London, U.K. --- (METERING.COM) --- September 19, 2011 - The Shetlands Northern Isles New Energy Solutions (NINES) pilot smart grid project has been given the thumbs up by Britain’s regulator Ofgem, following a consultation.

The project will pilot a set of solutions, including demand side response and energy storage, that if successful could be implemented to reduce the overall cost of meeting the electricity needs of Shetland, an island archipelago located about 170 km north of mainland Scotland.

Shetland is not connected to Britain’s electricity network. The islands rely entirely on local sources of generation, with local balancing of supply and demand. The majority of the demand is currently supplied by the Lerwick Power Station (LPS), a 67 MW diesel-fired generator. However, the facility is old and is becoming increasingly expensive to maintain and operate. It is also in breach of environmental requirements, but has been granted temporary derogations on condition that either adequate emissions controls are introduced or it is replaced.

In light of this situation, at the last price control review Ofgem placed a requirement on the operator, Scottish Hydro Electric Power Distribution (SHEPD), to present by January 31, 2013 an Integrated Plan to manage supply and demand on the islands, including replacing the LPS. SHEPD’s response was the NINES project as the first phase of this Plan, with the learning to inform the second phase, in which the LPS would be replaced. In particular, it is expected that the solutions trialled by NINES will allow a significant reduction in the capacity of the LPS replacement and enable the connection of more renewable generators.
 
At present, there is significant interest from wind generators to exploit the excellent wind resource on the islands. However, it is not possible to offer these new connections as there is insufficient demand to utilize this type of generation and maintain a stable system.

Ofgem’s consultation was aimed to assess whether the NINES project should be pursued, given the additional funding costs – around £15 million – that consumers would need to bear in the short term, with the expectation of these being offset by savings in the second phase. In addition there would be other benefits, particularly in allowing more renewable generation to be connected.

With agreement for the proposals from all the consultation respondents, Ofgem has said it will modify SHEPD’s license to enable the project to be formally submitted as a part of the Integrated Plan.

Ofgem has also indicated that it will require SHEPD to disseminate the learning from the project to the other distribution network operators and interested parties.