Concern over island interconnectors after Shetland and Lewis wind farms miss out in CfD auction
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The latest round of Contract for Difference energy awards signalled a blow for island interconnectors despite some onshore wind farms gaining consent.
A total of 12 new renewable electricity projects won CfDs across offshore wind, advanced conversion technologies and remote island wind sectors, which will deliver almost 5.8GW of power to the grid by 2025.
Costa Head and Hesta Head were among the onshore projects to succeed, with the two Orkney schemes operated by Hoolan Energy, part of Low Carbon, providing around 40MW of power to the islands.
However, Ofgem's conditional approval for the interconnetor requires a total of 135MW of new projects by December 2021.
Steve Mack, head of investments at Low Carbon, said: “We have been developing Costa Head and Hesta Head for almost five years and are delighted to secure CfD contracts for both projects. We look forward to the other Orkney projects completing their development, thus enabling construction of the interconnector to start as soon as possible.”
Muaitheabhail and Druim Leathann wind farms in Lewis were also awarded contracts, but Lewis Wind Power's Stornoway project – which has been the subject of a dispute over crofters' rights in the courts – was unsuccessful.
Gavin MacKay, head of energy industries at Highlands and Islands Enterprise (HIE), said: “This news represents a step in the right direction towards interconnection for Orkney with the successful award of Hoolan Energy’s two projects. Ofgem’s conditionality still requires a further 100MW of new generation to come forward by December 2021 to justify investment in the cable for Orkney.
“However, there is disappointment as other island projects – Stornoway wind farm in Lewis and Viking Energy in Shetland did not receive CfD awards after a huge amount of work by the teams.
“The combined capacity of the successful Lewis projects is not enough to meet the conditions of building the Western Isles Interconnector. Transmission links to the islands are vital to ensure that the Northern and Western Isles can continue to play a vital and strategic role in the UK energy mix for the decades to come.”
Lewis Wind Power said it would consider its options after the result.
Director Mark Vyvyan-Robinson said: “Obviously, we are all incredibly disappointed not to have secured a Contract for Difference after a huge amount of work by the team to make the project as competitive as possible.
“We now need to take some time to look at all the options for the project, and to assess what we believe to be the best way forward for the wind farm and we will keep our partners and the local community updated as we work our way through these.”
The four community energy companies seeking to develop renewables on common grazings in Lewis said a new approach was needed to developing renewables in the islands, putting the community at its heart.
Representing Sandwick North, Sandwick East, Melbost Branahuie and Aignish Community Energy companies, Rhoda Mackenzie said: “Comhairle nan Eilean Siar and the Stornoway Trust have always argued that the Lewis Wind Power wind farm was essential to get a new interconnector to the Western Isles.
“The logic of that argument is that the interconnector cannot now happen, given LWP’s failure in the subsidy auction.
“We believe it is time now for a new approach. There is still plenty of scope to develop renewables on the islands but we need to do so in a way that puts community-owned energy front and centre.
“The right way forward is to increase the capacity of the existing grid via new demand through electrification and hydrogen, install new storage via battery, and start working on an upgrade of the existing Skye connector.
“It is essential that the new Plan B is built around, by and for community-owned energy, as that is the only way to keep the income and profits in the islands.
“The Comhairle must not see the CfD outcome as a defeat but as an opportunity for them to take the lead in developing a new partnership with the community energy companies in the islands to work together and to unite around a new Plan B.”
Viking Energy Shetland said it was very disappointed in the outcome but that it remained committed to the project and will look at ways to deliver the wind farm.
Spokesman Aaron Priest said: “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.”
Trade body Scottish Renewables said including onshore island wind farms in this CfD round would help to boost communities in remote areas.
Its chief executive Claire Mack said: “Scotland’s islands have some of the best wind resource in Europe and the decision to award contracts to four projects today will mean economic, social and environmental benefits for communities in the Western Isles and Orkney.
“The record-low prices which have been achieved also mean more value for consumers, with island wind matching the price achieved by offshore projects.
“Scottish Renewables was proud to work closely with island councils and the Scottish Government to secure access to the Contracts for Difference mechanism for remote island onshore wind projects last year, and this announcement is a testament to those efforts.”
Elsewhere, the Moray West offshore wind farm – planned to add to a cluster of farms in the Outer Moray Firth alongside the completed Beatrice wind farm and the consented Moray East project – failed to secure a CfD allocation in this round.
However, the company confirmed that the project remains viable and it hoped to bid again in 2021, with construction to begin in 2024.
Dan Finch, Moray West director, said: “Despite this setback, it is a significant achievement to get the project to such an advanced stage in a short period of time. Moray West will continue to develop the project in anticipation of the next auction round and thank our suppliers for helping us deliver a highly competitive bid, and with whom we will continue to work to drive the cost-reduction agenda.
“We continue to look forward to taking Moray West into its construction phase and delivering significant economic opportunities for Scotland and the UK.
“We’re confident that Moray West is able to become a key piece of Scotland’s energy transition story. There is an opportunity for Scotland’s energy targets to be met in future by Scottish offshore wind farms and for Moray West to be a key step on that journey.”
HIE's Mr MacKay added: “While we are disappointed that the Moray West project did not proceed in the timeframe of this round, we look forward to continuing with positive engagement as the project is enhanced for future allocation rounds.
"The prevalence of offshore wind project success in the south of the UK underlines the criticality of having a competitive manufacturing supply chain in the region to supply components to projects clustered around the east of England.
“This allocation round demonstrates just how competitive remote island and offshore wind has become. Participation in the UK electricity market is the big prize both for place based, sustainable and inclusive economic growth opportunities. It also underpins the valuable contribution our region can make to a secure, sustainable, decarbonised UK energy system in our transition to net-zero carbon.
“We will work proactively with all stakeholders to understand the implications and work towards a solution for connecting the islands. Feedback received from island and offshore developers so far has been positive about optimising projects and bidding in the next allocation round.”
