Ofgem has rejected plans to install a 60MW power line between the Shetland Islands and mainland Britain.
The regulator said the subsea cable is no longer needed as the loosening of emissions limits means the islands’ ageing diesel power plant can remain open for longer than previously anticipated.
SSE’s 67MW Lerwick Power Station was due to close by 2021 due to tougher emissions limits introduced under the EU’s Industrial Emissions Directive (IED). In 2014, Ofgem instructed the system operator for the islands, Scottish and Southern Energy Networks (SSEN), to hold a competitive tender to ensure security of supply following the plant’s closure.
In May, SSEN selected proposals by National Grid Shetland Link and Aggreko to install a 60MW high voltage direct current (HVDC) cable to mainland Britain and build new backup diesel generation on the islands. Ofgem launched a consultation on the costs in July and concluded that the companies had presented a good business case to develop the link.
However, the regulator has now said that two major developments since then have undermined the case for the project.
At the end of July, changes were made to a document that sits under the IED meaning that the emissions limits introduced by the directive will now only apply to “small isolated systems” such as Shetland from 2030 onwards. The government also announced in October that wind farms on remote islands will be eligible to compete in the next Contracts for Difference (CfD) auction planned for 2019.
SSEN has told Ofgem that security of supply can now be maintained on the islands until 2025 by continuing to operate Lerwick Power Station and undertaking additional supporting measures.
Ofgem said this would be “significantly” cheaper than proceeding with plans to build the new power line and backup generation at a cost of around £300 million. The regulator said the savings will be even greater if a new transmission line is installed to connect renewables to the mainland following the next CfD auction.