UK energy regulator Ofgem said on Tuesday it “is minded” to approve a proposal by SSE’s Scottish and Southern Energy Networks (SSEN) to build a 600MW subsea electricity transmission link from Shetland to mainland Scotland.

But Ofgem said it is minded to reject SSEN’s separate proposal to build a 600MW transmission link to connect the Western Isles to the mainland — but would support an alternative proposal.

The Shetland link would allow new wind farms on Shetland to export renewable electricity to the rest of Great Britain and help ensure security of supply on the islands.

“SSEN estimates the link would cost around £709 million and would be completed in 2024,” said Ofgem.

“Ofgem is consulting on approving the link subject to SSEN demonstrating, by the end of 2019, that the Viking Energy Wind Farm project planned for Shetland has been awarded subsidies through the UK Government’s Contracts for Difference (CfD) auction.

“This would protect consumers from the risk of paying for a link that it is bigger than needed.”

On the Western Isles proposal, the regulator said: “Ofgem is minded to reject SSEN’s separate proposal to build a 600MW transmission link to connect the Western Isles to the mainland based on two Lewis Wind Power wind farm projects being awarded subsidies through the CfD auction because of the risk of consumers paying for a significantly underutilised link

“Ofgem would instead support an alternative proposal that more appropriately protects consumers from the additional costs of funding a potentially significantly underutilised link.

“This could be either a 450MW or 600MW transmission link depending on any revised proposals SSEN put forward.

“SSEN’s initial estimate for the proposed Western Isles 600MW link put the cost at around £663 million, and would be completed in 2023.

“SSEN’s equivalent initial estimate for the 450MW link put the cost at around £617 million.

“Ofgem estimates that the costs to consumers of building the Shetland and Western Isles links could be reduced significantly.

“Ofgem plans to reduce costs by seeking to replicate the outcomes of competition.

“The regulator is minded to use the ‘Competition Proxy’ model, setting the revenue that SSEN can earn from building and operating these links based in part on the regulator’s experience in cutting the costs of connecting offshore wind farms to the grid by tendering the ownership of these links …”

Ofgem will make a decision on the business case for the Western Isles and Shetland links in mid-2019.

SSE responded in detail to the Ofgem statements.

Colin Nicol, managing director of Scottish and Southern Electricity Networks, said: “Ofgem’s decision to provisionally approve SSEN’s 600MW proposed transmission link is an important milestone in connecting Shetland to the mainland electricity network and helping to unlock its significant renewables potential.

“There are still a number of steps to be taken before we can proceed with the transmission connection, in particular the requirement for renewable developments to secure CfD support in this year’s auction, and we will continue to engage with key stakeholders during this consultation period.  

“We also await clarity from Ofgem on their assessment of our proposed whole system solution.

“This decision will be important in reducing costs for consumers and securing the best economic case for delivery of renewable development in Shetland and Scotland’s other island groups.”

On the Western Isles statement by Ofgem, Nicol added: “Whilst we welcome Ofgem’s recognition of the need for network reinforcement, we strongly encourage them to reconsider and approve a 600MW link.

“A 450MW link would be short sighted, limiting the potential for community schemes to benefit from renewables expansion. 

“Moving to a 450MW at this late stage also introduces risks and uncertainty which, in turn, could impact on the delivery of a transmission link to the Western Isles.

“We call on Ofgem to look again at the robust, comprehensive analysis that underpins the 600MW investment case and listen to the broad view of stakeholders who strongly support the need for a larger link.”