Wind of Change for Shetland Oil Hub, but Who Will Benefit?

© Marcin / Adobe Stock
© Marcin / Adobe Stock

When storms batter Scotland's Shetland Islands, as they frequently do, the force of the winds whipping through its streets and valleys leave you in no doubt that this is Britain's windiest place.

Now islanders are looking to those fierce winds to take the place of the declining offshore oil and gas industry that transformed their economy from the 1970s.

Local energy developer Angus Ward first studied the potential of wind power in the archipelago, 100 miles (160 km) north of the Scottish mainland, using data from the Met Office national weather service as a student in the 1970s.

"There was a lot of wind in Shetland in comparison to other areas. It's the same 50 years later," said Ward, who now directs an energy company called Shetland Aerogenerators, which has operated the five-turbine Burradale Wind Farm since 2000.

There are now half a dozen onshore wind projects around Shetland. The largest is Viking Energy, with 103 turbines due to come online in 2024, which could power almost half a million homes via a new cable built to the Scottish mainland.

With only about 10,000 households and some 21,000 people, the islands are set to export to the mainland a lot more energy than they consume, leaving Shetlanders anxious to ensure their community gets its fair share of the benefits from new energy developments.

Replacing fossil fuels with clean energies like wind and solar will play a major role in the global race to cut greenhouse gas emissions and avoid the worst impacts of climate change, such as floods, heatwaves and rising sea levels.

But addressing the concerns of communities impacted directly by the installation of wind turbines and related infrastructure is key to ensuring such projects get built.

Planning laws in England have allowed local objectors to stop virtually all new onshore wind power projects since 2015. In Scotland, the law is more supportive of onshore wind, but many communities are still concerned over the impact.

For now, Shetland is still heavily reliant on the oil and gas industry that has brought prosperity to the islands, mostly through its harbour operations at Sullom Voe, one of Europe's biggest oil terminals.

While oil exports are in steady decline, the community still receives about £25 million per year in gross earnings from its port, according to council figures.

"Over the period that's helped us maintain better roads as you would expect in a place like here," said Douglas Irvine, who leads Shetland Islands Council's energy transition work.

The question facing Shetland is how quickly new forms of energy can replicate the role of oil and gas, and what is the benefit to the community.

"We're at the heart of an energy hub here already," said Irvine. "How do we use that to try and achieve opportunities in renewable energy?"

Planning beyond North Sea oil and gas
Britain's government announced plans last year to grant hundreds of new North Sea oil and gas licenses, and gave the go-ahead for Rosebank - its largest untapped oil field, which lies west of Shetland.

This is in spite of warnings from the International Energy Agency, which says nations must not develop new fossil fuel projects if the world is to limit global warming to 1.5 degrees Celsius (2.7 Fahrenheit).

But whatever the British government does will not dramatically alter the industry's long-term downward trend, said Simon Cran-McGreehin, head of analysis at the non-profit Energy and Climate Intelligence Unit.

"The North Sea oil and gas output is in decline. That's just simple geology: These are finite resources and we have run through them pretty rapidly," he said.

North Sea oil and gas output has shrunk by two-thirds in the last 20 years.

In Shetland, the council is working with energy companies to explore new projects, including with the firm Enquest that runs Sullom Voe and plans to repurpose it into a new energy hub.

Enquest wants to use excess wind power to create products like green hydrogen, along with carbon capture and storage projects in offshore reservoirs. It declined a request to comment.

Produced from water by electrolysis using renewable energy, green hydrogen could power industry and vehicles, but the technology is still in its early stages.

"We would really like to have a situation 10 years down where we're running the harbor at Sullom Voe and a considerable part of what's running through the harbour is green," said Irvine from the council.

How can Shetland benefit from new projects?
Another firm exploring ways to use Shetland's wind power is Voar Energy, a consultancy working on green hydrogen facilities, vessels powered by clean fuels and offshore wind.

Its managing director Daniel Gear said the council should build community wealth and support with similar deals to the historic oil and gas agreements.

Oil industry income allowed the creation of a Shetland Charitable Trust, which has given more than 320 million pounds ($406 million) to a variety of community and welfare activities like rural care homes and sports facilities since 1976.

"There's very little benefit from just having a project built and a handful of jobs by a corporation that extracts all the benefits," Gear said.

He said local people were concerned about the industrialisation of their islands with new energy infrastructure and should be given more say in planning for large projects, which is controlled by the Scottish government in Edinburgh.

"The interests of the host community can be diluted against the interests of a nation," he said.

This issue came to a head during the development of the Viking Energy wind farm, a divisive project that saw years of delays and court cases over its potential environmental impacts.

The council originally launched Viking as a joint venture between SSE Renewables and the community, but eventually had to pull out due to financial reasons.

The project will pay a community benefit of around 2.2 million pounds ($2.79 million) every year, but backers of the project argue it would have earned the community much more if it had remained a co-owner.

The council's draft energy strategy said such payments to the community by companies are voluntary, but a "fundamental component" of agreements with developers, and its guidelines recommend at least a 5,000-pound ($6,340) payment per megawatt - the same rate Viking Energy is paying.

Council leader Emma Macdonald said the cost of energy was a major issue in Shetland where it is colder and darker than mainland Britain and people pay more to heat and light their homes.

According to the council, the cost of living in Shetland is between 20% and 65% higher when coupled with things like more expensive food and travel.

Macdonald said the council was lobbying the British government for a special localised energy tariff to make major energy developments in Shetland more palatable.

"That's really difficult for people to be surrounded by all that and produce all this energy yet not actually see any benefits in their pockets," she said.


(Reuters - Reporting by Jack Graham; Editing by Jon Hemming)

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