Plans to build a new 120MW power station in Lerwick continue to be on hold despite planning consent having been granted by the Scottish Government yesterday.
The £200million power station will be linked to Scottish and Southern Energy’s smart grid project Nines, and replace the existing 60-year-old power station at Gremista.
Energy regulator Ofgem blocked the proposals for a modern “dual fuel” power station in April this year saying the developer had not done enough to prove they had come up with the most economic option.
Scottish Hydro Electric Power Distribution (SHEPD), an SSE company, had proposed the new power station could initially run on light fuel and then on gas piped in from Sullom Voe.
Ofgem is concerned with the high cost of producing electricity in the isles and wants to reduce the amount it has to be subsidised by the rest of the UK’s consumers.
SHEPD has until next year to carry out another consultation to find the most cost effective solution.
A company spokesman said SHEPD welcomed the decision to grant planning consent but had to comply with the regulator’s demands before moving forward.
He said: “Following Ofgem’s announcement in April that it was not able to grant regulatory approval for the Shetland Integrated Plan, which included the new power station, we await the forthcoming consultation and clarification on the competitive process which is now to take place.
“This will allow us to reach a decision on whether there may be scope for the power station proposal to be taken forward,” he said.
Granting planning consent, Scotland’s energy minister Fergus Ewing said constructing the new power station would create 400 jobs.
“The development is designed to utilise the heat produced during the electricity generating process, which could help Scotland further decarbonise its heating sector,” he said.