DECC and the Scottish Government are proposing a separate class of renewable generation, with higher support levels, for onshore wind in Orkney, Shetland and the Western Isles of Scotland as compared to other onshore wind projects. The joint consultation will close on 30 October.
Westminster and Holyrood are currently digesting responses to their main consultation on the structure and pricing of the new Contracts for Difference (CfD) subsidy scheme for non-domestic (over 5 MW) renewable generation.
The existing non-domestic subsidy scheme, the Renewables Obligation (RO), is run by the Scottish Government north of the border and there will be a transition period when both schemes overlap (2014 – 2017). The Scottish Government’s consultation on the transition closes on 2 November. It repeats the questions that were asked in the England and Wales consultation on the transition from the RO to CfDs.
The results of these consultations will inform the CfD prices and terms included in the final Electricity Market Reform (EMR) Delivery Plan, due to be published in December.
Scottish Islands strike price
The consultation suggests that onshore wind on the islands is not a marginal technology like offshore wind, wave or tidal where high subsidies are justified by the promise of creating a critical mass for learning and a first mover advantage for the UK industry. The island onshore wind strike price is proposed to be lower than the offshore wind subsidy but higher than other onshore wind technologies. Whether this would continue when the strike prices are reduced in the next EMR Delivery Plan period is not confirmed.
| Strike price per MWh |
| Proposed Offshore Wind | £155 in 2014/15 digressing to £135 in 2018/19 |
| Proposed Scottish Islands Onshore Wind | £115 in 2017/18 |
| Proposed Onshore Wind | £100 in 2014/15 digressing to £95 in 2018/19 |
Developers on the islands would be treated in the same way as other CfD eligible developers in all respects including contract length, terms, indexation and revision in future delivery plans.
As all renewable support mechanisms are from the same budget - the Levy Control Framework funds raised from consumer bills which have been capped by the Treasury at £7.6 bn until 2020 - the proposal will impact all renewables developers not only those locating projects on the islands.
Benefits
The need for higher funding for the island projects is because of their remote off-grid location which leads to higher connection costs. The conditions are also harsher than for other onshore wind projects, increasing both capital and operating costs but island onshore wind projects should also generate much more power. The benefits of additional support for the island projects are outlined as:
potential for very large projects, some already with planning;
- load factors are considerably above even the best sites of the GB mainland (c. 25%-57% higher);
- potential for very large projects, some already with planning;
- increase and diversification of jobs on the islands;
- improved security of supply on the islands;
- broader community participation than on the mainland; and
- a reduction in the overall cost of intermittency on the whole GB system.
Viking Windfarm setback
An ongoing court case over SSE’s Viking wind farm in Shetland has made headlines in the past few weeks. It provides a timely reminder that planning processes are a significant issue for island projects, in addition to the funding gap and grid connection.
Grid connections
The islands renewables study which fed into this consultation was independent of the emerging conclusions of Ofgem’s review of transmission charging (Project Transmit) due be published in the coming months and implemented in April 2014. Ofgem’s preference is for the most cost-reflective option and therefore the most expensive transmission charges for island developers.
The consultation suggests that the proposed additional subsidy through the renewable support mechanism is more transparent than dealing with the same through less transparent routes such as reduced transmission charging.
DECC and the Scottish Government are continuing to look at grid access issues for the islands and intend to report on this when the final First EMR Delivery Plan is published at the end of the year.
Marine
Marine projects on the islands are not expected at a commercial scale in the first EMR Delivery Plan period (2014/15 to 2018/19) and so only onshore wind projects would get an island price. However, DECC and the Scottish Government do propose to re-examine marine island support for the second EMR Delivery Plan period.
Geography
Under the consultation views are sought on whether the local government areas of the Orkney Island Council, the Shetland Island Council, and the Western Isles (Comhairle nan Eilean Siar) are unique and warrant the additional support.
DECC and the Scottish Government are considering other measures to help smaller scale, community owned and marine projects on the islands and intend to report on progress on these measures at the end of 2013 when the final EMR Delivery Plan is published.
More information
Scottish Islands consultation page
Renewables Obligation (Scotland) transition consultation page
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