SSEN welcomes Ofgem approval of whole system solution to secure Shetland’s future electricity needs
Scottish and Southern Electricity Networks (SSEN) welcomes today’s decision by Ofgem to approve its proposal to secure Shetland’s future electricity needs by contributing towards the Shetland transmission link.
As the distribution system operator for Shetland, SSEN has been working to identify the future security of supply solution for Shetland for a decade in anticipation of the closure of Lerwick Power station, which is nearing the end of its operational life and is expected to cease full duty operations in 2025.
The proposal will see SSEN Distribution provide a material financial contribution towards the proposed transmission link. The level of contribution, £251m, is based on the value of services that a link would provide to SSEN’s distribution customers on Shetland. This will secure Shetland’s future security of supply at the lowest cost to consumers, saving around £140m when compared to the cheapest alternative market-based solution. In response to Ofgem’s decision, SSEN Distribution will also now progress preparation of the Shetland standby arrangements which will complement the transmission link.
Today’s decision is a critical step forward in securing the network investment required to meet Shetland’s future energy and economic needs. This decision provides Shetland’s renewable developers the clarity they require about their future network charges, helping them make necessary financial investment decisions and provide the evidence required by Ofgem for the regulator to approve the proposed transmission link to the Shetland Isles.
SSEN notes Ofgem’s requirement for the policy intent of its decision to be implemented via changes to industry codes and licence conditions and we will shortly submit proposals to the system operator and relevant industry bodies. SSEN Distribution will work with all relevant stakeholders to achieve timely implementation in line with the Needs Case process.
Ofgem has also stated that it will consult early next year on the proposed methodology for similar contributions to the Western Isles and Orkney transmission links.
Commenting on today’s decision, Colin Nicol, Managing Director for Networks, said:
“We welcome today’s decision by Ofgem to approve our whole system solution for Shetland, which is a positive step toward meeting Shetland’s electricity needs at a much lower cost to energy consumers than alternative options.
“The proposal will support future security of supply as well as unlocking Shetland’s renewable potential. Once built, the transmission link and the low carbon output from renewable generators on Shetland will also help support the electricity needs of Shetland’s oil and gas industry and its wider economy.
“Our transmission business will shortly re-submit to Ofgem an updated Needs Case for the Shetland link and we look forward to working with Ofgem and Shetland developers to progress this proposal in a timely manner.”
This contribution value is calculated based upon the 600MW link with a cost of £709m which SHE Transmission proposed in its Needs Case and which Ofgem has consulted upon. The contribution methodology is designed to adjust the contribution value for certain assumptions to maintain value to consumers.