Energy ISSUE 13 AUTUMN/WINTER 2016
MatterS
How will
Brexit
change investment in electricity?
PLUS: Code changes may hold back better telecoms | A decade of major projects | Powering ahead in the Moray Firth | MeyGen update | Are we really ready for winter?
EM 13 Autumn/Winter 2016.indd 1
13/10/2016 18:19
WeLcOMe
cONteNtS
Telecoms: the new utility service THERE have been significant developments in telecommunications over the past 20 years and many people cannot imagine life without their smart phone giving access to email, Facebook, Twitter and the wider internet. The Government has recognised the growing importance of telecommunications services in their Digital Economy Bill, which is currently working its way through UK Parliament.
4 Massive tidal power project stays on target.
6 Offshore wind: Optimism in the Moray Firth in spite of Forth and Tay ruling.
8
The proposed law will see telecommunications moving into the same essential utility service category as electricity and water have been in for many years. This should also crystallise the Universal Service Obligation (USO) for provision of superfast broadband to every home with detail to come on the minimum speeds to be considered acceptable. Whether those receiving below the minimum speeds will receive cheaper bills is yet to be seen – they normally don’t at present.
Putting a brake on better telecoms?
While these developments will be welcome to many businesses, particularly in rural communities desperately in need of improved services, the law will change the way telecommunications infrastructure is deployed, and viewed, across the country.
cover story: How will brexit affect investment in electricity? Wood-to-gas power on a family farm.
The implications of the Bill will become apparent in time, but what is clear now is that the improvements in service for some are likely to be detrimental to others providing the infrastructure. We look at some of the potential impacts in our article on page 8. Mike reid mike.reid@ckdgalbraith.co.uk 01334 659984
9 10
12 Viewpoint: Are we really ready for winter?
Windfarm opens on Moy estate.
15 Current renewable energy subsidies.
The firm provides a full range of property consulting services across the commercial, residential, rural and energy sectors. CKD Galbraith provides a personal service, listening to clients and delivering advice to suit their particular opportunities and circumstances. Follow us on Twitter: @CKDGEnergy Like us on Facebook: www.facebook.com/ckdgalbraith Join us on Linkedin: www.linkedin.com/company/ckd-galbraith
A decade of m
Rolling out superfast broadband.
14 cKD GaLBraIth is Scotland’s leading independent property consultancy. Drawing on a century of experience in land and property management, the firm is progressive and dynamic, employing 236 people in offices throughout Scotland.
Advising on major projects is a key part of the CKD Galbraith offering. Bill Robertson reflects on some of the initiatives in which the firm has been actively involved.
Energy Matters is produced by Allerton Communications, London, and designed by George Gray Media & Design, St Andeux, France. © CKD Galbraith LLP.
IN the PaSt 10 years cKD Galbraith’s utilities team has been involved in several major electricity infrastructure projects acting for both the transmission operator and landowners. In March, the Kintyre to Hunterston project was completed on time and on budget. CKD Galbraith staff were part of the team that helped to deliver this £200 million project which saw the building of a new grid substation at Crossaig, the replacement of 14km of 132kV overhead line and the installation of 41km of sub-sea cable linking the new substation with Hunterston in North Ayrshire. The team secured planning consent for the grid substation and statutory consents from landowners and stakeholders. This often required innovative solutions to logistical issues, such as creating a new service road to allow delivery of two 110 tonne and two 133 tonne transformers to the site. The project provides a more secure supply of electricity in the Kintyre peninsula and additional capacity for future renewable projects.
Page 2 | Energy Matters Autumn/Winter 2016 | www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy
EM 13 Autumn/Winter 2016.indd 2
13/10/2016 18:19
of major electricity projects
For the past five years the team has acted on behalf of several landowners with major properties in the Cairngorm National Park in co-ordinating the actions of SSE Transmission during the dismantling of a steel tower line. This line was built pre-war by the Grampian Electricity Supply Company and is being dismantled through a commitment by SSE following the construction of the Beauly Denny 400kV line. One of the affected estates has seen the removal of 42 steel towers parallel to the A9 trunk road which was temporarily closed to permit the removal of those closest to the carriageway. Work continues in negotiating surface damage claims and remedial works. In the far north of Scotland the team contributed to the successful initial connection into the grid for the MeyGen tidal energy project (see page 4). This involved installing one of the longest underground cables in the world from a tidal energy project into the grid. When complete, the tidal energy array in the Pentland Firth,
one of the most hostile stretches of water in the world, will produce 400MW of renewable energy – enough to power 175,000 homes. The work involved installing the cable in challenging ground conditions through the Caithness “flow-country”.
A helicopter carrying dismantled tower parts out of the Cairngorm National Park flies past the Dalwhinnie Distillery.
Further recent successes in securing all necessary consents, both voluntary and statutory, while acting for the district network operators have contributed to the successful connection of various on-shore renewable projects in excess of 300MW. The downturn in renewable energy projects has been disappointing, but the team retains the skill set required to meet the demands of the electricity supply industry to connect new projects large and small and to carry out essential refurbishment works to the existing network.
bill.robertson@ckdgalbraith.co.uk 01738 456074
www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Autumn/Winter 2016 | Page 3
EM 13 Autumn/Winter 2016.indd 3
13/10/2016 18:19
Huge tidal project will soon be powering Scotland MeyGen is big on every measure – and the first phase of the massive project is on target to start generating electricity. Toby Kirkwood reports from the official opening.
the world’s largest free-stream tidal power project, MeyGen, has been officially opened at the Nigg Energy Park by Scotland’s First Minister, Nicola Sturgeon. Participants in the project and about 150 guests gathered to mark this key stage in the onshore and offshore construction campaign, aimed at delivering clean, reliable, predictable tidal power to Scotland. I was fortunate to attend the event in September when we were given an exclusive first look at one of the turbines. It was an exciting occasion and the buzz of anticipation in the sector was evident. The event followed the project’s successful connection to the National Grid at the Ness of Quoys distribution network in June, the 33kV power export cables having been installed by the network operator, Scottish Hydro Electric Power Distribution. The project’s owner, Atlantis Resources, is on track to deliver first power to the grid from MeyGen Phase 1A this winter, which will be another landmark event for the global marine power industry. When the project is completed, MeyGen’s 269 turbines will generate enough energy to power 175,000 UK homes. ABB, alongside its local civil contractor John Gunn and Sons, has finished the construction of the power house, site of the power conversion gear for the turbines, 33kV switchgear for the grid connection, and a control centre to operate the array. The building also includes an indoor substation for the SSE grid connection equipment and offices for the MeyGen operations team. The first of the four 1.5MW Andritz Hydro
Page 4 | Energy Matters Autumn/Winter 2016 | www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy
EM 13 Autumn/Winter 2016.indd 4
13/10/2016 18:19
SSe appoints CKd galbraith as wayleave services provider cKD Galbraith has been awarded an agreement to provide property consulting services to SSe plc. The firm’s energy team will work closely with SSE to help ensure the utility group’s continued provision of the highest levels of service in energy production, storage, transmission, distribution and supply across Scotland.
Above: The 18 metre diameter blades of the first of the 1.5MW turbines overshadows guests at the official opening.
underground connection. This became the world’s largest tidal energy grid connection when it was commissioned in April.
Far left: Atlantis Resources CEO Tim Cornelius looks on as First Minister Nicola Sturgeon gives the opening address.
National Grid classifies MeyGen as a large power station, and it must therefore satisfy the stringent UK grid code. This is the first tidal energy project to go through this process – demonstrating the scale and importance of the project.
Below: Nigg Energy Park, on the Cromarty Firth, where the turbine structures are being assembled before they are shipped to the Pentland Firth.
The Scottish Government has provided £23m of funding to help develop the project. Ahead of her visit to the Nigg Yard, the First Minister said MeyGen was set to invigorate the marine renewables industry in Scotland and provide vital jobs for a skilled workforce, retaining valuable off shore expertise that would otherwise be lost overseas.
Hammerfest turbines is being assembled at the Nigg Energy Park before being transported to the Pentland Firth for installation later this year. CKD Galbraith is proud to have been involved in such a significant project in Scotland. We were heavily involved in securing the wayleave agreements on behalf of Scottish Hydro Electric Power Distribution for the 17km onshore 33kV
General Manager of the Crown Estate’s Scotland Portfolio Ronnie Quinn said at the official opening: “The Crown Estate has been working with Atlantis Resources over a number of years, providing specialist support on seabed leasing and investing nearly £10m in the project to help unlock Scotland’s tidal energy potential. With the deployment of these turbines in a commercial array, a world first, Scotland and the UK remain at the forefront of this industry.”
toby.kirkwood@ckdgalbraith.co.uk 01786 434600
The focus will be on wayleave services, whereby SSE works with landowners, local authorities and others to install and maintain infrastructure. Calum Innes, Head of Energy at CKD Galbraith, said: “We are among a small number of firms to
have been selected to work with SSE and in a demanding evaluation process were awarded maximum points for the quality of our work. “SSE works hard to ensure it is a responsible, sustainable supplier to homes and organisations across the country and we look forward to continuing to help the group achieve its goals.”
www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Autumn/Winter 2016 | Page 5
EM 13 Autumn/Winter 2016.indd 5
13/10/2016 18:19
Offshore wind: Powering ahead in the Moray Firth A pioneering offshore project that’s set to upgrade Scottish energy supply has been boosted by a wildlife conservation area adversely affecting other sites. Toby Kirkwood reports.
Moray Offshore Renewables Ltd (MORL) was established in 2010 to develop offshore wind generation in the outer Moray Firth. The Crown Estate awarded MORL development rights for offshore wind in Zone 1 (Moray Firth). MORL split the site into eastern and western development areas, and drew up proposals for the eastern area first, receiving consent from the Scottish Government for 1,116MW in 2014. This represents the average electricity needs of more than 700,000 households. MORL is owned by the Portuguese utility group EDPR. CKD Galbraith has been involved from the start of the land acquisition process for the onshore element of the project, carrying out extensive land referencing and acquiring the rights to lay two electricity circuits from the landfall site at Boyndie Bay, Banffshire, to the substation that is to be constructed at New Deer in Aberdeenshire. MORL’s work to date in the Moray Firth has been in the eastern development area, as this part of the zone had fewest constraints to development. MORL is now examining the feasibility of development of the western area. The recent Court of Session ruling against four offshore windfarms in the Forth and Tay estuaries has brought a huge dip in confidence and renewed uncertainty in the sector. MORL, however, is unfazed by this ruling and is now in the process of opening consultation
on the proposals to develop the western development area. Dan Finch, EDPR’s Director of Offshore said: “We worked hard to deliver a high-quality project in the eastern development area, with no impediments to its construction. All that we need to proceed is a contract which will enable us to sell power in the reformed electricity market, and we look forward to the UK Government announcing the next Contract for Difference auction, which will allow us to compete for the contract which will let us deliver the project. “Today we are announcing proposals to develop the western area of our site to maximise renewable energy generation in the zone which was allocated to us by the Crown Estate. This can create a pipeline of offshore wind projects in the Moray Firth, and associated opportunities for the local economy. “MORL received considerable support from local communities as we developed the eastern area of our site. We will be returning to those communities with events this summer which will be announced in the local press. This will help to establish the level of support for the development of the western area of the zone. “I look forward to continuing to work with all of the individuals and organisations who have an interest in the Moray Firth; their participation is vital to the successful and sustainable delivery of new infrastructure.”
Page 6 | Energy Matters Autumn/Winter 2016| www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy
EM 13 Autumn/Winter 2016.indd 6
13/10/2016 18:19
Beatrice Offshore Windfarm SITE
h m o r ay f i r t h
MORAY Offshore RENEWABLES SITE
Despite the recent ruling, we believe the offshore wind energy sector has a very bright future in Scotland. Confidence can be gained from the fact that the £2.6bn Beatrice Offshore Wind Farm managed to reach financial close and is in the process of being constructed using significant input from the Scottish supply chain. There is a huge recognition across the board that renewable energy projects are needed to decarbonise our electricity supply. The key issue is to locate them in suitable areas and to have them supported by a rigorous environmental impact assessment process. MORL will be publishing a scoping document for the environmental impact assessment for the western area. This will detail initial proposals for infrastructure capable of supplying the electricity needs of about 470,000 homes. As it stands, the future of offshore wind is still bright within the Moray Firth.
toby.kirkwood@ckdgalbraith.co.uk 01786 434600
Ruling casts a shadow over other projects In July, RSPB Scotland won a judicial review that challenged the consent for four offshore wind farms in the outer firths of the Forth and Tay. The conservationists argued planners had failed to address wildlife concerns and adapt applications to minimise environmental impact. Given the charity’s concerns over Bass Rock and the Isle of May especially, development was always going to be challenging and compromise hard to achieve.
in the Moray Firth which will see £2.6bn poured into a 588MW scheme. Meanwhile the neighbouring MORL (main story) scheme achieved consent for 1.1GW of capacity in 2014 and remains confident of securing a Contract for Difference in the next round of auctions. There is no doubt that the recent judgment lessens the amount of renewable MWs that will be deployed but it is likely that
Scottish ministers approved the Inch Cape, Neart na Gaoithe and Seagreen Alpha and Bravo projects in 2014, but Lord Stewart’s ruling at the Court of Session in Edinburgh means ministers will have to reconsider the decisions and address the legal points raised by the RSPB. Despite a considered and nonconfrontational tone from the RSPB in light of their success, the story has still generated headlines. Former Energy Minister Brian Wilson declared Scottish offshore wind “pretty much dead”. However, even ignoring the possibility that development in the Tay and Forth may yet come forward in revised form, there are still significant consents to be deployed. SSE has confirmed that a final investment decision has been made for the Beatrice project
Bass Rock is home to the world’s largest Northern Gannet colony. further renewable capacity will find its way to market in addition to the now-approved Hinkley. A positive outcome would be a more cohesive approach to consultation so that applications can be advanced with suitable certainty.
Jamie Grant
jamie.grant@ckdgalbraith.co.uk 01786 434638
www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Autumn/Winter 2016 | Page 7
EM 13 Autumn/Winter 2016.indd 7
13/10/2016 18:19
Code changes could put brake on better telecoms A shake-up in mobile operators’ payments could make landowners reluctant to accommodate their masts, says Mike Reid.
IN the Queen’s speech in May the Government announced plans to reform the electronic communications code, to help “communications companies promote greater long-term investment in digital infrastructure”. Provisions for the Code were included in the Digital Economy Bill placed before the UK Parliament in July. The Department of Culture, Media and Sport (DCMS) anticipates the new Code will become law in June/July 2017. Better access to digital communications and improving the rate at which these can be rolled out across the UK are excellent objectives, but introducing compulsory powers for the telecom operators and reducing the financial benefit to those affected by their installations may not be the best way to achieve this. It could possibly even have the reverse effect. The new code would introduce a revised market value for mobile-telecom masts and wayleave rights in a “no scheme” world. There is uncertainty over what this means in practice as the Digital Economy Bill proposes site providers will be paid compensation and a consideration assessed on the underlying value of the land without any clear definition of how this is to be assessed. Details need to be clarified, but it seems certain that this will devastate telecom rents for landowners, including farmers who have become reliant on this revenue. A standard 15 metre mast on a rural hillside currently attracts an annual rent of between £5,000 and £6,000. This could drop to less than £500. The proposed code includes no additional payments to site providers for site sharing or upgrading equipment. Assigning sites would also be unrestricted. Landowners would lose control over what happens on their land and may not even know who is occupying the site at a given time, which could have significant health and safety implications. The original DCMS announcement stated the new code wouldn’t be retrospective and would come into force as existing agreements came to an end. However, this may not actually be the case as the proposed Digital Economy Bill includes provisions for telecom operators to end existing agreements and invoke the new code where the tenant has an unconditional break clause. And most existing telecom agreements have such a clause since it is a
standard provision requested by the operator. Many landowners could find that current agreements, where the fixed term ends in more than 10 years time, are terminated and a new agreement is requested under the new code. Nothing would physically change on the ground, but the income would reduce to a nominal value as the rent reduces and the landowner is not entitled to a share of any site sharing income. If telecom operators start to instigate this break provision once the new code becomes law, we envisage landowners will be less likely to engage in discussions with operators and are likely to withdraw co-operation. We are already seeing landowners refusing to consider sites on their land (particularly on rooftop sites) due to the implications of the new code. Much remains unsettled but the direction of travel from the Government is clear. It wants
“
A standard 15 metre mast on a rural hillside currently attracts an annual rent of between £5,000 and £6,000. This could drop to less than £500. to open up the market to extend and speed up deployment of digital communications, especially to rural communities, but its proposals may find operators being compelled to rely on the new code – possibly a more costly and slower process than entering into a voluntary agreement. Landowners should check all existing telecom agreements to see if these are likely to be affected by the new code and review if any action can be taken now to mitigate the potential impact. Anyone approached about a new telecom agreement, or where changes are requested to existing agreements, should ensure appropriate terms are agreed to take account of the proposed changes.
mike.reid@ckdgalbraith.co.uk 01334 659984
Page 8 | Energy Matters Autumn/Winter 2016| www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy
EM 13 Autumn/Winter 2016.indd 8
13/10/2016 18:19
Fruits of fibre Nick Morgan looks at some of the implications of the roll-out of superfast broadband.
the Scottish Government has invested heavily in initiatives which provide broadband to rural and urban areas with a view to Scotland becoming a “world class digital nation” by 2020. About £500 million has been allocated to get superfast fibre traffic flowing, and the Government is working alongside major players in its delivery, with grant funding for community projects and even some enterprising residents coming together and “self-delivering”.
Threat to new emergency services network THE timing of the code-change announcement could potentially delay the roll-out of the new emergency services network (ESN). The operator EE has been awarded the ESN contract, which is scheduled to provide for the first time nationwide voice and data services through its 4G network to replace the Airwave voice network. EE has confirmed it will be building more than 500 new sites and the phased transition to the ESN is due to start in mid-2017 so that the police, fire and ambulance services are equipped to do their work. Most, if not all, of EE’s new sites will require contracts with landowners. However, if landowners know they may end up receiving a nominal rent for these sites in future they may not want to accommodate them. The new code legislation isn’t currently in place and EE cannot at present use it to acquire new sites, so the roll-out of the ESN could be put at risk. Far from modernising and improving the UK’s emergency services communications infrastructure, the Government may, in the short term, oversee major delays in the transition to the improved service.
Scotland currently sits at about 85% of its 95% target for areawide access to fibre broadband with a download speed higher than 2Mbps (megabits per second). Some 50,000 homes have been ‘enabled’ in the past three months. More recent discussions are looking to increase this requirement to 10Mbps with most households on speeds of 38Mbps and above. These are the speeds generally required to stream something like BBC iPlayer. Fibre optic cables have started to replace copper cables which are unable to provide these improved internet speeds. A great deal of this replacement work can be done in conjunction with existing infrastructure either by running it alongside or by taking its place. In many locations new infrastructure is required. This may be on previously unused routes, requiring either new wood poles or the underground installation of cables. Landowners with new installations or additional cables attached to poles on their land should be entitled to receive a wayleave payment, although this payment is not due in all circumstances. These payments are paid to the landowner on either an annual basis or capitalised as a one-off lump sum. Where cables are to be installed
underground it is very important for landowners to ensure that they receive all relevant details in writing and specifically seek confirmation of the depth and location of these installations, or details of where any poles would be installed for above-ground services. Before any of this happens a wayleave agreement should be presented for signature and this will have an associated payment attached to it. A number of other aspects may first need to be confirmed by the telecoms provider, such as confirmation of liability for damage to property caused by access for
cable or pole maintenance and confirmation of payment for any losses that result. Other key considerations include the effect on field and roadside drainage which could both be severely affected by underground telecommunications cables if the installation is not carefully planned and monitored. Land with either planning permission or development potential raises other issues for the route taken by the cables. CKD Galbraith has a breadth of experience in a range of utilities and infrastructure projects and can also offer advice on planning related matters throughout Scotland.
nick.morgan@ckdgalbraith.co.uk 01738 456063
www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Autumn/Winter 2016 | Page 9
EM 13 Autumn/Winter 2016.indd 9
13/10/2016 18:19
Turning wood into gas powers family farm A farming family’s plan to boost its renewable energy supply led them to combined heat and power gasification, via Germany. Lawson Doe reports. Managers of Scotston Farm in Angus were investigating further improvements to their renewable portfolio when they happened across an emerging technology – gasification. This is typically used in large multimegawatt power plants. However, wood gas has been used for many years in smallscale installations as a substitute for petrol. The great advantage of the technology is that instead of burning woodchips in a
biomass burner, the gasifier converts the wood chip into “syngas” which is then used to drive a modified petrol generator, producing both heat and electricity. The gasifier of choice for the owner, CKD Galbraith client JS Baird & Sons, is a Spanner Holz Kraft, as Spanner is regarded as among the most experienced manufacturers of mass-produced, smallscale wood gas units. The Bairds opted for a 45kW unit, sufficient to provide all the electricity needed on the farm, including a 25,000-broiler shed, a 200-tonne on-floor grain drying unit and two heat-pumpequipped houses. The Bairds toured Germany visiting five different Spanner installations, and a contract was signed for delivery four weeks later. Members of the farm and a specialist installer were given training in Germany.
Above: The on-floor grain drier, drying woodchip. Below: The modified petrol generator on the Bairds’ farm.
Back at Scotston, the gasifier, engine and feed-in hopper were installed by the farm members and the specialist installer who had accompanied them to Germany. Once the installation checklist had been submitted, the Spanner commissioning team travelled to Scotston to complete the final checks. In making the scheme Ofgem accredited, there are three applications: Renewable Obligation Certificate (ROC), Renewable Heat Incentive (RHI) and RHI for solid biomass produced by the gasifier reformer process. The Bairds are confident that once all the applications are complete, the tariffs for each, combined with the energy saving and grid export will produce a payback of between two to three years. The Bairds took the simple option to buy in timber and hire a chipper to create the fuel. The wood chip has to be of a good quality and the correct moisture content. Diarmid Baird is keen to impart the knowledge he has gleaned in the installation and running of the gasifier. CKD Galbraith may assist with planning and Ofgem applications. Anyone seeking an initial chat with him should please call me in the first instance. lawson.doe@ckdgalbraith.co.uk 01738 448141
Page 10 | Energy Matters Autumn/Winter 2016 | www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy
EM 13 Autumn/Winter 2016.indd 10
13/10/2016 18:19
after Brexit... How will investment in electricity change? Clarity and stability are needed to encourage investment in energy generation and infrastructure in the wake of the vote to leave the EU, says Jamie Grant.
FOr many in the investment community, 24 June threw up something of a surprise, with few anticipating that the UK would vote to leave the eU. Given that investment in new electricity generation in the UK has come from diverse international sources in recent years, one of the potential impacts is a change in this underlying investment market. As Michael Kelly argues on the next page, UK energy infrastructure continues to limp along looking like a threadbare, post-war heirloom. The Government has managed to encourage investment into the grid through regulated returns, which has largely been underpinned by balance sheet financing. Even with current levels of investment, these assets are increasingly at the end of their service life and continued investment is still required. However, we have seen a sea change in generation, with the closure of centralised fossil fuelled plants and a
“
It is timely that the Government realises that the future energy mix cannot be underpinned by one technology in one location. move to distributed generation supported by more speculative sources of capital. The mass of these new megawatts have been provided by renewable generation, although this has been supported by peaking power plants and the limited deployment of plant such as combined-cycle gas turbines (CCGT). Attractive and, critically, stable returns provided by such mechanisms as the Renewables Obligation (RO) have helped encourage investment to transform this market. But the generation development industry finds itself hit by a triple whammy:
• The low oil price continues artificially to suppress energy prices (and its true effect on the market is limited as we decarbonise our sources of generation) • The RO has now essentially ended and there appears almost zero confidence in the market that a sufficient mass of replacement contracts for difference (CFD) projects will be supported, or that an alternate mechanism for plant such as CCGT will come to fruition • Post-Brexit, the market needs to demonstrate that it can still offer the stable environment for the deployment of capital that has made it so attractive in recent years. A solitary focus was placed on Hinkley C by the previous Government, in part as a means of justifying the lack of continued support for diverse and distributed sources of generation. There is obvious solace in the commitment that the Chinese and French investors have made to the project in the aftermath of the referendum, and this has now been formalised by the government committing to the project, albeit not without a moment of hesitation. Despite this, it is timely that the Government realises that the future energy mix cannot be underpinned by one technology in one location. The opportunity for continued investment in the generation sector, with all the economic benefit it will bring to private sector business, should be seized by the government and a clear and stable support framework (which does not necessarily mean generous) should be put in place. This would be a certain means of conveying the message that the UK remains open for business and helping to cement our ties to outside capital markets at this time of flux. It is vital that the lights stay on, but they need to stay on the right price and this only seems viable if we maintain a good relationship with international capital markets.
jamie.grant@ckdgalbraith.co.uk 01786 434638
www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Autumn/Winter 2016 | Page 11
EM 13 Autumn/Winter 2016.indd 11
13/10/2016 18:20
Why the UK is hopelessly unprepared for winter VIEWPOINT
Years of green confusion and ill-informed Government action have distorted the energy market to our national detriment. Michael Kelly calls for new thinking, followed by action.
After the defence of the realm, one of the fundamental responsibilities of government is the provision of adequate, secure, affordable and environmentally friendly energy. It is not necessary that government should make the actual provision, but it should assure that the provision is workable and effective. By any measure, the UK Government has been in dereliction of its duty over the last 20 years, and especially the last 10. One of the operating definitions of a thirdworld country is that the energy supply is unreliable and in short supply. The headroom for the supply of winter energy has shrunk from more than 20% 20 years ago to 6% for next winter (including special back-up measures without which the margin is almost zero), and in one severe winter this will result in mass blackouts. Even in the benign winter just gone, there were two crisis points in energy supply. Governments which drive a country towards third-world status are endangering their citizens. The privatisation of the energy supply 30 years ago meant that the Government’s role since has been arm’s length, ensuring that the conditions for required investment are benign. Here I want to focus on the role of environmental legislation that has brought the country to its present parlous position. The wafer-thin winter energy margin is the result of several EU directives including the Industrial Emissions Directive (IED), the successor to the Large Combustion Plant Directive (LCPD). The IED constrains UK flexibility in the construction and management of its conventional electricity generation. The downward pressure is exacerbated by the UK-only carbon price floor and the recent announcement that all coal-fired power stations will be gone by 2025. The LCPD was signed in 2008 and we are already halfway
“
The supreme irony is that our lost production is made up by cheap imports made in China with coal-fired electricity, so that the original problem of global carbon dioxide emissions is exacerbated by our domestic measures.
in time towards the target date of 2025, by which time, according to a recent report by the Institution of Mechanical Engineers, the ‘closure of UK coal and nuclear plants [is] to create [an] electricity supply gap of up to 55% by 2025’. Britain has lost more than 15.4GW of dispatchable electricity generating capacity in the past five years, with less than 35% replaced on the same basis; this has resulted in especially tight capacity margins, and the emergency actions were needed over the winter and spring to ensure the lights stayed on. The only saving grace is that peak winter aggregate energy demand has decreased by about 10% over the last decade in part because of the closure of energy intensive industry. It is a tragedy in this country that we have a Committee on Climate Change (CCC) and not an energy and climate change committee. As it is we get the dire warning of the future climate being used to drive targets for CO2 emissions reductions that are not properly weighed in the balance: this has resulted in an absolute privileging of environmental concerns over security and affordability of energy supply in both the public discourse and Government policy. It is precisely this absence of balance that has produced the economic environment where private investors are not coming forward to secure our future energy security. The CCC has offered carbon budgets for the future which at present are being met with renewable energy projects that are subsidised as they are deployed. Private investors in, say, combinedcycle gas turbines see a playing field that is tilted against them. As in Germany, the high efficiency of their technology has to be downgraded because renewable energy is privileged over gas-fired electricity unless the former is not available. The constant acceleration and deceleration of the turbine reduces the life of the shaft, and the
Page 12 | Energy Matters Autumn/Winter 2016| www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy
EM 13 Autumn/Winter 2016.indd 12
13/10/2016 18:20
Solar storage: A route to energy independence German innovator Solarwatt is striking a blow for household energy independence with UK partner network, says Pol Spronck. The leading German pioneer of high-performance dual-glass solar PV production and storage systems, Solarwatt is developing a UK partnership network to bring advanced renewable-energy generation and management systems to homes across the UK. There’s been a big response from both installation and building design professionals and from the business media.
electricity price has to go up (i) to compensate for the shortened service life of the shaft and (ii) to compensate for the time when the turbine is not producing electricity that it could have done. This double hit means suppliers of energy by conventional means are demanding subsidies to re-level the playing field. The history of successful technologies shows producers of electricity should not be subsidised: it is intrinsically bad for economic competitiveness. Six years ago we lost our aluminium smelters in the face of an upward ratchet of electricity prices, and we are at proximate risk of losing our steel production in part for the same reason. Note that green energy surcharges do not apply to energy intensive industries in Germany. The supreme irony is that our lost production is made up by cheap imports made in China with coal-fired electricity, so that the original problem of global carbon dioxide emissions is exacerbated by our domestic measures. In the national interest we need to follow the decade where environmental concerns have trumped all else, to one where security and affordability of energy supply must be privileged. This is doubly important as we make our way in the global economy postBrexit. Hobbling our future efforts with more costly energy for environmental reasons not matched elsewhere is a form of national psychosis. It is hopeful to note a part of the last speech made by the new Prime Minister during her campaign for the job: “I want to see an energy policy that emphasises the reliability of supply and lower costs for users.” Let’s follow this with action.
Professor M J Kelly is Emeritus Prince Philip Professor of Technology, Department of Engineering, University of Cambridge.
Some might think the EU vote or renewable energy subsidy cuts meant that this was not a great time for a European company to come to Britain. While these are factors to consider, they could not change our minds about bringing the latest technology to UK households. Solar power is gaining traction due to carbon reduction obligations and concerns over energy costs and fuel security – boosted by advances such as our ground-breaking MyReserve storage system. Fixing energy costs, locking in savings by storing and using energy from solar panels rather than feeding it back into the grid, is increasingly attractive as fossil-fuel prices continue their long-term rise. MyReserve addresses the longstanding challenge of power provision during low or no sunshine. The modular device is easy to install and increase Solarwatt’s PV and battery in capacity, helping customers storage solutions. reduce costs permanently. In Germany, Solarwatt supplies MyReserve, Energy Manager and a software app for an all-in-one solar PV solution provided by the utility company E.ON in Germany. Batteries bridge the power gap by storing electricity as it’s produced for discharging when families need lights and appliances in the morning and evening. Storage means more usable power from solar PV, making renewable energy more flexible, reducing reliance on the grid and cutting building energy costs. With PV plus storage, people can fix the electricity costs for decades and boost their independence from utilities.
Pol Spronck is Solarwatt’s International Sales Manager. www.solarwatt.net
www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Autumn/Winter 2016 | Page 13
EM 13 Autumn/Winter 2016.indd 13
13/10/2016 18:20
The sweet taste of windfarm success Mars joins Eneco and local people for the opening of a new windfarm on the Moy Estate. Toby Kirkwood reports.
Local, European and international guests helped Eneco UK to officially open the 60MW Moy Windfarm, near the villages of Moy and Tomatin, south of Inverness. Special guests included sustainability expert Leo Johnson, local schoolchildren and representatives of the Mars food group. A coat of arms, designed by nine-year-old competition winner Lois Ferguson from Strathdearn Primary School, was unveiled to members of the community. CKD Galbraith has played a key role in the project from the start, securing consents for the 22km 33kV underground cable grid connection, representing the Moy Estate, and negotiating terms from the original option agreement through to completion of the site. The windfarm is on Moy Estate and was initially a Carbon Free Developments Ltd project and received Scottish Government consent in 2012. The Dutch electricity company Eneco purchased the rights to develop and construct the Windfarm, and in 2014 Scottish Ministers agreed to increase capacity from 50MW to 60MW. The German manufacturer Nordex supplied all 20 turbines. Construction took 22 months and involved local Scottish contractors including Morrison Construction, which signed a balance of plant (BoP) contract worth £10million, and its electrical sub-contractor Southern Energy Contracting (SSEC).
Eneco has worked closely with the local community on a number of initiatives throughout the construction of the project, and a community working group has been set up to ensure the pledged fund from the windfarm is invested into the community responsibly. This totals £4,500 per installed MW throughout the commissioned lifespan of the windfarm. Hugo Buis, Eneco’s Generation and Storage Director, said: “It is good to see that the success of Eneco’s windfarms in Scotland has paved the way for not only Moy Windfarm but also our other investments including Burn of Whilk, commissioned last year, and Lochluichart which opened in 2014, also located in the Scottish Highlands. These represent significant steps towards Eneco’s vision of making sustainable energy available for all.” Eneco had formed a partnership with Mars UK in which Mars will take most of the energy produced on a 10-year supply agreement, allowing Mars to use 100% renewable electricity for all its UK factories and offices – 12 sites in total. Barry Parkin, Mars’ Chief Sustainability and Health and Wellbeing Officer, said: “We are proud that as a result of our partnership with Eneco, Mars’ entire UK operations and our best loved brands are now powered by 100% renewable electricity.” Eneco has set up a new green collaborative tariff with Co-operative Energy for the remaining power output. The Highland and Mearns Wind Tariff is to be offered to residents living near the Moy, Tullo and Lochluichart windfarms. toby.kirkwood@ckdgalbraith.co.uk 01786 434600
Page 14 | Energy Matters Autumn/Winter 2016 | www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy
EM 13 Autumn/Winter 2016.indd 14
13/10/2016 18:20
Current renewable energy subsidies The renewable energy industry is undergoing a major shake-up as the Westminster Government reviews incentive entitlements across the board. The CKD Galbraith energy team has researched the current subsidy regime to produce this reference guide for the most popular technologies.
Feed-in Tariffs (FiT) Generation & Export Payment Rates* Installed capacity kW Hydro
≤100 >100≤500 >500≤2000 >2000
Solar**
≤10
Subsidy levels are subject to change, so the figures given here are for guidance only. Current details of FIT rates, ROCs and CFDs can be found at www.ofgem.gov.uk/environmental-programmes.
>10≤50
>50≤250
Contracts for Difference (CFDs) Technology
Strike price range (£)
Advanced Conversion Technologies
114.39 – 119.89
Energy from waste with CHP
80.00
Offshore Wind
114.39 – 119.89
Onshore Wind
79.23 – 82.50
Solar PV
50.00 – 79.23
Renewable Obligation Certificates (ROCs)* For period 2016-2017. ROCs/MWh
Anaerobic Digestion
1.8
Hydro
Higher Middle Lower Higher Middle Lower Higher Middle Lower
>250≤1000 >1000
From 26/02/2015. As at August 2016.
Technology
Banding
Stand-alone solar PV**
Tariff p/kWh 1/4–30/6 1/7–30/9 7.68 6.14 6.14 4.43
7.66 6.13 6.13 4.43
4.32 3.89 0.74 4.53 4.08 0.74 2.38 2.14 0.74 1.99 0.74 0.74
4.25 3.83 0.68 4.46 4.01 0.68 2.32 2.09 0.68 1.94 0.68 0.68
Wind
≤50 >50≤100 >100≤1500 >1500
8.46 7.61 4.89 0.85
8.39 7.61 4.89 0.85
Anaerobic Digestion
≤250 >250≤500 >500
8.21 7.58 7.81
8.21 7.58 7.81
CHP
≤2kW
13.45
13.45
4.91
4.91
Export Tariff *Publication date: April 7, 2016. Source: Ofgem.
**FIT payment for solar photovoltaic installations have been determined by the Gas and Electricity Markets Authority (Ofgem) under Article 13 of the Feed-in Tariffs order 2012, in accordance with Annex 3 to Schedule A to Licence Condition 33. Source: Ofgem.
0.5
Offshore Wind
1.8
Onshore Wind
0.9
Solar PV**
1.8
Domestic RHI* Technology
Tariff p/kWh
* ROCs buy-out price set at £44.77/ROC by Ofgem.
Biomass boilers and stoves
4.68**
** Small-scale solar PV (<5MW) closed as of 01/04/2016 and to additional capacity added to existing accredited stations that does not take it above 5MW in total installed capacity from that date.
Air-source heat pumps
7.51
Ground-source heat pumps
19.33
The availability of grace periods in line with those provided for solar PV projects above 5MW last year, enabling projects to be accredited up to 31/3/2017 where preliminary accreditation or significant financial commitments have been made on or before 22/7/2015, and for projects affected by grid delay. Source: Scottish Government.
Solar thermal
19.74
* Period: July 2016 onwards. Source: DECC. ** A 20% reduction to 4.68 from July 2016.
Non-Domestic RHI* Tariff name
Eligible technology
Eligible sizes
Small commercial biomass
Solid biomass including solid biomass contained in waste
Tier 1 (<200kWth) Tier 2 (<200kWth) Tier 1 (≥200kWth <1MWth Tier 2 (≥200kWth <1MWth ≥1MWth All capacities Tier 1 all capacities Tier 2 All capacities <200 kWth <200 kWth ≥200 kWth ≤ 600 kWth
Medium commercial biomass Large commercial biomass Solid biomass CHP systems** Water/Ground-source heat pumps Air-source heat pumps** All solar collectors Small biogas combustion Medium biogas combustion** Large biogas combustion**
Solid biomass CHP Ground-source & water-source heat pumps Air-source heat pumps Solar collectors Biogas combustion
≥ 600 kWth
Tariff p/kWh 3.26 0.86 5.24 2.27 2.05 4.22 8.95 2.67 2.57 10.28 5.90 4.63 2.04
* Source: Ofgem. Tariffs that apply for installations with an accreditation date on or after 1/1/2016. ** Commissioned on or after 4/12/2013.
www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Autumn/Winter 2016 | Page 15
EM 13 Autumn/Winter 2016.indd 15
13/10/2016 18:20
OUr eXPertISe ● Valuations ● Investment in renewables/
financial incentives
● Planning ● Land referencing ● Telecoms ● Utilities ● Wind power ● Biomass ● Solar energy ● Hydro power
OUr eXPertS Our energy experts can be contacted in the following 8 of our 11 offices: aBerDeeN Tom Stewart 01224 860714 tom.stewart@ckdgalbraith.co.uk ayr Bob Cherry 01292 292303 bob.cherry@ckdgalbraith.co.uk cUPar Mike Reid 01334 659984 mike.reid@ckdgalbraith.co.uk eDINBUrGh Richard Higgins
07717 581741
richard.higgins@ckdgalbraith.co.uk
INVerNeSS Dougal Lindsay 01463 245380 dougal.lindsay@ckdgalbraith.co.uk Perth Calum Innes
01738 456075
calum.innes@ckdgalbraith.co.uk
GaLaShIeLS Harry Lukas 01896 662829 harry.lukas@ckdgalbraith.co.uk StIrLING Toby Kirkwood 01786 434635 toby.kirkwood@ckdgalbraith.co.uk For a full list of our energy experts visit www.ckdgalbraith.co.uk
Offices across Scotland | Sales & Lettings | Farm & estate Sales & acquisitions | Property & Land Management Subsidy trading & advice | rural | energy | Forestry | commercial | Sporting | agricultural Loans
EM 13 Autumn/Winter 2016.indd 16
13/10/2016 18:20