In October 2012 Edward Davey and the Scottish Government set up a joint independent study to address concerns that renewable projects on the Scottish islands are not coming forward quickly enough, even though the potential on the islands is vast.

The study aimed to look at the following:

  • Commercial viability of the renewable projects within the existing framework
  • The economic value of the projects and their potential to make a cost-effective contribution to Government targets
  • The barriers to the development of the projects and why more projects are not being put forward
  • Broadly costed options for actions to tackle the barriers to development, with assessments of their value for money compared to alternative sources of renewable power

The report was published in May 2013 by DECC and the Scottish Government and the key conclusions of the report were:

  • Renewable generation in the Scottish islands could make an important contribution to the UK and Scotland's 2020 renewables target
  • The development of renewable generation on the islands could significantly benefit the economy through direct, indirect and induced jobs that are associated with marine and onshore wind technologies
  • The report identified four key challenges faced by large scale renewables on the Scottish islands:                
  1.                      A funding gap
  2.                      Grid access
  3.                      Early stage funding for marine projects
  4.                      Supply chain 
  •  The cost of renewable projects in the Scottish islands is significantly higher than comparable projects on the mainland, even when taking into account higher load factors on the Scottish islands, mainly because of expensive subsea transmission links that would be required to connect to the GB grid
  • For onshore wind, projects on Orkney or Shetland are roughly 25% more expensive than on the mainland with a levelised cost of energy at £103-105/MWh, and projects on the Western Isles are over 50% greater than mainland equivalents with a levelised cost of £129/MWh
  • Marine renewables are in the early stages of their evolution and analysis confirms that these technologies will continue to require financial support at levels at or above what is currently being offered (5 ROCs/MWh)
  • Reliance of Scottish island projects on proposed new transmission links is a further challenge, particularly for small or community owned projects or those with new technologies who are not able to underwrite the liabilities and security requirements and therefore are depending on 'anchor projects'

The conclusion of the consultation has now been reached and was published on the 18th December 2013. It was concluded that:

  • There is considerable potential to develop large projects that are cost effective compared to marginal technologies and that the potential can be delivered in a way that can provide value for money for consumers
  • The potential for renewable projects arises from a set of circumstances that exist in relation to projects on the islands, and in particular in relation to the renewable resources on and around the island
  • There is considerable support for this option and the limited opposition comes from elsewhere in the UK, arguing that the support for renewables on the islands is unjustified, however insufficient evidence was provided to support that claim
  • It is considered that a higher strike price available only to one of the islands at a level at or close to that available to offshore wind would not deliver value for money and increasing the strike price for the projects would place further pressure on the LCF without the potential for longer term benefits
  • The proposal is expected to lead to 400MW deployment of onshore wind on the islands by 2020 and annual generation of 1.5TWh and is consistent with the LCF constraint
  • For marine, evidence from the responses shows that the majority of wave and tidal projects in the UK are located on the islands and it is not expected that commercial-scale marine projects will be deployed during the lifetime of the first ERM delivery plan
  • As a result, an island-specific uplift on the £305/MWh generic strike price is unlikely to lead to an increase in deployment during the first delivery period over that expected
  • Given progress of the marine energy sector towards early commercial deployment, it is anticipated that projects will be developed during the second delivery plan period and it is to then be reviewed in details whether Scottish island-specific measures for marine energy should be put into place, and at what level
  • Several respondents to the consultation explained that long lead times for island projects meant that future uncertainty over pricing was unhelpful for securing investment needed, and it is noted that the wider EMR consultations have received similar feedback
  • As a result, it is to be considered whether earlier assurance can be provided on future pricing to enable investment decisions