capacity.
Prime Minister Boris Johnson said: “The UK is leading the way in the fight against climate change, and it’s great news that millions more homes will be powered by clean energy at record low prices.
“Seizing the opportunities of clean energy not only helps to protect our planet, but will also back businesses and boost jobs across the UK.”
Of the winning remote island wind farm projects, the Western Isles’ Muaitheabhal Wind Farm has the largest capacity at 189MW, gaining a strike price of 39.650 £/MWh. The Viking project had a maximum capacity of 457MW.
Earlier this year ground investigation work began on the proposed Viking Energy wind farm, leading to some concerns in the community over the effect on the environment, and planning permission conditions have started being discharged.
It was also confirmed in May that Shetland Charitable Trust, which had invested £10 million into the project, would no longer be proving any finance to Viking – with SSE taking on all future responsibility.
A community benefit fund which could bring around £2.2 million a year into Shetland from Viking Energy was earlier this month “within touching distance” of striking an agreement with the wind farm developer.
Friday’s news – announced just hours before a climate ‘strike’ protest is held in Lerwick – was welcomed by campaign group Sustainable Shetland, which argues that Viking Energy is not a right fit for the isles.
Chairman Frank Hay said: “We are well aware that Viking Energy may continue to try to progress their project and may re-enter the bidding process for the next CfD allocation.
“Sustainable Shetland remains strongly opposed to Viking Energy wind farm and continues to believe that this ill-starred project is all wrong for Shetland.
“It is perhaps time to draw a line under this project and look at better ways of ensuring a sustainable future for Shetland with smaller, more appropriate projects.”
He commented that it was “surprising” that the project was in a position to put in a “realistic CfD bid”.
Hay said this was partly because it would be difficult to estimate the cost of developing the site, as the ground investigation work is “some way off being completed”.
He also said Ofgem has not publicly confirmed the charging regime that will apply to transmission and has not confirmed full approval for an interconnector to Shetland.
Hay also noted that “not all the planning applications involved with Viking Energy have been approved so far” – with some objections coming in, and many conditions yet to be satisfied.