Ofgem is proposing changes to a plan by the network division of SSE to build a 220MW high voltage link to connect the Orkney Islands to the Scottish mainland.
The UK energy regulator said Scottish and Southern Energy Networks’ proposals “do not do enough to protect consumers from the risks of paying for a link that is bigger than needed”.
The link, estimated to cost around £260m, would be completed in 2022 and help new wind farms and tidal power projects on Orkney send electricity to the rest of the UK.
Ofgem is consulting on approving the Orkney link subject to SSEN demonstrating, by no later than December 2019, that at least 135MW of new generation on the island has been awarded a Contract for Difference in the government’s next CfD auction or secured planning consent and finance for construction.
Ofgem said it plans to reduce the cost to consumers of building the link by seeking to “replicate the outcomes of competition”.
It said: “The regulator is minded to use the ‘competition proxy’ model, where it will set the revenue that SSEN can earn from building and operating the Orkney link based in part on its experience in cutting the costs of connecting offshore wind farms to the grid by tendering the ownership of these links”.
Ofgem is also consulting on approving an SSEN trial to improve the management of the queue of generators wanting connections on Orkney.
Prioritising generation projects which are most ready to connect would move them up the queue and prevent other projects from holding up the queue .
The trial could also help SSEN to meet Ofgem’s target for the amount of generation that must be committed to use the link.
SSEN is also proposing to temporarily reduce the financial commitments that generators have to make to ensure the Orkney link can be built.
However, Ofgem said it is minded to reject this proposal as it “passes on too much risk to consumers, who would have to pay additional costs if a generator decided not to go ahead with its connection”.
Ofgem will make a decision on the business case for the Orkney link in spring 2019. It will also confirm whether it will use the competition proxy model at the same time.