Western Isles HVDC Link Costs Rise (UK)

Scottish Hydro Electric (SHE) Transmission plc, previously SHETL, has been developing a link to the Western Isles to meet the requirements of large and small renewable generation on the islands.

Recognising that investment decisions are being made by contingent generation developers, it is important that those decisions are made on an informed basis utilising the most up to date information.

This open letter provides an update on the current status of the project.

A considerable amount of work has been undertaken by SHE Transmission over the last number of months in relation to the proposed Western Isles HVDC Link and Lewis infrastructure.

Following an assurance on the programme for development of large generation schemes in March this year, SHE Transmission advanced detailed contractual negotiation with the preferred supplier of the HVDC Link.

The first stage of this negotiation concluded in late summer and it became clear that the cost and delivery programme agreed in October 2010 would be substantially altered.

The total cost of the HVDC Link (excluding associated infrastructure on Lewis) is now estimated to be no less than £700 million. The current programme estimates a delay in the planned completion date of October 2015 for the HVDC Link of at least 12 months with a real potential it could be later. Further negotiations with the supplier are ongoing.

Work to finalise the design of the Lewis infrastructure works is also advancing. From the information known at present, it is anticipated that project costs for this element will be no less than £75 million and there will be a delay in the planned completion date of October 2015 of at least 12 months with a real potential it could be later. Design works are ongoing.

In parallel with these contractual negotiations, SHE Transmission made the first stage of a funding request to Ofgem in April 2012. Work with Ofgem on the assessment of the requirement for the Western Isles and Lewis infrastructure project progressed well over the summer; however, the increased cost and delayed delivery date is likely to have a material impact on this assessment.

Given this, SHE Transmission is in the process of reviewing and updating the analysis.

The increased cost of the HVDC Link will have a consequential impact on transmission charges and, hence, the affordability for generators. A further work programme to assess options to offset network costs in the Scottish islands has commenced.The outcome of this work will be an essential component of any investment decisions in transmission infrastructure.

In order to meet the already challenging programme, further commitment from contingent generation schemes will be required in late spring 2013.

SHE Transmission remains committed to working with all stakeholders to achieve timely, cost effective investment in the transmission system in the north of Scotland. The company will provide a further update on the progress of the Western Isles transmission project, including the supply chain discussions around cost and delivery date, by the end of the year.

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Press Release , November 05, 2012;  Image: Siemens