DavidThomson

I’ve hopefully repeated a few times that, as yet, no-one is committed to actually building a windfarm. We are investigating an opportunity that, in my opinion at least, could offer significant positive benefits to Shetland. That there would be a cost to such an investigation has always been accepted. It is a risk and no-one is pretending it isn’t. The decision taken by councillors (and now trustees) over several years is that the potential rewards are worth the risk. The reverse way to look at it is if we didn’t do this, would we look back and regret that we did not fully explore something that could have negated or mitigated any future difficulties this island faces? Despite the apparent prosperity, it doesn’t take much to tip Shetland into economic crisis. Can we really afford not to seek new revenue for our community? At the moment we are strictly onshore but we have indeed suggested that perhaps the islands should be considered as offshore and benefit from some of the financial support that offshore developments get. I can say that the lobbying we do undertake has never mentioned the strategic assessment for offshore energy recently announced. At the moment is has been mainly focused on campaigning for fair and equitable charges for the use of any eventual electrical transmission infrastructure created.

Chinese Whispers has nothing on the internet. For anyone unfamiliar with this story it is best to return directly to the original announcement. Energy Secretary John Hutton announced a study. Nothing more. It will hopefully lead to a significant increase in UK offshore energy production (renewables and also oil & gas) but it is not a commitment to build anything. Even if projects do come forward, Mr Hutton stated in his announcement that, while a big deal, this scale of development “could be a major contribution towards meeting the EU’s target…â€. It would not be enough to actually meet the target and more projects are required. Exactly the same way it was viable the day before the announcement was made and as I have tried to explain on these pages. I acknowledge that the press didn’t cover the detail very well but a rather large fact within the published scoping document is that it specifically excludes Scotland and Northern Ireland. The study might find places for acceptable offshore development around England and Wales but it is not even looking around Scotland. Since Scotland needs power too then we cannot just cease developing projects north of Hadrian’s Wall. They will only be of use if they are already passing Shetland David. This is absurdly oversimplified. If the study finds potential and if every potential turbine is built then benefit referred to above has nothing to do with ‘plugging into’ passing cables. It is to do with having a UK electricity system that has the overall generation, distribution and flexibility to supply the national demand at all times. Having a stronger English network (say bolstered by the significant infrastructure required to connect the hoped for offshore turbines) strengthens the Scottish system it is connected to. Having a stronger Scottish system makes it easier to connect island projects. This is not a substitute for the currently proposed interconnector but it might make building that a tiny bit easier. Therefore it is a positive for us. This leads me onto… We absolutely need a mix of generation types. Overdependence on any particular form, including wind or other renewables, would be unwise. We do have a fair bit of scope to increase our use of wind energy however before there is an issue. Oxford University did a report ages ago that disproved the concern about a national windless moment. The report found that there has never been a time over the past 35 years when the entire country has been without wind, and that the wind always blows strongly enough to generate electricity somewhere in Britain. This means that in a national sense wind energy projects can provide the back up to other wind energy projects. It is not as simple as that but, basically, a large number of offshore turbines around England and Wales complements any development in Shetland rather than competing with it. Shetland has the potential to be the strongest performing component of a national geographical distribution.

I can see you’re unconvinced. That’s fair enough; but I do feel it necessary to counter inaccurate statements. You absolutely did not say the wind elsewhere was better. You did say however: That statement is factually inaccurate. The wind here is better. Burradale Windfarm is more productive than an equivalent windfarm anywhere else. Would you be prepared to provide the figures and sources to back up that statement? It certainly does not match anything known to Viking Energy. Even if it was true and the project would not be viable then, simply, the project would not happen. SSE would not continue and banks would not lend. The whole point of equity is the borrower ‘sharing the pain’ of the lender if the venture is a failure. The interest paid by borrowers is the reward to the lender for taking the risk. Most business loans (even mortgages) need equity and I have stated here repeatedly that it might require a 10 to 20% equity investment from the community resources to convince the banks to lend the rest or our half. If the bank required the entire trust as security and we were prepared to undertake the project with that then we would not need the loan (and would be able to avoid interest payments and a lot of hassle). That is not being proposed.

You're opinions about only supporting the windfarm if it directly benefits you personally and not through public services are perfectly valid if that is your feeling. I personally feel that while not a direct payment into my standard of living, I have benefited (or could) from the existence of leisure centres, care homes, rural schools, upgraded roads, museums, potential cinema/music venues, inter island ferry and air links and other infrastructure that would not exist (or would be a shadow of the existing) without Shetland’s unique community revenues. The windfarm will continue those funds beyond the oil era. The only point I would bring you up on is the above one. We pay high fuel costs because Sullom Voe is an oil terminal not an oil refinery. The oil has to be shipped to Grangemouth or somewhere else then back up. We are at the end of the line for refined fuel. Electricity from wind turbines is completely different. You do not have to ‘refine’ electricity. The energy is converted from the wind in a form that is immediately useable. It will therefore be available in Shetland at exactly the same cost as it is elsewhere. A further aspect is that, unlike fuel supply, electricity supply is a regulated market. You can buy your electricity from anyone. Even if the windmills in Shetland produced electricity at greater cost, there is no requirement that you (or anyone else) has to buy your electricity from the owner of the windfarm. Imagine if you didn’t like the prices at Leask’s you could take the fuel anyway then agree a sale for that volume with a garage in London who had a price you liked. That is how the electricity market works. Most of Shetland’s electricity is produced at Lerwick Power Station, which is owned by Scottish and Southern. If I don’t like their prices I can go to Scottish Power or someone else. That other company doesn’t have to physically deliver me the electricity. The regulated market takes care of that and I get my electricity at the cheapest price. If you are paying more than everyone else in the UK for your electricity then it is your own fault. You should never have to pay more than the average. I can make the further argument that if we don’t build these types of big project then your electricity bills certainly will be more expensive. Oil and Gas are not going to get cheaper. They have announced that heating bills are due to rise 10% this winter again due to demand for oil and gas. Our best hope for affordable electricity is to maximise indigenous, renewable production. The Viking Windfarm will help keep average UK prices down - not Shetland’s prices up.

The landscape and visual impact of this project is undoubtedly the most difficult issue to reconcile. Most of the environmental concerns can be avoided, managed, mitigated or compensated but you simply cannot hide all the turbines from everywhere. We have done a lot of work to minimise the visual impact, particularly from neighbouring populated areas, but the windfarm will be a feature of the central mainland landscape while it is there. We make the argument that the positive economic benefits to the community of the project will outweigh the subjective negative impacts that cannot be otherwise avoided. With regard to the survey, as a Shetlander I welcome it as much as anyone. I bothered myself to actually go and read the article and I don’t see that the recognition is automatically threatened by the windfarm. I encourage differing opinions from others who have read the article but I don’t think they are ranking islands essentially for scenery or attractiveness. The opening paragraphs state they are examining the integrity of islands against the pressures of population pressure, climate change, storm damage, invasive species and tourism overkill. That is quite a different type of ‘unspoilt’. The comment on Shetland itself is also interesting: “Extremely high integrity in all aspects of heritage and ecology, despite oil developments. Great planning controls and attitudeâ€. This suggests to me that the existence of industrial activity is not in itself a problem so long as it is done right. I also note that while third overall, the score given to Shetland puts it in the “Minor Difficulties†category and not the “Unspoilt and likely to remain so†category. Without wishing to drag this aspect further my own opinion is actually more centred about the fact that I am surprised people might think Shetland could be so easy spoilt. I am personally not clear how a windfarm would seriously affect the attraction of the “spectacular sea cliffs; pristine beaches; fascinating geology; over a million breeding seabirds; the highest density of otters in Europe; regular sightings of killer whales; and superb displays of rare sub-Arctic flora." I have always felt that doing something like this would only ever enhance Shetland’s worldwide reputation. Windfarms do not deter tourists anywhere else in the world. I don’t see why they would here.

A premise of this project is to provide a local equity and borrow the bulk of the capital costs. Such commercial project finance would be borrowed from banks but probably not the high street ones. High street banks won’t normally ‘touch it’ because of the scale. The type of bank likely to be used will normally deal in billions and this would be a small project. The security for any loan would be the project itself. You cannot borrow that level of money without confidence of success. Everything about the project will be based on binding legal contracts to give the bank(s) the confidence that the project can pay back the borrowings. If the project cannot convince the banks that it will succeed then they will not lend the money and the project will not happen. In a related manner, SSE (a private company with shareholders) will also be investing and will not put up their half of the capital costs unless they are convinced that the project will be successful. As an international utility they will not be able to fool anyone about whether the project is viable or not. Furthermore, the energy industry regulator Ofgem will be interested in the project finances to be sure the project is viable before it will be willing to sanction the investment associated with the interconnector. If the project cannot convince the industry regulator that it is viable then there will be no cable. No cable no project. All this external scrutiny can give the Shetland community the confidence to consider making an investment. Obsolete to what? Marine technologies are decades away from being commercial. I can argue against any suggestion that nuclear is economic. Do you suggest oil and gas are suddenly going to become easy and plentiful (and non-finite)? Since at least 90% of the finance for this project will be private money (from commercial banks and SSE) then I’m not clear how you think no-one is putting private money on the line. We don’t have to invest anything. We can be confident that because of Shetland’s wind resource , these big companies will come to Shetland and look to build big projects but there is no law that says we have to get involved ourselves and keep half the profits in Shetland. It is extremely unlikely however that Shetland would be able to get better than token handouts otherwise. Unfortunately, very little of Shetland is ‘our land’. While there may be crofting interests, most land in Shetland is owned by private landowners. The Viking Windfarm is centred around the Busta Estate, which is owned by the Council, but most of the site is on various other land estates. If developers reached agreement with those landowners then there is little that can be done to force those developers to share finances with the local community. The oil companies were forced to benefit Shetland because the Council achieved an Act of Parliament to allow them to compulsorily purchase the land under the terminal. It is an option that Shetland could try this again but given the prevalence of windfarms nationwide it is unlikely to be successful. Even then we would still only get a ‘good rent’ rather than profits. Better perhaps to do things on our terms and see as much as possible of the real benefits of any project stay in Shetland.

Hi, seemed worth adding a few comments. Viking Energy was initiated in Shetland. SSE were proposing a project of their own and it made sense to join the local project with the external project to increase the viability of both. If the project achieves all the various milestones and the decision is made to proceed with the development the Shetland community would be expected to contribute £30m to £60m representing 10% to 20% of half of the overall capital cost currently estimated around £600m. With the working basis that nothing would proceed without watertight contracts to guarantee a fixed acceptable price for every unit of electricity produced, we currently calculate that the community could expect to receive community benefit distributions of around £1.5m per year and profits for the community funds of around 18m per year after costs and borrowing repayments. Ignoring the community benefit and any other benefit such as rents, jobs, supply chain business etc, that is an internal rate of return of no less than 25%. Not really. A windfarm in Shetland will produce twice as many units of electricity as an average windfarm on the mainland. Even with the minor electrical losses associated with the cable Shetland’s wind resource is so powerful that it justifies the distance of cable involved and will deliver more units of renewably sourced electricity to the final user. The investment can be viewed in the same light. If windfarms are viable anywhere they will be more viable in Shetland. The UK does have an incentive system but these machines are being built worldwide in places without the incentive mechanism. They would be viable without. Even if they find ‘cheaper’ forms of energy (I would argue whether nuclear was ‘cheap’ even economically) then, as above, the project is protected because it would only happen if there are watertight legal contracts to give a guaranteed income for every unit of electricity produced. The wind resource offshore around the UK is very good and if we could somehow allow unconstrained development it might even be ‘sufficient’ but it is not better than we have here. I’m not sure what evidence would convince you but I’m afraid you are factually incorrect.

There will be a talk in the Shetland Museum and Archives on Friday night (5th October) presenting three speakers, one of whom is Ross Gazey of PURE Energy Centre. Denis Pinto, Chairman of the Energy Institute (Aberdeen Highlands and Islands Branch) is travelling to Shetland to attend the Careers Convention on Thursday night. Denis wanted to arrange an event during his visit and Shetland Renewable Energy Forum has helped facilitate a public talk. It is a free event open to everyone and there should be a buffet starting at 18.00pm while everyone arrives. The presentations will start at 18.30pm. Ross Gazey is going to speak about how the PURE Energy Centre has been progressing and will be able to discuss and explain the many positive news stories coming from Unst recently. I am sure he will be able to discuss Shetland's considerable potential to lead the development of any hydrogen economy. I’m giving an version of a presentation given during the recent Energy At The Edge Symposium about setting up large scale energy projects in remote regions. Denis will then speak about the Energy Institute and it is likely that the evening will end with a chance for general questions. The event should be finished before 20.30pm The talk would be relevant to anyone interested in energy matters, and renewable energy in particular. Perhaps we might see some of you there. Best regards David Thomson

I've added the bold format in the above quote. Those national targets are based on environmental concerns and are about being 'green'.

I am uncertain of the precise figures but have heard the following figures announced by the Financial Controller of the Shetland Charitable Trust during the public meetings to discuss the windfarm. Shetland has received around Eighty million pounds from the oil industry since the 1970s. Shetland has spent over Two Hundred million pounds locally and still has over Two Hundred million pounds in value left. In any investment portfolio there are winners and losers but the above sounds like overall the investments have been successful. The Charitable Trust can invest in anything if there is a reasonable prospect of a return on that investment which can then be used for local benefit. One or two high profile losses does not make the whole thing a failure. At the same meetings I also heard (as all those who attended will have heard) that there have been well recorded losses but that the overall reserves suffered far bigger losses due to stock market drops. These losses have been overcome by ongoing investment and we are clearly still ahead.

There is no suggestion of 'every last penny of the oil reserves' being spent on this project. The vast bulk of the funding for this project will be found by commercial borrowing. A small percentage (<20%) of our half of the overall cost will have to be stumped up locally. It will still be a big figure but it will be tens of millions not hundreds and so will not use up the oil reserves. I could be wrong but I understand the oil reserves are currently worth over £200 million. The project will not happen unless everyone involved is comfortable that the risks have been minimised. This project wil involve banks and Scottish and Southern Energy and will be scrutinised by several independent parties (including the electricity industry regulator). We can be reassured that their shareholders will not permit investments into unviable projects and the regulator will not sanction investment for a cable if the trigger project is iffy. The concept behind the project is to create a new revenue stream to supplement and replace the reducing income from the oil industry so that future generations of Shetlanders can have the choices and opportunities we currently enjoy. Shetland as a community has a list of ambitions which, if we were to simply commit to building/paying for, would certainly use up the oil reserves in a generation. This has been reported in Council meetings and in the Shetland Times. The windfarm is an opportunity to use Shetland's world-class resources to contribute to national targets and give this community financial security beyond the oil era.

The further explanation would be that while it has long been thought that it would be best for the ownership to migrate eventually, it was not always known whether the Charitable Trust would necessarily be the correct vehicle. This project may have justified a new Trust. The emerging Community Development Trust might have been a better vehicle. It is only more recently that the conclusion towards the Charitable Trust has been decided. The SIC could easily have taken the project up to the day when the machines started producing so was a reasonable owner to start with while the eventual ownership was debated, investigated and decided.

I tend to agree. Tell you what - If the Viking Windfarm ever gets concluded we'll discuss Phase 2.

You can't expect me to discuss my personal circumstances on an internet forum. I feel I'm being fairly reasonable about answering questions.

Why? It's not like there hasn't been an endless stream of hellery up there for the last 60+ years, the current "Eiffel Tower" is the highest structure of the lot and it's on the highest and nearest to Sumburgh peak. It's not on any particular flightpath, and it's a minimum of 5+ miles distant. The age of the existing stuff excuses its existence. Rules to protect things get introduced but have to accept what is already there. Try putting something new anywhere and then the difficulties start. If allowed, static masts are one thing but moving wind turbines are another. There are radar interference issue etc to consider. The hill also bounds the National Scenic Area. I'm not even saying it couldn't be done but it's not where any developer would start.