By Mark Latham
People in Shetland have been left frustrated by a stand-off between an
energy company and the regulator that has put a stop to the building of a
long-awaited new power station and shows no sign of early resolution.
Last month, Scotland’s Energy Minister Fergus Ewing gave planning
permission for a new 120-megawatt power station a couple of miles
north-east of Shetland’s capital, Lerwick.
A Government press release announced Ewing’s satisfaction that construction
work on the project would create 400 jobs.
But neither the press release, nor most of the subsequent media coverage,
mentioned the fact that national energy regulator Ofgem earlier this year
ordered the developer Scottish Hydro Electric Power Distribution (SHEPD) to
take the project back to the drawing board.
According to Ofgem, Scottish and Southern Energy’s distribution arm SHEPD
had not done enough work to prove that the plan represents best value for
consumers across the north of Scotland, who effectively cross-subsidise the
cost of electricity generation and distribution in the islands.
Ofgem also claims SHEPD had not “sufficiently tested the market for an
efficient and economical solution” and had not adequately considered
alternatives to the building of a new power station in Shetland.
Plans for the new power station, which would have replaced a 67-megawatt
power station which dates back to the 1950s and which no longer meets
modern environmental emissions standards, were unveiled by SHEPD in 2013.
SHEPD spent three years drawing up plans for the new plant after being
required in 2010 to draw up an integrated energy plan for Shetland.
After consultation with the local community, SHEPD’s plans were unanimously
approved by the planning committee of Shetland Islands Council in February
before receiving approval from the Scottish Government in August.
The current harbour-side power station at Gremista, which burns heavy fuel
oil in some of its generators and also uses some diesel, is blamed by many
Lerwick residents for sooty emissions that often make it impossible for
them to dry their laundry outside.
The power station proposed by SHEPD would have burned greener, light fuel
oil with the option of burning natural gas from Sullom Voe oil terminal, 25
miles north of Lerwick.
SHEPD’s energy solution for Shetland for a new power station incorporated
“smart grid” plans to help balance local demand for electricity.
It would also have allowed small-scale renewable energy sources to feed
into the island electricity distribution network, which is not connected to
the national grid.
The new power station would also have seen heat from the generating process
being pumped into the local district heating scheme.
SHEPD claims it examined more than 20 other potential options before
submitting its plans for the dual-fuel power station, which were turned
down by Ofgem.
A spokesman for SHEPD said last week that, in line with Ofgem’s
requirements, it was close to appointing an independent auditor who will
oversee the “competitive process” that will identify a new solution to
Shetland’s energy needs. A consultation process to precede the competitive
process will get under way soon but it is likely to be several months
before new plans are drawn up.
Until the process has been completed SHEPD says it cannot say for certain
if Shetland will get a new power station and, if so, whether it would be
built on the site it now has planning permission for.
The chairman of Lerwick Community Council, Jim Anderson, said that people
in Shetland were “quite confused as to why the new power station has not
been built”.
“People in north Lerwick will be glad to see the back of the old power
station,” he said. “Everybody was happy with the proposal on the table
until Ofgem pulled the rug out from underneath it.”
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