OFGEM reduces Caithness Moray allowance by £105million

This is £105 million less than SHE Transmission’s most recent cost estimate of £1,223 million.  The regulator’s decision is £105 million less than the funding request from Scottish Hydro Electricity Transmission (SHE Transmission) to ensure consumers pay no more than necessary.

Ofgem’s lower cost assessment is, according to them, based on a range of analysis including unit cost benchmarking, a detailed review of some costs, comparisons to similar projects, and a review of SHE Transmission’s procurement strategy and processes.

The final funding decision is £56 million more than Ofgem’s view in October. This follows consultation responses and new information provided by SHE Transmission.

The new link will connect 1.2GW of new renewable electricity generation following completion in 2018/2019. This additional capacity will increase the resilience of Britain’s energy infrastructure. It will connect the electricity grid on either side of the Moray Firth.

In 2013, SHE Transmission submitted a proposal for a large reinforcement of the transmission system in the far north of Scotland, called the Caithness Moray project.  SHE Transmission has proposed the project to provide additional transmission capacity to export power from the expected increase in onshore renewable generation in the Caithness area, as well as new generation located on the Shetland and Orkney islands.



SHE Transmission’s proposed project involves a subsea cable link between Caithness and Moray and a number of associated onshore works.
The cable at the centre of SHE Transmission's plan uses High Voltage Direct Current (HVDC) technology to transport power between converter stations at Spittal in Caithness and Blackhillock in Moray. This well established technology allows the efficient transmission of large volumes of electricity across long distances.

Reinforcement of the onshore transmission network between Dounreay and Mybster in the north; and between Loch Buidhe and Beauly further south will improve the use of the existing network in combination with the cable.  

OFGEM plans to update SHE Transmission’s revenue allowance for the project in January next year. This will affect 2015/16 transmission charges and increase the annual electricity bill for domestic users by around £1. OFGEM is also reducing the threshold for re-openers for this project to 5% from 10% of the project costs. This reflects the composition of the project cost onshore/offshore, and the different risks associated with each part.

The proposal is being assessed under our Strategic Wider Works (SWW) arrangements for the RIIO-T1 Transmission Price Control.

To implement their decision OFGEM is consulting on modifying SHE Transmission’s electricity transmission licence. A notice under section 11A(2) of the Electricity Act 1989 and the proposed modifications have been published alongside this letter on OFGEM' Caithness Moray page.