Comhairle nan Eilean Siar has written to Lord Duncan, Parliamentary Under Secretary, regarding renewables in the Western Isles.
In his letter, Comhairle Convenor, Cllr Norman A Macdonald, said: “You will be aware from previous exchanges of the issues surrounding the development of Renewable Energy in the Western Isles. These islands are home to the best Renewable Energy resource in Europe but attempts to access this resource in the national interest have been hampered by a lack of Grid connectivity. Our Transmission Owner, Scottish Hydro Electric (Transmission) Ltd, is now moving towards construction of a new HVDC Transmission Link, conditional on success of the two Lewis Wind Farms in this year’s Contract for Difference (CfD) Auction Round.
“We have circa 450MW of commercial Onshore Wind consented and contracted to Grid in the islands and developers will soon be submitting bids to the 2019 CfD Auction Round. We deeply appreciate your support and advice in getting things to this stage and, although I am cautiously optimistic about the prospects of our developers at Auction, there remain some significant uncertainties.
“The first uncertainty concerns OFGEM’s aversion to an appropriately sized Transmission Link. You will know that OFGEM has consulted on a ‘minded to’ position which will see the capacity of the Western Isles link restricted to 450MW. With 450MW already consented and contracted to Grid, 88MW of new community owned generation in Planning and a further 64MW in pipeline, not to mention emerging Floating Offshore Wind and Test Wave deployment, we believe that OFGEM’s position is incredibly short sighted in respect of a Grid asset that is to have a lifespan of 40 years. Within the current cable contract, it would cost between £27m and £45m to increase the capacity of the link to 600MW. To come back later and construct a new, additional 150MW cable would cost circa £270m. We would value any support you can give us in making the common sense argument for an appropriately sized Transmission Link.
“The second uncertainty concerns a proposal by Scottish & Southern Energy Power Distribution (SSEPD) to pay £250m to Scottish Hydro Electric (Transmission) Limited for the use of the proposed Shetland Transmission Link for supply of domestic electricity to Shetland. The SSE Group presents this as a ‘value for money’ alternative to the construction of a separate supply cable at a cost of £450m. While the value for money argument is accepted, the unintended consequence of this arrangement is that the capital cost of the Shetland Transmission Link becomes discounted by 35% through cross subsidy within the SSE Group when the SSE Group wholly owns a planned 450MW Wind Farm in Shetland. Any discount on the capital cost of these island links will read through to reduced Transmission Network Use of System (TNUoS) charges for Wind Farm operators, in this case the SSE Group. We are concerned that, through internal cross-subsidy within the SSE Group, a Wind Farm wholly owned by the SSE Group in one Island Group will become more competitive at Auction, by a factor of 35%, than a Wind Farm in another Island Group. Again, we would value any support you can give in ensuring that OFGEM arrives at a decision that promotes competition and is fair and equitable to all concerned.
“We have called on OFGEM to dislocate this cross-subsidy from the TNUoS calculation so that no one developer gains a competitive advantage at Auction and we have asked OFGEM to look again at the competitive appropriateness of a Transmission Owner and Distribution Operator owning generation assets.
“Finally, I would like to update you on some emerging work that is going on here around Hydrogen. The Comhairle has had ambitions for a Hydrogen economy for some time now but efforts have been held back by the lack of a market for Hydrogen. However, Scottish Gas Networks (SGN), who own and operate the Stornoway LPG network as a ‘Statutory Independent Undertaking’, is required by Government directive to convert all its UK networks to 100% Hydrogen by 2050. There is a 20% blending milestone in 2026 but Hydrogen cannot be blended with LPG so the Stornoway network will have to be converted to 100% Hydrogen by the mid-2020’s. This provides the opportunity for us to work with SGN and others to develop Hydrogen manufacture at scale, powered by Renewable electricity, and a consortium of interested partners is currently proving this concept through a Feasibility Study.
“As you can see, Energy matters are moving apace in the Western Isles and I feel a further visit by yourself would be helpful. Alternatively, the Chief Executive and I could arrange to meet you in Edinburgh or London to discuss the various issues raised above.”