Iberdrola SA and National Grid Plc awarded Siemens AG and Prysmian SpA a 1 billion-pound ($1.6 billion) contract to build an undersea link to transmit renewable power between England, Wales and Scotland.
Siemens and Prysmian, a Milan-based cable maker, will build the first subsea electricity connection between the nations for operation by 2016, Iberdrola said in a statement today. It’s the first major project as part of Iberdrola’s 2.6 billion-pound plan to upgrade its U.K. transmission network.
Scotland is seeking to get all of its electricity needs from renewable sources by 2020. That will require the nation’s generating capacity to double at a cost of 46 billion pounds, Peter Atherton, a Citigroup Inc. analyst, forecast on Nov. 1.
The Scottish National Party government plans a referendum on independence from the rest of Britain in the second half of 2014. Utilities such as SSE Plc and Iberdrola’s Scottish Power unit should exercise “extreme caution” in committing further capital to Scotland until it’s clear subsidies on new projects would be 100 percent legally guaranteed, Atherton said.
Iberdrola expects to invest 2.6 billion pounds from 2013 to 2021 upgrading its U.K. network and may spend 12 billion pounds in total in the U.K. this decade, including major offshore wind projects, according to the company. Prime Minister David Cameron and Scottish First Minister Alex Salmond are meeting today in Edinburgh to discuss the referendum.
The company’s 260-mile (418 kilometer) high voltage cable will run from Hunterston in Ayrshire to North Wales. The upgrade, which is subject to planning approvals, will increase transmission capacity by more than 2,000 megawatts and allow grid access for 6 gigawatts of new renewable energy projects in Scotland, according to Iberdrola.
The U.K.’s target to get 15 percent of its energy from low-carbon sources by 2020 means links need to be improved to transport power produced at remote wind farms on land or offshore to consumers.
“The additional capacity from this link will provide a significant boost to renewable energy projects being developed in Scotland in order to bring clean energy to consumers throughout the country,” Ignacio Galan, chairman of Scottish Power, said in the statement.