Western Isles Link

The upgrade of grid access on the Western Isles

Western Isles link

1 About us 2021 . As part of this process, Ofgem has accepted SHETL’s Business Plan2 which sets out, amongst

other things, our expected network expansion over Scottish Hydro Electric Transmission Limited the coming decade. This expansion is primarily to (SHETL) is the licensed electricity Transmission facilitate the substantial increase in renewable Owner (TO) in the north of . generation in the north of Scotland and hence to

support the growth of the low carbon economy. SHETL owns the 5,000km high voltage electricity network of underground cables and overhead lines Whilst we have some specific forecasts of what that serves the northern part of Scotland, and reinforcements will be required, we recognise that the connects to central and southern Scotland and the exact size, timing and location of new renewable rest of Great Britain. SHETL is responsible for generation is uncertain. As customers pay for maintaining and investing in this transmission investment in the transmission network, it is network, which serves around 70% of the land mass important that we ensure investment is made at the of Scotland. right time rather than too early or too late.

Electricity transmission businesses like SHETL are In order to manage this uncertainty, we have agreed, natural regional monopolies. As a result, they are with Ofgem, to submit each project for funding at the regulated by Ofgem through a ‘price control’. point which we are satisfied that the project is Amongst other things, this determines the amount of required and can be delivered. It is then for Ofgem, revenue they are able to earn from network users on behalf of customers, to review the project and and the framework for the capital investment they are determine whether or not funding should be allowed. able to spend in maintaining and developing the networks.

Ofgem are in the process of finalising the next price 1 Link to Ofgem’s RIIO-T1 Final Proposals: control, which runs from 1 April 2013 to 31 March http://www.ofgem.gov.uk/Pages/MoreInformation.aspx?docid=190 &refer=NETWORKS/TRANS/PRICECONTROLS/RIIO- T1/CONRES

2 Link to SHETL’s RIIO-T1 webpage: http://www.ssepd.co.uk/Projects/TransmissionPriceControlReview/

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Western Isles link

One such project, which is described in our Business Plan, is the Western Isles Link, which establishes a 450MW HVDC link between Beauly and the and the associated Lewis Infrastructure reinforcement.

We believe that there is now a strong case that this project is required and, as such, are commencing the funding determination process with Ofgem.

This document explains the Needs Case for the Western Isles Link and we are seeking feedback from our customers and wider stakeholders. Our contact details can be found on page 12.

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Western Isles link

Contents

Project overview 05

Drivers for investment 06

Economic appraisal 09

Deliverability 11

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Western Isles link

The Western Isles Link

Project overview

Taking into account the requirements of both We propose to establish a link between , connected and committed generation, and the the Isle of Lewis and Beauly. The need for this practical deliverability of the project, we believe that reinforcement is driven by the growth of renewable the optimum timing for delivery of the link is October generation on the Western Isles. We have recently 2015. This is the forecast availability date for the made, or offered, connections for 28MW of small assets, although construction will continue generation schemes plus 343MW of large schemes. throughout 2016 to complete subsea cable burial In addition to allowing the connection of these works and reinstatement works as appropriate. generators, the reinforcement is also designed to improve the security of supply to Western Isles. We estimate the capital cost of providing this link to

be in the region of £490m. During the pre-construction phase of this project, we have assessed a number of different technical There are a number of drivers for this project and solutions, routes and delivery dates. The outcome of these drivers have informed our final technical that extensive assessment is presented in the solution. The following sections describe these diagram above and comprises - drivers, the economic appraisals based on these

drivers and deliverability considerations. § A 150kV 450MW HVDC link (80km subsea cable

and 76km underground cable) between Beauly and

Gravir;

§ A single 132kV 180MVA AC connection (20km

subsea cable and 6km overhead line) between

Gravir and Stornoway (‘Lewis Infrastructure’); and,

§ The extension of Stornoway substation.

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Western Isles link

Drivers for investment Small generators (<10MW) § The project to establish a link between the Western 6MW operational § Isles and the mainland is driven, primarily, by the 18MW consented § need to support the growth of renewable generation 10MW not consented on the islands. However, there are also demand and system security benefits associated with the link. This volume of connected and contracted generation is already more than the existing network connection to the Western Isles can accommodate but, in The growth of renewable generation addition to this, there are a number of further Over the last 10 years, there has been a steady developers who have expressed interest as follows - increase in the number of connection applications from developers of renewable generation seeking Forthcoming connection applications access to the distribution and transmission networks § 120MW competent applications on the Western Isles. These have been § 151MW connection enquiries predominantly from wind developers, but more recently applications have been received from This brings the total volume of renewable generation developers of marine technologies. The schemes either connected, contracted or at enquiry stage to range in size from 0.2MW to 152MW. 663MW. This represents very substantial growth for

the Western Isles, where the current volume of The current view of generators who are either connected renewable generation is 6MW. connected or contracted to connecting on the

Western Isles is as follows – Our ‘best view’ of forecast generation

As set out in our Business Plan, we have taken into Large generators (>10MW) account the work of the Electricity Networks Strategy § 15MW under construction Group (ENSG) – a cross-industry group jointly § 150MW consented chaired by the UK government and Ofgem – when § 193MW not consented assessing the likely growth in renewable generation

across our network. The central scenario, known as

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Proposed Lewis Infrastructure – Western Isles link 132kV AC Gravir Stornoway to Stornoway

Existing AC transmission link from Fort Augustus on mainland Gravir

Proposed Western Isles Transmission Link – HVDC link Gravir to Beauly

Harris

to Skye and mainland

Current network arrangement on the Western Isles

‘Gone Green’, was initially used to identify and Stakeholder feedback evaluate a range of potential electricity transmission Having identified the key drivers for the Western Isles network solutions that might be required to link, it is important to establish the optimum timing accommodate such a growth in generation. and technical solution. This is done by an economic However, it has been recognised that an alternative appraisal (see next section) but the outcome is also ENSG scenario, known as ‘Slow Progression’, is informed by stakeholder feedback. more likely to represent the generation outcome in the north of Scotland, particularly given the effects of During the development of our Business Plan in 2010 consent on onshore wind projects. and 2011, we sought views from stakeholders on our proposed approach to supporting the growth of the Taking the ‘Slow Progression’ scenario into account, low carbon economy. in our view, it would not be unreasonable to predict that an element of the potential 271MW of We received many comments from stakeholders forthcoming applications will be unsuccessful in supporting the need for investment in order to bring securing consent and/or its deployment delayed. This forward the renewables potential in the north of is particularly due to the consenting, environmental, Scotland. In particular, a number of stakeholders commercial and economic risks that the developers concur that: will need to consider before deciding whether their “SHETL’s proactive approach to facilitating project is viable. transmission development in a challenging and heavily regulated environment” As such, and in accordance with the ENSG is welcomed methodology, our ‘best view’ of renewable generation “given the level of uncertainty in the electricity market on the Western Isles is a level between 300MW – due to the breadth and depth of fundamental review 600MW over a time period stretching out to 2019/20. of transmission charging, underwriting and market We have made our assessment based on a range of arrangements.” scenarios of timing and scale of generation around and that this ‘best view’ assessment. “Taking each proposal on a case by case basis, identifying uncertainties, adopting a robust

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Western Isles link

engineering approach underpinned by evidence is Whilst the existing link can service much of the the best way forward.” islands’ demand, there is a shortfall during peak periods, particularly over the winter months. This One stakeholder noted that: shortfall is currently met by the diesel generators at “Some local development should be regarded as Battery Point and Arnish. strategic… there is a case for basing a needs case on a mixture of committed generation, and future The current single circuit arrangement on the potential schemes.” Western Isles does not provide the preferred level of demand security on the islands and the fixed backup The development of the Western Isles link is based arrangements rely heavily on the aging diesel on the principles set out in our Business Plan. In generators. completing the economic appraisal, we have taken into account these stakeholder views, in particular The establishment of a second circuit would reduce when considering the uncertainty around the dependence on fossil fuelled generators and provide expected growth of generation on the Western Isles. greater demand security for the islands.

Securing island demand Stakeholder feedback The network on the Isle of Lewis was historically an During the development of our Business Plan, we electrical island, with no connection to the mainland received specific feedback from Western Isles grid. Supply was sourced mainly from diesel Council relating to the securing of island demand: generators in the power station at Battery Point, with “Outages cause inconvenience for householders and some energy being supplied by two small businesses and, where they are sustained, they can hydroelectric power stations on the island. impact on short term business viability at a time when the is seeking to grow its teleworking In 1990, an electrical link with the mainland grid was sector. The Council acknowledges the tightening established to feed demand on the islands. This link economic climate facing all utilities but urges SHETL comprises a 243km single circuit from Fort Augustus to remain alive to the needs of consumers at the end via Skye and Harris to Stornoway on Lewis. of fragile radial links.”

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Western Isles link

The Western Isles Link indicative route

Economic appraisal Following consideration of these options, we believe that the optimal solution is a 450MW HVDC link from

Beauly to Gravir with a 132kV AC link from Gravir to During the pre-construction phase of this project, we Stornoway. made an assessment of the optimum solution, taking into account technical, economic and timing This solution includes some anticipatory investment requirements and the key investment drivers. comprising (a) the ‘dualling’ of the land portion of the

HVDC circuit between Beauly and Dundonnell; and, As the project delivers a point to point radial link, as (b) the provision of 450MW capacity prior to opposed to reinforcement of the meshed network, a immediate need (where immediate need is specific ‘radial link’ approach to this assessment is considered to be constructed or consented required. As such, we have established the Needs schemes.) Case based on a volume of generation versus the cost of investment on a whole life basis. “Dualling” the land cable Our assessment applied this approach to a number Given the significant increase in renewable of options to accommodate both generation and generation on the Western Isles so far, and taking demand requirements including – account of the work of the ENSG, it is likely that a § Different routes second link to the mainland will be required in the § Different capacities future which will follow the same route as the current § Different technlogies proposal.

In particular, each option had different costs and There are a number of sensitive environmental areas timescales for delivery which were considered in the along the proposed cable route on the Scottish context of developers’ requirements. mainland, and environmental impact considerations strongly suggest that any cable installation should be undertaken at one time, rather than making a second

excavation some years in the future.

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Western Isles link

Taking into account the strong environmental signals, for developing and constructing this link means that we have also assessed the benefits of making this more of the ‘potential’ generation schemes are likely £29m anticipatory investment to “dual” the land cable to be consented by the time the link is completed. at this time. There are two notable benefits – As previously mentioned, we considered a number of § The cost of the anticipatory investment is offset by different options to accommodate this level of known a reduction in electrical losses and improved existing and future generation, before concluding that availability, even if the full capacity is not utilised; a single 450MW HVDC link is the optimum and, investment at this time. § The cost of a separate installation at a later date, which we estimate would be at least twice the cost The key findings from our assessment which support of doing so at this point (assuming planning the establishment of a 450MW link at this time are – permission could be achieved). § At around 150MW of connected generation, the lost As such, we propose to install two land cables at this opportunity cost (taking into account constraints time and have secured planning consent on this and carbon cost) exceed the estimated capital cost basis. of the 450MW link; and, § Taking account of the current generation Providing 450MW capacity early background, the proposal to build a single 450MW The volume of connected and consented generation link rather than a phased smaller or larger on the Western Isles is currently 189MW with a construction remains the more economic approach known potential for a further 474MW on the horizon. for around 8 years. We define 189MW as immediate need and beyond that is anticipatory. Anticipatory investment, These are clear indicators that the proposal to underpinned by a known future requirement, has a establish a 450MW HVDC link ahead of immediate number of benefits. For example, the cost of a need is the most economic and efficient solution. 450MW reinforcement is significantly less than the cost of two 225MW reinforcements. The environmental impacts are minimised. Also, the time

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Western Isles link

Deliverability Planning consents and conditions Any project to construct transmission infrastructure in The Western Isles link is part of the National the north of Scotland must take into account the Planning Framework 2 (NPF2) and, as such, is environment, both from the perspective of the recognised as an important part of Scotland’s plans project’s impact on the environment and the for sustainable economic growth. The HVDC link is environment’s impact on the project. largely consented and only some of the consents

required for the 132kV AC link are outstanding. There are some key considerations for the construction of the Western Isles link, including – Supply chain constraints

The global requirement for HVDC cable is particularly § The land cable route passes through some strong at the moment, which places constraints on environmentally sensitive areas; the supply chain availability. However, this project § The remote nature of much of the route makes has been tendered and a preferred supplier access challenging, particularly in the winter identified, who can deliver the project in October months; and, 2015 (subject to contract award in October 2012 and § The sea between the Western Isles and the assurance of cable manufacturing capacity). mainland, where the cable is to be laid, is well

known for inclement weather. Generator connection requirements

The next large developer to commence construction These considerations are amongst the wide range of has a connection agreement for 150MW in October risks assessed, and mitigated where possible, when 2015. As proposed, the project is on track to meet developing the construction programme. this connection date and capacity.

Additionally, the programme must also take into Having considered these risks and constraints and account – factored them into the construction programme, we

expect to deliver an operational link in October 2015, § Planning consents and conditions; with further cable burial works and reinstatement § Supply chain constraints; and, works being completed throughout 2016. § Generator connection requirements.

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Western Isles link

Stakeholder contact

We would welcome feedback on our proposal. To provide comments, or for further information, please contact:

Morven Smith Major Project Communications Manager 10 Henderson Road Inverness IV1 1SN

Email: [email protected]

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