Middle East to fund Scotland's £5bn power grid

Holyrood in talks with sovereign wealth funds to build offshore network to transmit wind, wave and tidal energy to the UK

The Scottish government is in talks with two Middle Eastern sovereign wealth funds to provide the cash for a £4.8bn offshore energy grid, to be built off the east coast of the UK.

Scottish Development International (SDI), the government's inward investment agency, has been in discussions with the funds for two months. One is known to be from the United Arab Emirates, and SDI is opening an office in Dubai to tap into the region's vast funding potential.

Paul O'Brien, SDI's senior executive for renewable energy development, said that the grid would "accelerate offshore wind, wave and tidal energy projects in Scotland".

The move would help meet the European Union's strict sustainable energy targets, although a deal is unlikely to be agreed until next year, according to Mr O'Brien.

"The point we have to address," he said, "is finding a way of sparking their interest. They could be joint venture partners or at least part of a wider consortium."

The transmission grid would stretch from Shetland and the Orkneys on the east coast of Scotland down to Norfolk. Mr O'Brien said that there was 60GW of "untapped potential" from offshore energy that could be accessed only through establishing the grid.

A spokeswoman for the Crown Estate, which owns the seabed, said that SDI and any Middle Eastern partner would have to apply for a licence to undertake the development.

However, the Crown Estate is likely to approve the idea, having published a feasibility study in January, looking at a power grid on the east coast seabed. The cost of the core part of the project was estimated at around £1.7bn, but was expected to rise to £4.8bn as more phases were added up to 2020.

The Crown Estate has awarded a number of offshore wind farm contracts, including a £900m agreement in May with the US engineering and construction conglomerate Fluor to build a farm off the coast of Suffolk. The grid would provide links between these wind farms.

SDI has launched a feasibility study into a similar project on the west coast. This is being run in conjunction with the governments of the Irish Republic and Northern Ireland, and is funded by the European Union.

The governments hope that the west coast scheme could ultimately be joined up with the proposed grid to the east.