Scottish energy giant SSE (LON:SSE) announced on Wednesday that it had approved a final investment decision to build a 103-turbine 443MW Viking onshore wind farm, which the company said would help ‘drive forward a green economic recovery after Coronavirus‘.
The Viking project is located in Shetland and is wholly owned by SSE Renewables, having been developed in partnership with Viking Energy Shetland. The project, upon completion, will be the UK’s largest onshore windfarm.
The company said Viking will harness Shetland’s excellent wind conditions, and expects to generate around 1.9TWh of electricity each year towards the UK and Scotland’s net-zero targets.
Terms and conditions
SSE now has to wait for the outcome of the consultation of Ofgem’s minded-to position to approve a 600MW transmission connection from Shetland to the UK mainland, with completion anticipated for July 2020. Approval was subject to the Viking wind farm reaching a positive final investment decision – which it now has done.
However, SSE’s decision today is conditional on the outcome of ongoing industry code modifications, which include those which facilitate, “the contribution from the Distribution Network Operator, SHEPD, to the cost of the transmission link”. Ofgem is expected to announce their decision on these before the decision on the Needs Case.
What it means for Shetland
The company stated that their capital expenditure on the project is expected to be around £580 million. It said that construction on the enabling works for the transmission link had started and that works on the wind farm would commence in the latter stages of summer.
It added that the Viking project was the anchor that commercially underpins the transmission link with the UK mainland, and that it will play a ‘critical’ role in Shetland’s security of supply needs. SSE stated that both the wind farm and the link will be socio-economically beneficial for the islands, and will provide ‘much needed and sustainable diversification of the Shetland economy.’
Managing Director of SSE Renewables, Jim Smith, commented on the announcement:
“Viking wind farm will help kickstart the green economic recovery, bringing much needed low-carbon investment to Shetland. In doing so, it will trigger the building of the associated transmission connection to the islands, which will itself help resolve longstanding security of supply issues on the island”.
Scottish Government Energy Minister, Paul Wheelhouse, added:
“This is excellent news for Shetland, and for Scotland’s renewable energy and climate change ambitions. The Viking wind farm project is also a great symbol for the green recovery that the Scottish Government is determined to foster and encourage, as we move through and beyond the current Coronavirus pandemic.”
“This decision is of sufficient scale to act as the trigger to unlock the much anticipated major investment in a high voltage connection from Shetland to mainland Scotland, subject to a final decision by Ofgem which we expect shortly. It is essential that the community of Shetland benefits from this project and we look forward to further news of contracts being awarded to local businesses, as well as Scotland as a whole, during the construction phase.”
“I am determined that this excellent outcome should be a starting point for similar investments and connections to unlock equivalent potential and benefits on the Western Isles and in Orkney.”
Following the update, SSE shares boasted a strong 8.79% or 111.53p rally, up to 1,380.53p per share 17/06/20 12:56 BST. The SSE p/e ratio is currently 18.91, their dividend yield is generous at 7.08%.