SSEN welcomes Ofgem Orkney Needs Case consultation

Scottish and Southern Electricity Networks (SSEN) welcomes the publication of Ofgem’s Needs Case consultation for the Orkney transmission reinforcement.  In particular, SSEN welcomes Ofgem’s recognition there is a need for the reinforcement, that a 220kV (220MW) reinforcement is the optimal solution and that the link is deliverable. 

Throughout the development of the Orkney transmission reinforcement, SSEN has worked in close consultation with its generation customers, industry stakeholders and the local Orkney community. Ofgem’s Needs Case consultation is an extremely important milestone for the project and Orkney’s renewables industry, testament to the hard work and commitment of all stakeholders who have helped get the project to this critical stage.

SSEN recognises that Ofgem, as the economic energy regulator for GB, has to balance a range of factors in its consideration of the Needs Case, not least ensuring value for GB consumers.   However, SSEN has a number of concerns with regard to some of the conditions Ofgem has proposed before it will grant full Needs Case approval. 

Firstly, SSEN strongly disagrees with Ofgem’s view that 135MW of new generation is required before it will approve the project.  This is in contrast to SSEN’s Needs Case, which proposed that no more than 70MW of new generation is required to justify the investment in the project.  Crucially, SSEN’s figure is based on well-established, industry best practice, used to assess similar transmission investments across GB.  It is unclear why Ofgem is proposing a different test for Orkney, which conflicts with Ofgem’s own guidance on these types of transmission investments.  SSEN therefore remains firmly of the opinion that the volume of generation required to justify the investment is no more than 70MW and will provide a further update on its assessment of the tipping point in due course.

Secondly, Ofgem has proposed a number of conditions that Orkney renewable developers will have to achieve before it will approve the project, with these conditions intended to demonstrate the commitment of those developers.  Whilst SSEN recognises developer commitment is an important factor in Ofgem’s determination, Ofgem is again proposing tougher rules for Orkney than that applied for similar transmission investments elsewhere in GB. 

As the combination of the conditions proposed by Ofgem look extremely challenging to achieve, they risk threatening the viability of the project unless changed. SSEN will now undertake a round of engagement with its generation customers and other stakeholders with an interest in the Orkney transmission reinforcement to help shape its response to Ofgem’s consultation.

Finally, SSEN notes Ofgem’s minded-to proposal regarding delivery model, in which Ofgem has proposed the project is delivered via its Competition Proxy Model, which has still not been fully developed by Ofgem, rather than the well-established Strategic Wider Works model.  SSEN continues to have significant concerns about Ofgem’s implementation of competition in transmission, as it set out clearly in its recently published Half Year Results statement for 2018/19 and previous consultation responses.  Whilst SSEN will continue to engage constructively with Ofgem and other stakeholders as part of this process, it will also consider all options available to ensure the integrity of the Price Control is maintained and the development of existing projects continues.

Commenting on the Needs Case consultation publication, David Gardner, Director of Transmission, said:

“After over a decade working on different proposals to provide a transmission connection to Orkney, today’s publication of the Needs Case consultation, and Ofgem’s recognition there is a clear need to provide a transmission connection, is a crucial step forward for the project and Orkney’s renewables industry.

“Whilst there are still several obstacles to overcome, having got this far it is important we don’t miss this opportunity to unlock Orkney’s vast renewables potential.  We will therefore continue to work in close consultation with our generation customers and wider stakeholders to address the key points raised by Ofgem in its consultation.”

Ofgem has separately published a consultation today on SSEN’s Alternative Approach for Orkney, which is a stakeholder led, new policy proposal, designed to help overcome the barriers to connection faced by SSEN’s generation customers on Orkney, as well as demonstrating developer commitment.  As part of its engagement on the Needs Case consultation, SSEN will work with its stakeholders to help inform its response to this consultation.