matters
ENERGY
The new voice in environmental consulting
King coal makes a comeback
ISSUE 2 Winter 2012
Unlocking the power grid
The crofting land challenge Biomass boilers: a nice warm feeling
Why Scotland needs renewables
WELCOME
NEWS
Calum Innes Head of the energy team at CKD Galbraith
Challenging valuation yields ‘excellent result’
CKD Galbraith has just settled the first inheritance tax valuation concerning a substantial windfarm by agreement. The firm was appointed to act for the land owning Trust in connection with inheritance tax valuations. The Trust was also subject to an option and lease arrangement concerning an extension to the windfarm and the developers had obtained planning permission and a grid connection for this extension. The existing windfarm had been in operation for four years.
RHI is a step in the right direction In recent years, energy has never strayed far from the headlines and, indeed, this month we have seen the Prime Minister making bold statements with regard to protecting consumers in the face of significant energy price rises being issued by various utility companies; a Government Minister has declared that there are now enough wind turbines and their development should be curtailed, while his colleague pledges to boost deep geothermal power.
Whether you are a climate change sceptic who views wind turbines as an unacceptable blot on the landscape or a vociferous supporter of all renewable technologies, I think it is safe to say that energy is g oing to be at the forefront of Government policy for the foreseeable future.
While inheritance tax is payable on the value of an estate at the time of death, a high valuation would have imposed a very heavy financial burden on the Trustees.
Government seeking to avoid any similar difficulties.
It is always easy to criticise Government, but I believe that they are to be congratulated in their attempts to create a framework to support renewable technologies which provide useful heat, as it is understood that something like 42 per cent of all energy expended in the UK is in heat production. I know of no similar mechanism in operation anywhere in the world, and perhaps the technologies being encouraged by the RHI are less likely to divide opinion. Notwithstanding any of the above, there can be no argument that we have finite fossil fuel reserves, so it is imperative that careful consideration and encouragement is given to technologies which will help to provide tomorrow’s energy needs.
In this issue of Energy Matters we look at the Renewable Heat Incentive. Of course, many people are aware of the difficulties encountered by Government as a consequence of the unexpected take-up of solar PV under the Feed in Tariff, and the rate of progress with regard to the RHI regulations is doubtless a consequence of the
As a firm, CKD Galbraith is developing an ever-increasing knowledge and understanding of this developing market and, from a professional perspective, it is interesting to play a part in how these issues interact with land and property interests.
CKD Galbraith is the leading independent property consultancy, with 12 offices throughout Scotland.
service, listening to clients and delivering advice to suit their particular opportunities and circumstances.
The firm provides a full range of property consulting services across the commercial, residential, rural and energy sectors. Drawing on a century of experience in land and property management, the firm is progressive and dynamic, investing in its 200 people and in technology.
Our associate, CKD Kennedy Macpherson, is based in London.
CKD Galbraith provides a personal
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ENERGY MATTERS Issue 2 • November 2012
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CKD Galbraith entered into negotiations with the Senior Valuer in the Scottish Valuation Office, which involved analysing operational constraints and revenue risks. Given that there was no precedent a methodology had to be agreed with both parties acting as experts.
In the first case of its kind in Scotland CKD Galbraith believe a very fair value was agreed for their client. The option and lease for the extension presented further challenges and here too CKD Galbraith achieved an excellent result.
Tim Kirkwood, Chief Executive, CKD Galbraith, said: “The Valuation Office people were very fair in their negotiations and were happy to work with our team, who were extremely well informed and achieved an excellent result for our client. The values in these windfarms can be colossal and inheritance tax issues for Trusts substantial.”
Aberdeenshire picks CKD Galbraith for wind projects CKD Galbraith has been appointed principal consultants by Aberdeenshire Council for the development of planning applications for four sites identified as suitable for wind turbines. The former quarries north of Aberdeen were chosen as offering the best combination of prospects for deliverability and income generation for the council.
“We are delighted that we have been appointed by Aberdeenshire Council to develop the planning applications to assist in achieving their sustainability targets and increasing the use of renewable energy in meeting its energy needs,” said Harry Stott of CKD Galbraith.
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Renewables earn a place in Scotland’s economy Not everyone is convinced by renewable energy. But, says Richard Higgins, Scotland will continue to benefit from this growing sector — throughout the supply chain.
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here is no shortage of argument regarding the benefits or otherwise of renewable energy provision in the UK. On the cost side lie government subsidy (and increased energy pricing) in meeting the 2009 Renewable Energy Directive which sets a target of 15 per cent of electricity consumption by renewable sources by 2020. The Scottish Government has set an ambitious target for renewables to meet 100 per cent of Scottish electricity demand by that year. The technologies being used are evolving in both their efficiency and potential to harness natural energy resources. The filtereddown benefits to the wider economy, in particular local economic activity and development, together with sustainability, are frequently overlooked and are not necessarily factored into the raw figures on investment return.
Over the years Scotland has developed a wealth of transferable skills and competitive advantages, arising from the oil, gas, fishing and marine industries. With critical mass created particularly in the oil industry, the expansion of renewables offers the opportunity for engineers, consultants, manufacturers and suppliers, directly and in numerous support industries, to diversify and generate new revenue streams for their businesses. In the current economic climate this diversification is vital in helping local businesses to attract additional investment funding to provide employment. Supporting this activity directly and otherwise are world-leading science, R&D and education establishments. These markets and associated industries are being supplemented strongly by inward investment in marine fabrication, repair, servicing and the supply of specialised engineering skills.
The trend is underlined by Samsung Heavy
Industries planning to site its first European offshore wind project in Fife, a project worth up to £100 million that is expected to create more than 500 new jobs in Scotland. Gamesea is to bring some 800 new jobs to Leith in manufacturing for the offshore wind industry. These developments are hugely valuable, not merely in their own right, but also in generating confidence in Scottish industry.
activity and highly skilled employment into the longer term.
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Renewable energy will be increasingly important as the focus shifts, longer-term, from oil and gas, where Scotland has established a global position, particularly in deep water engineering. These skills play a vital role in the development of windpower as well as tidal, wave and other marine-based renewable energy resources.
There are several other investment and expansion projects in the pipeline which will not only help to sustain local employment markets but also involve major,
Renewable energy is the logical next step in stimulating activity and demand.
value-creating investment in existing property stock, new property development and much needed infrastructure. That means investment, for example, in harbour facilities at Peterhead, Aberdeen, Inverness and Invergordon, potentially improving the nation’s trade links. Increased property demand means owners can invest in maintaining and expanding their assets. Local taxes rise, shops are needed to support workers and new businesses arise to supply larger projects. Investment in renewable energy attracts specialist engineering, repair, replacement and servicing teams, creating economic
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Scotland, already an energy power-house, has decades of experience in hydro power generation and the oil and gas industry. Renewable energy is the logical next step in stimulating activity and demand, bringing enviable advantages in a competitive world.
This investment, often spurred by subsidy, creates economic activity in the short and long term, generates employment and protects and enhances infrastructure and skills, keeping local communities together.
It is easy to criticise ‘windmills on the hills’ but renewable energy is the future, the Scottish Government is behind it, increasing numbers recognise the trend daily, and there’s much more to come. These early strides will shape and sustain the diverse, dynamic skills that abound in Scotland. We owe it to the next generation to get behind renewables.
Richard Higgins, a partner at CKD Galbraith, is based in the firm’s Edinburgh office.
richard.higgins@ckdgalbraith.co.uk Tel: 0131 240 6960
ENERGY MATTERS Issue 2 • November 2012
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The challenge of
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ENERGY MATTERS Issue 2 • November 2012
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Renewable energy developments on crofting land involve special considerations. Harry Lukas explains.
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apid advances in onshore and offshore wind and wave power generation mean the northern coasts and islands of Scotland will play an increasingly important role in harvesting renewable resources.
The Western Isles, Skye and the inner islands, Shetland and Orkney and the crofting counties on the mainland are in part subject to crofting tenure. It is important that anyone planning to develop land in these areas is familiar with the rules regarding crofting, as the communities are long established and take great pride in their rights to the land. Crofting tenure was established in law in 1886 by the Crofters Holdings (Scotland) Act and the regulation has been tweaked and altered over the years mainly to advance the original purpose of preserving rural communities and community use of land for agriculture. Since the Crofting
identify all the parties involved as there may be absentee crofters, those who have died, and disputed wills.
Where an energy development is proposed under current crofting rules, the tenants are due a 50 per cent share of the landlord’s development value of the project, so crofting communities will be a central partner in any project from the outset. With any proposal for wind or hydro schemes, access roads, cable runs, substations, etc, a share of the 50 per cent of the development value will be due to the crofters directly involved. This involves a lot of organisation, and clear explanation of the project to the communities and the individuals concerned. The key individual co-ordinating the process is often the clerk to the common grazings or the township clerk for c ommunication. Funders of any renewable scheme will require the land needed for the develop-
the crofts
Reform (Scotland) Act 2010, regulation of crofting has been overseen by the Crofting Commission, which, in April 2012, became the statutory regulator in Scotland.
The rights of crofters are very different from those in an agricultural tenancy. Typically, they hold a croft house and a few acres of land as tenants, often together with rights to common grazings. Unless this land is ‘de-crofted’ or resumed from crofting — both formal processes specific to this area of law — the land remains subject to crofting rules even if sold to another party. The rules apply not only to traditional crofts but also to holders of apportionments of common grazing and owners of a purchased croft or apportionment. In many cases the landlord may still retain sporting and mineral rights over the land and there is a debate as to whether this includes the air above the ground where crofting tenants are involved.
Records at the Crofting Commission are, since the most recent reforms, being updated and registration of crofts and crofters is an ongoing process, so in some areas information is sparse. It is often difficult to
ment to be free of tenancies and of crofting tenure, which will require the land to be resumed or de-crofted through the Commission and Land Court. Resumption from crofting tenure can be granted by the Scottish Land Court under the 1993 Crofters (Scotland) Act. The most recent amendments to the law require the crofting commission to address the sustainability of the project in relation to the scheme. Resumption via an application to the Scottish Land Court can enable a major project where it may not be possible to get unanimous local support
for a scheme but where the project is in the wider interest of the communities. The application to the Land Court is a ccompanied by a defined project scheme and method of compensation. The court will assess four main tests: • The development has to be for a reasonable purpose; • The development must not be unfair; • The scheme must provide for fair recompense to each member of the crofting community; • The development must be one which would be likely to bring benefit to the community at least comparable with the benefit which could be achieved if the development progressed by other means. Where there is unanimous agreement among the crofters involved, there is a fast-track scheme which allows the court to proceed more quickly. Resumption of crofting land can be temporary and compensation can be paid in variable installments over the life of the project. In some cases at the end of the scheme the land could revert to use by the crofting community.
The number of people involved and the intricacies of crofting tenure mean that challenging and delicate valuation issues arise. This should be borne in mind by anyone involved in the division of the project value within a crofting community.
A clear understanding of the issues and a good rapport with both landlord and crofters is essential. CKD Galbraith has a team experienced in dealing with crofting issues.
Harry Lukas is a consultant at the Peebles office of CKD Galbraith.
harry.lukas@ckdgalbraith.co.uk Tel: 01721 722787
Community choices With the implementation of the C rofting Reform Act of 2010, the new Crofting Commission is charged with updating the registers of crofters, reducing absenteeism and furthering the goals of crofting and crofting communities. This has coincided with the rapid expansion of renewable energy projects in the Highlands and Islands, and procedures originally structured for
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minor development schemes within crofting communities are now being looked at for major renewable energy developments. As with any development project, there will be some dissenters, so the community, and in turn the Land Court, must decide whether the sustainability of the community is enhanced and the share in the project is fair and reasonable.
ENERGY MATTERS Issue 2 • November 2012
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The right FIT for fair funding? Changes to the Feed in Tariff scheme were necessary if not universally popular. Anneka Walker explores the outcome.
Since the introduction of Feed in Tariffs (FIT) in April 2010 there has been considerable investment in renewable energy projects, and developers have received generous payments for the electricity they generate and export to the National Grid. In February 2011, the Government began a comprehensive, three-phase review of FIT to find out how the scheme’s administration and the tariff levels for each technology needed to change in order to save £40m.
Phase 1 reviewed solar photovoltaic (PV) tariff levels and resulted in a reduction in tariffs for large-scale installations from August 2011 and for small-scale installations from March 2012. Phase 2A reviewed solar PV tariff levels and from August 1, 2012 a degression mechanism was introduced whereby generation tariffs will reduce at three-monthly intervals, subject to deployment figures. Current solar PV generation tariffs are shown in the table above right.
Phase 2B reviewed tariffs for non-solar PV technologies and from December 1, 2012, these changes will take effect: • No generation tariff higher than £0.21/kWh; • All tariffs will be subject to annual degression, subject to deployment figures; • Preliminary accreditation will be available for certain installations; and • A new, intermediate, hydro band tariff will be introduced for projects
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ENERGY MATTERS Issue 2 • November 2012
between 100kW and 500kW to stop under-sizing.
Annual degression of tariffs will be introduced from April 2014, and reductions will range from 2.5 per cent to 20 per cent depending on deployment figures from the previous year. For most technologies, tariff bands will reduce by: • 2.5 per cent if deployment in the previous year is less than 7 per cent of the predicted value; • 5 per cent if deployment is in the range of 75 per cent to 150 per cent of the expected value; • 10 per cent if deployment is in the range of 75 per cent to 300 per cent of the expected value; and • 20 per cent if deployment is greater than 300 per cent of the expected value. Generation tariffs can however be fixed for the first six to 24 months, by preliminary accreditation, provided planning permission has been granted and a formal grid connection offer has been made. Preliminary accreditation will be available for wind and solar projects greater than 50kW declared net capacity together with all hydro and anaerobic digestion projects.
In future, all tariffs will continue to be index-linked using the Retail Price Index and the export tariff will increase to 4.5p/kWh for all installations after the tariff changes.
Degression will not be favoured by all investors, but the outcome of this review was not unexpected. The revised FIT scheme aims to distribute funding fairly between the technologies, but whether it can achieve this remains to be seen. Anneka Walker is a chartered surveyor working as a rural and renewables surveyor in the Cupar office of CKD Galbraith.
twitter.com/ckdg_awalker
Current solar PV generation tariffs Type of installation
Tariff from 1/11/2012 to 31/1/2013 (p/kWh)
Total installed capacity 4kW or less, where attached to a new building prior to first occupation
Higher rate: 15.44 Mid-rate: 13.90 Lower rate: 7.10
Total installed capacity of 4kW or less, where attached to an occupied building
Higher rate: 15.44 Mid-rate: 13.90 Lower rate: 7.10
PV scheme (other than stand-alone) with total installed capacity greater than 4kW but less than 10kW
Higher rate: 13.99 Mid-rate: 12.59 Lower rate: 7.10
PV scheme (other than stand-alone) with total installed capacity greater than 10kW but less than 50kW
Higher rate: 13.03 Mid-rate: 11.73 Lower rate: 7.10
PV scheme (other than stand-alone) with total installed capacity greater than 50kW but less than 100kW
Higher rate: 11.50 Mid-rate: 10.35 Lower rate: 7.10
PV scheme (other than stand-alone) with total installed capacity greater than 100kW but less than 150kW
Higher rate: 11.50 Mid-rate: 10.35 Lower rate: 7.10
PV scheme (other than stand-alone) with total installed capacity greater than 150kW but less than 250kW
Higher rate: 11.00 Mid-rate: 9.90 Lower rate: 7.10
PV scheme (other than stand-alone) with capacity greater than 250kW
7.10
Standalone PV scheme
7.10 Source: Ofgem
FIT changes for non-solar PV projects Technology Band (kW)
Current Final tariffs generation from 1 Dec tariffs 2012 (p/kWh, (p/kWh) 2012 prices)
Hydro
15 >15—100 >100—500 >500—2000 >2000—5000
21.9 19.6 12.1 12.1 4.9
21 19.6 15.5 12.1 4.48
Wind
1.5 >1.5—15 >15—100 >100—500 >500—1500 >1500—5000
35.8 28 25.4 20.6 10.4 4.9
21 21 21 17.5 9.5 4.48
Anaerobic 250 Digestion >250—500 >500—5000<
14.7 13.6 >9.9
14.7 13.6 8.96
microCHP
10.5
12.5
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Source: Department of Energy & Climate Change
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Unlocking the power grid Major work is being done to turn Scotland’s transmission network the ‘right way round’ to distribute renewable energy. Peter Watson reports. Renewable energy may sound modern but in Scotland it goes back a long way. Since the days of ‘Power from the Glens’ and the creation of the North of Scotland Hydro-Electric Board, the great hydro schemes built on the rivers of Scotland have played a major role in renewable energy generation.
Today we are well into the latest era of renewables development, with hydro schemes and wind farms becoming a major source of both rural income and renewable energy. The electricity transmission infrastructure in the north of Scotland was built to transmit power from the centres of generation to consumers wherever they were, at the same time exporting surplus south to the industrial heartland of the central belt. Times have moved on and, as renewable energy has played an increasingly large part in our lives, the sites where energy is generated have themselves become more dispersed. For modern needs, the transmission grid is effectively built the wrong way round, with the lowest transmission capacity located at the fringes.
Work is therefore in progress to ensure we have the capacity to transmit the renewable
energy potential available in Scotland in the most efficient and effective way. Huge efforts are being made to reinforce the existing transmission grid and to build new lines and cables to enable Scotland to unlock and use its renewable energy resources. This work is driven by the need to move away from a fossil fuel economy towards one based on renewable energy and efficient resource use. Views on the best ways to produce renewable energy are as varied as they are strongly held. That is understandable. However, with the growing realisation that fossil fuels are finite and increasingly expensive, coupled with the need to protect
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Huge efforts are being made to reinforce the existing grid and build new lines to enable Scotland to use its renewable energy resources.
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the environment, it is clear that renewable energy has a major role in our future.
This huge infrastructure upgrade comes at a cost to our close surroundings and the landscape around us. There is a balance to be struck between the environmental effects of continued dependence on fossil fuels on the one hand, and the environmental impact of renewable energy development on the other — and it is difficult to quantify. However, the days are over when fossil fuel users were allowed to dump their waste into the atmosphere freely, with inevitable global impact. To build a transmission line requires a truly huge effort, from identifying the route to construction. As consumers we are all caught between the desire for reliable, reasonably priced electricity and our role as custodians of the land we live on. Protection of the environment is a key factor in the choice of a transmission line route and later in the construction phase. It is fair to say that there will always be environmental impact from any construction project but that it needs to balanced against, in this case, our need for robust electricity supply.
How does CKD Galbraith fit into this? This is a busy and legally complex area to work in, and one in which knowledge of both legislation and land management are essential. The firm’s energy team is involved in these projects from the ground up and offers a wealth of experience in land management, plus detailed knowledge of the environmental sector.
Peter Watson is an environmental adviser at the Perth office of CKD Galbraith.
peter.watson@ckdgalbraith.co.uk Tel: 01738 451 111
ENERGY MATTERS Issue 2 • November 2012
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Warming to biomass heating Thinking of heating with biomass? Think sourcing, storage and cost, says Fiona Samson. Then wrap up warm. In the last issue of Energy Matters, Calum Innes discussed the opportunities for electricity production from biomass systems. Now, as winter approaches, thoughts turn to the cost of heating oil or gas. Many of our clients have considered installing a biomass system for heat production, and we have advised on a variety of options, including heating their homes, offices, let properties and even leisure facilities using either wood chips, pellets or logs. There are several considerations before making the decision to convert your heating system.
First, where will you get your fuel? The best option is to find a local supplier — the closer the source, the lower delivery costs are likely to be. Estates and farms across Scotland are now producing wood fuel and many will deliver. Some landowners may be able to produce their own fuel by using the cheaper cuts
from timber that usually go for pulp or chipwood. However, it is critical to ensure the timber is harvested well in advance and properly seasoned to ensure maximum efficiency.
Secondly, where will you store your fuel? Some of our clients have erected purpose-built fuel stores, while others have converted an existing building.
The financial incentives for installing biomass boilers come via the Renewable Heat Incentive (RHI), where there are two key mechanisms, the domestic and non-domestic phases. The non- domestic scheme works on payments per kWh of heat produced. Each boiler will be metered to measure the output and the scheme will run for 20 years.
In contrast, it is proposed that domestic systems — installations which serve a single private, residential dwelling only — will operate for seven years. Payments would be based on the amount of heat that the property is deemed to need each year. The Government is expected to confirm or adjust the proposals for domestic installations during 2013. Other technologies that qualify for the RHI include biogas combustion, deep geothermal, ground source heat pumps and solar thermal. The tariffs per kWh vary per technology, meaning that homeowners will need to consider the financial returns before deciding on an installation.
For those who installed these technologies after July 15, 2009 there is the option to claim RHI, but other grants received at the time may have to be repaid before RHI can be claimed.
CKD Galbraith’s clients who are using the non-domestic scheme are predicted to achieve payback within five to eight years of the system being installed. In this example, non-domestic systems include heating an office building as well as let cottages. These paybacks make a biomass installation an attractive investment as well as a good way to cut fuel bills and be kinder to the environment. Fiona Samson is a surveyor at the Elgin office of CKD Galbraith. fiona.samson@ckdgalbraith.co.uk Tel: 01343 546362
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ENERGY MATTERS Issue 2 • November 2012
Far from being a spent force, coal is making a comeback — and local communities are bound to benefit. Calum Innes reports.
Back
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erhaps it was the political fallout from the miners’ strike of 1984, or the associations with William Blake’s ‘dark, satanic mills’, or the increased emphasis on renewable energy, or a mix of factors. Whatever the reasons, the UK coal industry has kept a low profile in recent years. Nevertheless, coal remains of vital strategic importance to both Britain and Europe. Around a third of the UK’s electricity is generated from thermal coal. Prices for coking coal, used in the manufacture of steel, have experienced never before seen prices in recent times.
Production of coal in the UK is by far the most efficient in Europe, according to the Confederation of UK Coal Producers. The industry employs more than 9,000 people directly and many more in related activities. One of the newest entrants into the UK industry is New Age Exploration Limited (NAE). The Australian company was granted an underground licence by the UK Coal Authority over the Lochinvar project on the Borders near Canonbie, between Glasgow and Carlisle, in June 2012. Covering some 26 square miles, the area is served by extensive infrastructure including a railway line, providing access to ports and steelworks and high-voltage power lines. www.ckdgalbraith.co.uk
to the black stuff “
as long as manufacturers require high-quality steel, producers will need the stuff that fires the furnaces.
Steel production has peaked with the global financial crisis and, inevitably, demand for coking coal has also been affected. But as long as manufacturers require high-quality steel, producers will need the stuff that fires the furnaces. With a conceptual exploration target of between 330 and 410 million tonnes of coking coal, Lochinvar has the potential to be a major project that stands to generate huge spin-off benefits for Scotland as a whole and the local community in particular. Of course, matters are at an early stage, but as this is a deep mining project, it does not suffer from many of the environmental disbenefits associated with open-cast coal mining. Notwithstanding, this is a major project which will be duly scrutinised by the planning and environmental authorities in due course. CKD Galbraith is delighted to be associ-
ated with the project having been appointed as early stage advisers to NAE prior to the granting of the licence by the Coal Authority. The firm’s role is to act as land and property consultants, identifying land necessary to validate and develop the project together with negotiating and concluding agreements with landowners to facilitate test drilling and other matters requiring surface land access. The firm has also undertaken diligence with regard to previous mining and gas exploration in the locality and liaison with community bodies. Lochinvar is uniquely well positioned, with significant key infrastructure in place and of a high quality, including the West Coast railway line, high-voltage power line with substation, the A74 (M6) motorway, and Gretna, Dumfries and Carlisle all with 30 minutes’ drive.
Since the licence was granted, NAE has been busy advancing the project. Key tasks have included the appointment to the project team of key personnel with more than 120 years of collective experience in the UK coal industry, and planning for a 12-month detailed work programme. This includes phased drilling and calculating the estimated total resource, which is expected to begin before the end of 2012. The scoping study, expected to be completed by Q4 2013, will investigate safety, health, environment and community
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aspects, estimated resources, coal quality, mining and processing considerations together with surface and transport infrastructure and costs.
Initial test drilling is due to start shortly and Gary Fietz, NAE’s CEO has said he is confident his team has the right experience to drive the project forward. In addition to a very experienced executive NAE has a very strong cohort of UK-based professional advisers providing strategic advice and services to help deliver the project: alongside CKD Galbraith; SRK Consulting (Cardiff) is providing geological and mining expertise with Dr Bill Hatton as principal adviser; and Karen Dalgleish of Dalgleish Associates (Dunblane) is providing mineral planning and environmental consultancy. Coal may not be seen as new green technology, but it doubtless has a role in delivering our future energy requirements and, in the case of the Lochinvar project, providing an irreplaceable constituent to the steel making process. The development of this project is a case to watch. Calum Innes, based in Perth, is head of CKD’s energy team and leads the firm’s involvement in Lochinvar. calum.innes@ckdgalbraith.co.uk Tel: 01738 451111 ENERGY MATTERS Issue 2 • November 2012
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Why it’s worth listening Planning a project? It pays to do your homework, say Dougal Lindsay and Peter Curtain. That means consulting those likely to be affected. Developers sometimes take insufficient heed of either the people or places likely to be affected by their proposals. Companies undertaking big commercial projects, whether in energy, or for that matter in housing or leisure, will be understandably enthusiastic about their plans. They also tend to surround themselves with people with little incentive to ask difficult questions.
CURRENT PROJECTS CKD Galbraith’s experience in renewables extends across Scotland, including the islands, and into the north of England.
Developers should consider how their plans will be received by all affected, even incidentally or remotely. And they should go beyond the statutory minimum to show an active interest in what people think. In particular when it comes to renewable energy projects, people will, and do, have strong views on the environmental implications of any new scheme, opinions on the aesthetics or changes to landscape. They will also want to know whether the local environmental costs as they see them are outweighed by the national benefits associated with energy policy. Therefore, in an age of mass media and social networking, cause-hungry politicians and active communities, it is folly to assume that even a small scheme will escape scrutiny. This presents an opportunity as well as a challenge.
Not all opponents are NIMBYs, nor are all objections motivated by fear or hatred of progress. Campaigners are often well educated and able to make a convincing argument. They’re likely to have done thorough research, be well prepared and have access to decision makers. All this makes them a potential resource — some developers have willingly adopted alternative proposals put forward by early opponents.
Early in any process, wise developers will not only use professional consultants to investigate and report their findings — as indeed they should — but also consult local individuals and groups about their plans. This can be achieved directly or through advisers, but it should be done. Consultation can take many forms — from advertising, public meetings, presentations and visual displays to press campaigns and social media. It will involve thoughtful preparation. But the key thing is to communicate and to listen.
Addressing valid questions early on will very likely save money. At best, openness will recruit advocates, convince waverers and convert opponents – it will often significantly improve the chance of a project winning official approval. It is worth saying
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KEY Wind Hydro Biomass Solar
here that some people will never be won over — and taking them on will waste effort and sap enthusiasm. However, they’re not the ones you’re targeting.
To anyone involved at a senior level in a planned project, our advice is to appreciate the value of listening. You’re going to have to engage with people anyway. To the extent you can, you should turn this to your advantage. You can build up a tremendous fund of
goodwill merely by asking people for their views. Doing this could even produce big opportunities. Dougal Lindsay is a chartered surveyor specialising in energy projects at the Inverness office of CKD Galbraith. Peter Curtain is MD of Allerton Communications.
dougal.lindsay@ckdgalbraith.co.uk Tel: 01463 224 343
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All change for solar subsidies The financing picture for solar energy has changed significantly. Fiona Samson considers the implications for private property owners.
S
ince my last report in these pages earlier in the year, a lot has changed in the UK’s solar industry, primarily in relation to the subsidy mechanisms in place.
Changes made under the various reviews and consultations that have taken place mean the available rates are lower, there are different conditions to achieve the highest rates on offer and there is a new pre-planned system of degression. This will provide a method of decreasing feed-in tariff (FIT) payment rates if installations across the country reach a critical point for the FIT funding structure. In other words, in an effort to avoid making the same mistake as its predecessor, the Westminster Government wants to avoid a potentially destabilising rush of applications, instead allowing demand to set or at least influence the level of subsidy available. The Government is pushing towards ensuring that installations are also providing real environmental benefits. To achieve the highest rates, householders must ensure that their property is energy-efficient — by achieving an energy performance certificate (EPC) of level D. This means a 4kW scheme could achieve 15.44p/kWh. This is significantly less than the 43.3p/kWh on offer in January 2012. Those interested in larger-scale develop-
ments, such as multiple installations across an estate, would be entitled to receive a ‘medium rate’, which is 90 per cent of the highest rate available. Farmers considering installations in the corner of a field of around 50kW would only be able to achieve 7.1p/kWh and not the 19.0p/kWh being paid in January, assuming they feed directly into the grid or into an agricultural shed.
Despite the changes, one problem remains: it is difficult for people to achieve the higher rates of the FIT if they cannot improve the energy-efficiency of their buildings. Rural properties, which offer the most space for the installation of panels, are finding it difficult to meet the level D or above rule. A traditional stone construction, under a pitched slate roof, with little insulation or energy efficient measures, is unlikely to qualify. There are many such
properties across Scotland and they stand to miss out on the best rates of FIT. This is a substantial issue and needs to be addressed. So, is solar still a good investment?
Over the past 12 months, the w holesale cost of solar panels has continued to decrease and along with it the cost of installation. This helps to ensure the industry does have a future in spite of lower FIT rates.
It is important to remember that installing solar panels offers a number of benefits: the chance to produce your own renewable energy and reduce reliance on mains electricity and its costs; the opportunity to earn an income on a resource not previously producing financial returns such as a shed roof or the corner of a field; and the opportunity to increase the range of commercial activities on a property. Every case is different — much will depend on the amount of cash available (or what other financial investments you might make), how much energy you can use and where, and whether planning permission is required. Property owners need, as ever, to examine the pros and cons of an installation before embarking on a project.
Fiona Samson is a surveyor at the Elgin office of CKD Galbraith.
fiona.samson@ckdgalbraith.co.uk Tel: 01343 546362
Demand still high for small schemes Ahead of the Feed in Tariff changes for nonsolar PV technologies which are due to take effect on December 1, 2012, CKD Galbraith were instructed to market a 0.13Ha site at Langside Farm, Galston, East Ayrshire which has planning permission for a 225kW wind turbine and a 200kVA grid connection offer. The turbine would be erected after the generation tariff changes came into force. Offers over £225,000 were sought for a one-off lease premium in exchange
www.ckdgalbraith.co.uk
for a 25-year full repairing and insuring lease. The site was on the open market for about two weeks before a closing date was set on October 15, 2012. There was considerable interest in the site and a number of offers were received above the asking price, demonstrating that while investors are generally apprehensive about the forthcoming Feed in Tariffs changes, there is still a high level of demand for small-scale renewable schemes.
ENERGY MATTERS Issue 2 • November 2012
11
Our People and places Fiona Samson Elgin
Sarah Tyson Elgin
Tim Kirkwood Inverness
Bill Robertson Perth
Mike Reid Cupar
Wattie Barbour Perth
Calum Innes Perth
Alex Jameson Perth
Anneka Walker Cupar
Richard Higgins Edinburgh
Harry Lukas Peebles
Elgin 01343 546 362 elgin@ckdgalbraith.co.uk
ELGIN
INVERNESS
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Dougal Lindsay Inverness
ABERFELDY
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Cupar 01334 659 980 cupar@ckdgalbraith.co.uk
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Peebles 01721 722 787 peebles@ckdgalbraith.co.uk
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GALASHIELS KELSO
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