Orkney Islands Council (OIC) applied to the UK government’s FLOWMIS fund, but was placed on the reserve list after two other projects – Port Talbot and Cromarty Firth – were listed as the preferred projects.

Being placed on the reserve list means the Orkney application may be reconsidered for funding if either of the projects placed on the priority list are subsequently rejected from the process or do not proceed.

Discussions will now be held with the UK government and other potential funders on the next steps.

Orkney Islands Council is currently taking two project options – a deep water quay at Scapa and a logistics base at Hatston – through the planning process, as well as continuing work on a final business case around Orkney’s offer to the offshore wind industry.

This will see a wider analysis of the environmental, social and economic impact of the potential impact of the industry on Orkney’s communities and the contribution that a project in Orkney could make to supporting the council’s financial position in future years.

That business case will become a key document for the councillors as they make final decisions on whether to proceed with the proposed project options or not, once the outcome of the planning process is known.

OIC chief executive, Oliver Reid, said: “Being placed on the reserve list for this fund is the most realistic and favourable outcome for us at this point in the development of the project.

“In April last year, the council determined that three key things needed to happen before the projects could go ahead. They needed to achieve all relevant consents – including terrestrial and marine planning permissions – there needed to be suitable funding streams identified and an economic business case in place, and there needed to be clear benefit for Orkney’s communities as well as for the council.

“With some of these aspects still being worked on – and no decision yet taken by elected members as to whether to go ahead with the project – effectively being placed on hold by the funders for now, is the right place for us to be. This gives us space and time to work on those other aspects – and scope for further discussion with government on our requirements.”

Councillor Heather Woodbridge, leader of Orkney Islands Council, said: “There are a range of views across the chamber on the potential benefits, and strategic importance of this project for Orkney. This is very healthy, and it is the kind of robust interrogation that you would expect from a predominantly independent council.

“I welcome the FLOWMIS announcement, and where Orkney has been placed within the funding arrangements. The fact that this project has been placed on the reserve list is encouraging and endorses the validity of the project in the wider context of offshore wind infrastructure in Scotland.

“We understand we are at an earlier stage compared to the successful FLOWMIS projects, and so this funding decision reflects where we are right now, as this project progresses towards a full business case.

“Our next steps will be to receive further feedback from the government on our application, to continue to investigate with government and industry the additional funding opportunities that exist. We will also continue to interrogate as a council, alongside our community, the opportunities that exist for Orkney from offshore wind.”