Hebrides to be Britain's green powerhouse

Britain's first community run solely on "green energy" generated from wind and wave power could be set up in the Outer Hebrides under a plan being considered by ministers.

The scheme could see the Western Isles, which includes the beautiful and remote islands of Lewis, the Uists and Benbecula, become a net exporter of "guilt-free" energy to the rest of Britain by using a string of wind farms and wavepower plants. The Western Isles would also become one of Europe's biggest centres for renewable energy research, creating up to 1,000 jobs.

The proposal follows a surge of interest from ministers, officials and advisers at the Department of Trade and Industry (DTI), Downing Street and the Department of Transport in using hydrogen as a major fuel source. Ministers have pledged to spend £260m on green energy schemes.

The Outer Hebrides is one of the world's windiest inhabited places, and has the world's third-highest wave-power levels. It could theoretically generate about 40 per cent of the UK's 58 gigawatts of peak electricity demand.

But it also one of Britain's poorest areas, with incomes at 65 per cent of the UK average and declining. Its 27,180 population is expected to shrink by 18 per cent by 2016. The islanders have looked on enviously as the Shetland and Orkney islands earn millions of pounds from the oil and gas industry. "We're sitting on a huge, untapped energy resource here," said Derek McKim, a Western Isles Council executive. "We would like to see ourselves as a flagship for renewable energy."

The "energy innovation zone" proposal is supported by Brian Wilson, the energy minister at the DTI who is heading the Government's energy review announced by Tony Blair last month, and by the Scottish Executive in Edinburgh.

Mr Wilson is leading a delegation of DTI officials travelling to Stornoway, the islands' capital, on Wednesday to meet councillors and local economic development agencies. "We will bring a wide range of players together to look at ways of supporting this initiative," Mr Wilson told The Independent on Sunday.

Last week, David Jamieson, the transport minister, told a seminar organised by the centre-left think-tank the Institute of Public Policy Research that he was certain hydrogen would play a "key part of any future low-carbon economy".

Hydrogen fuel cells are seen as attractive because the gas, while potentially combustible, does not contribute to climate change. It can be easily and very cheaply generated by electrolysis of water. Fuel cells, a form of rechargeable battery which runs on hydrogen, are also at least twice as energy-efficient as petrol-driven engines.

Mr Wilson, a former Scotland Office and Foreign Office minister, is keen to distance himself from his reputation as being strongly pro-nuclear power. As part of the energy review, he unveiled plans last week to boost electricity production from hydroelectric dams.

The ability of hydrogen fuel cells to store electrical energy would be extremely attractive on the Western Isles since the islands could generate much more renewable power than they can use.

Council officials claim the project could succeed without direct government grants, if the Treasury were to temporarily lift or cut taxes such as National Insurance and VAT for businesses involved in the project.