Newscast issue 7

NEWSCAST SMITHS GORE IN SCOTLAND THE Energy ISSUE

issue 7 Summer 2014

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You cannot be serious!

Increasingly I find myself both enraged and amused by the debates that engulf us. Perhaps this is down to age or was it always like this? Did I just not pay attention years ago or has something really changed and, most importantly, is it for the better?

Toby Metcalfe t:0131 344 0888 e:toby.metcalfe@smithsgore.co.uk

For those of us immersed in Scottish rural life we are not spoilt for choice over subjects needing serious and deep discussion. To the outsider the list would seem intriguingly long. I will not bore you as you will be all too familiar with the subjects but I find myself asking, if the impact is as substantial as I envisage will it be for the better? We are assured by our political masters that support can only result in everyone being better off, healthier and happier - no downside, nothing to fear. But such was the sales pitch of the snake oil salesmen of the American west. The quality of the public debate needs to match the gravity of the subject matter.

unlock the big scale energy potential of tidal flow, wave, and offshore wind. If engineering solutions can be found that can be funded profitably (and recent news of a helium-inflated tethered wind turbine is an example of how new thinking continues to emerge) there is a very long way to go yet for energy production in Scotland, and well beyond 2020. Engineering solutions have constantly lengthened the lifetime of oil and gas in the North Sea - the benefits of this are manifest and might just buy us enough time to get our renewable resource up to capacity to power Scotland in the future.

I gain some wry amusement by claims that clearly either don’t stack up or are patently not true – deeply worrying given that the debate on television and radio is the basis on which many people will form their opinions. Then there is the absolute certainty with which statements are made. If you are going to say something about which you know very little then say it with total conviction. Sadly there is all too much of this at present.

Indeed, such is the potential that we should not only be looking to power Scotland but should also be an exporter of low carbon energy. That is a goal worth achieving, and the debate must move to who our customers might be and what we should be doing to make our low carbon energy as attractive to them as possible.

This edition of Newscast focusses on Energy - one of the major issues that makes up part of the debate ‘soup’ that is bubbling away. Our contribution to that debate must be to continue to focus on facts, direct experience and knowledge.

The ‘renewables revolution’ in Scotland continues to progress towards its 2020 targets. Dr Jason Beedell’s article needs careful study not just for what has been achieved but what is also in the pipeline and so far we have not really started to

So, in this complex and diverse world, our legislators should bring forward more challenging issues of national importance for consideration and action. Equally however we need the quality of public debate to be improved. Aided by good reporting, we need more facts and less emotional fiction for the outcomes are too important. We also need as large a pool of scientific and engineering knowledge as possible, customers eager to do business with us, fewer boundaries and bigger vision.

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Smiths Gore working with NFU Scotland to unlock rural sector’s renewables potential Thomas McMillan t:0131 344 0888 e:thomas.mcmillan@smithsgore.co.uk Last year, Smiths Gore was appointed as an independent consultant and facilitator for NFU Scotland’s Renewable Development Initiative for which funding had been secured through the SRDP Skills Development Scheme. The project is designed to assist with the creation and provision of sound, independent advice to farmers and land managers across Scotland on renewable energy.

The project will, over its three year period, cover all technologies and involve up to 27 farm visits to allow farmers to share knowledge and understand best practice through a range of demonstrations and workshops.

The project is also intended to show different schemes at different stages of development (ie feasibility, planning, construction, commissioning and operation) with repeat visits and updates.

NFU Scotland’s Regional Co-ordination Manager, Lisa Roberts, who is managing the project, says: “In order for Scotland to achieve the full potential that exists in the rural renewables sector we believe that it is essential for farmers and land managers to learn from each other’s experiences.”

Since November 2013, six events have been organised with four more planned this June/July. Locations that the project has visited include Balring Farm, near Mintlaw courtesy of Hamish Watson where there is an operational 400kW log batch boiler used for grain drying; a 200kW woodchip boiler heating three houses, a workshop building, the farm power washer and top-up heat for the grain dryer. He is also progressing a biomass gasification boiler which is currently being commissioned. A visit to see this scheme will be held toward the end of 2014 once it has bedded in.

At East Knockbrex Farm, Dumfries & Galloway, Iain Stewart is constructing an anaerobic digester combined heat and power scheme at his dairy unit that will provide heat, power, fertilizer and an income.

The initiative has also visited Andrew Stewart at Marshill Farm, Lanarkshire who is at the feasibility stage of a community wind farm project involving CARES funding (the Scottish Government’s Community and Renewable Energy Scheme); Cairndally Farm, Ellon courtesy of Davie Smith, where he has a proposed wind turbine site; and Gledpark, Dumfries and Galloway, where Rupert Shaw has both solar PV and an on-farm wind turbine.

Davie Smith, one of the host farmers and NFU Scotland North East’s renewables convener, said:

“There is no better way to showcase the technology than by showing it in action on farms. These days offer great networking opportunities with industry experts to help farmers optimise their projects, maximise financial returns to the business and identify future investment opportunities.

“It is essential that Scottish farmers grasp the opportunity that renewables present, be it large developments or smaller domestic projects, rather than leave it to corporate investors! This Renewables Development Initiative, and its network of demonstration farms round the country, will make sure farmers remain at the core of the renewable sector’s success.”

Industry and regulatory experts have also been enrolled in the initiative to give a fully comprehensive and rounded programme, and there is a suite of information for each project answering many of the questions and providing those attending with a far better understanding of each technology and what it could do for them on their own farm.

For more details on future events and further information visit: www.renewableenergyonfarms.co.uk Next event Wednesday 30th July 2014 West Mains of Kingblethmont Renewables Safari - wind, solar and biomass.

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Putting balance back in the energy debate Balance in the energy debate is important. We are all too easily impressed, for example, by the volume of information that promotes renewables and new technologies. But whilst these might provide solutions at a local, or in some cases at a national, level, what is the bigger, global picture, and what is the future with regard to the oil and gas sector and our reliance on it?

Toby Metcalfe put the questions to Simon Thomson, Chief Executive of Cairn Energy PLC

Simon Thomson

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Toby Metcalfe: Unlocking energy resources is at the core of your business, but have you ever ventured beyond the oil and gas sector?

Simon Thomson: Cairn is an established and pioneering independent oil and gas exploration company with a track record of delivering substantial returns and capital growth for shareholders. We focus on the oil and gas sector as that is where our expertise lies. Cairn’s growth model is to create, add and realise value within a self funding business which has either balance sheet cash or operating cash flow from which to fund exploration.

TM: Where do you focus your oil and gas activity?

ST: The exploration programme is focused on seeking to create value within frontier and emerging basin opportunities with suitable equity levels, which are reflective of the company’s size, in the Atlantic Margin and Mediterranean basins. This frontier and emerging basin strategy is underpinned by the non-operated mature basin exploration and development projects in the North Sea. These development projects will provide Cairn with growth and income in the medium term which the Company will use to fund future exploration activity.

TM: Do you see the push for more energy to be created from renewable energy in any way as a threat?

ST: To meet the energy needs of all households worldwide, energy supplies must double by 2050 with estimates suggesting that there is only enough energy resource to satisfy energy demand for the next forty years.

the world. The Company historically focused its activities in South Asia and India, in particular, where it operated for almost 20 years. Cairn’s major oil discovery in Rajasthan has the potential to provide more than 30% of India’s crude oil production and to generate US$100billion of revenues for India.

This reorganisation was compliant with tax legislation in place at the time in each relevant jurisdiction, including India.

TM: A stable political climate is clearly vital to your ongoing success; how do you ensure that the risks will be balanced by the returns?

While this information request is being dealt with, Cairn is unable to access the value of its shareholding in CIL (US$1 billion at 31 December 2013), either through disposal or future dividend income.

ST: Before Cairn embarks on a new project it considers the commercial, political and technical risks associated with it. The company will only proceed with a new opportunity if it believes it can manage the risks associated with it to ‘as low as reasonably practicable’.

Our success stems from being pioneers and partners – particularly building partnerships with host Governments, on whose behalf we are working to help them to realise the value from their natural resources.

TM: The North Sea remains important to you. Why is that?

ST: Over the last two years, the Group has built an attractive business and acreage position in the North Sea. Importantly, this is an area which provides an active market place for asset trades, with such activity set to continue. The North Sea provides an attractive combination of mature basin priorities, established infrastructure and new play concepts.

In the UK, the Kraken and Catcher development projects are a key part of our portfolio, acquired to provide cash flow following first oil production in 2016/17.

While renewable energy is playing an increasingly important role in global energy, the International Energy Agency has indicated that oil and gas will remain a key part of our energy future in the years ahead.

In the Norwegian North Sea the Group has built a strategic position around its Skarfjell discovery including other discoveries and prospects which offer the potential for a hub and satellite development scheme in the future.

TM: Exploration or prospecting has always been a risky business – but is luck ever a factor any more?

TM: Cairn Energy has been through some tough times recently as reported in the media. Will this in any way affect how and where you do business in the future?

ST: It takes a great deal of skill and stamina to successfully discover commercial quantities of hydrocarbons.

Many different technical factors may limit your chance of success. Cairn has discovered and developed oil and gas reserves in a variety of locations around

ST: In January 2014, Cairn received a request from the Indian Income Tax Department for information relating to a group reorganisation completed in 2006.

The Indian Income Tax Department has cited legislation introduced in 2012 as the reason for these enquiries.

The current year’s programme is funded fully from the cash on the Balance Sheet and we have moved quickly to review the capital allocation for 2015 and beyond and will keep this under review. Capital allocation for future programmes will depend primarily on the conclusion of debt facilities for both Catcher and Kraken and the results of our 2014 drilling programme.

The existing portfolio provides many opportunities and we are looking closely at the allocation of capital for the programme beyond 2014, which will be guided by three core principles: •

creating value through exploration;

•

maintaining a balanced portfolio, with a strong operating cash flow in the future; and

•

capital discipline.

TM: Do you think we will reach a point where energy costs cease to travel only in one direction?

ST: The World Energy Council expects global demand for oil and gas to continue to grow at 1% and 2% per year respectively. Given population growth pressures, even with increasing energy diversity, the dominant role of fossil fuels in global energy supplies, and pressures to replace oil and gas reserves, are expected to continue for at least another forty years.

TM: “Rise early, work late and strike oil” has been a maxim for success in your particular sector, but will the time come when it will be fitting to substitute something else for striking oil?

ST: I think for the moment the demand for oil and gas will remain a key part of the global energy mix.

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Energy generation in Scotland Dr Jason Beedell Head of Research t: 01733 567231 e: jason.beedell@smithsgore.co.uk For electricity, onshore wind is the largest renewable source at present and will remain so for a while. But other sources will grow; Scotland has 25% of Europe’s offshore wind resources, 25% of its tidal potential and 10% of its wave potential.

The target is to produce at least 30% of overall energy demand in Scotland from renewables by 2020 - reducing reliance on fossil fuels.

Despite the vast increase in installed renewable capacity - almost 250% growth between 2003 and 2012 - the pace needs to increase to meet targets.

So where is the power going to come from?

And the current third of electricity from nuclear will reduce over time as existing power stations are not replaced.

Scotland's energy targets Greenhouse Gas reduction by 2030

Total energy consumption from renewables by 2020

Gross electricity consumption from renewables by 2020

30%

100%

42%

80%

by

2050

UK

42% 80%

by by

2030 2050

UK

15%

by

2020

EU

40%

by

2030

EU

27% by

2030

Heat consumption from renewables by 2020

Energy consumption reduction by 2020

2011 target of 31% beaten; new target of 50% by 2015 set

Decarbonising electricity supply by 2030

CO2 11% Current level is around 3 - 4%

12%

Consumption is already falling but it may be due to the recession rather than energy efficiency

50g CO2/ kWh 2010 level was 347g/kWh generated

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‘The Scottish Government has the most ambitious renewable energy targets in the world’ Richard Lochhead, Secretary for Rural Affairs and the Environment

Scotland's past and current electricity generation

2012

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Other biofuels

1% 2 %

Landfill gas

7% ve) - 1

C oal

e wa

Hydro pumped storage

%

om

N u c l e a r - 3 4%

* *

- 30

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Hydro - 9%

Total Renewable -10%

*

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Electricity Generation

N u c le a r - 3 4 %

*

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Total Fos sil Fu

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Harvesting the sunshine in Scotland

Kay Paton t: 01387 263066 e: kay.paton@smithsgore.co.uk The idea of farmers in Scotland being able to harvest sunshine seems like an oxymoron - however there is evidence of growing momentum for medium to large scale solar arrays north of the border as a result of developing technologies that can cope with lower levels of light.

As farm and estate profits continue to get squeezed and with potentially widespread reductions in support payments for farmers via CAP reform looming, opportunities for diversifying income streams become ever important. Whilst on-farm renewable technology usually conjures the image of small scale turbines or micro hydro-electric schemes, solar provides farmers lacking the natural resources (or capital) to harness wind and water power with a third option.

Farms and estates can provide excellent hosts for both ground mounted and roof mounted arrays of solar photo voltaic panels (SPV), particularly around coastal areas in the east and south/ south west of Scotland where irradiation levels (ie. exposure to sunlight) exceed those elsewhere, and developers are willing to pay significant sums to rent suitable sites.

Smiths Gore has been active in working with developers, identifying and securing planning consent on suitable sites up to 250 acres throughout Scotland with solar development potential. As with all renewable technologies, grid connection and capacity are crucial to a site’s prospects, and many farms already have a suitable link to the grid into which new connections can be made.

Sites should typically be south, south east or south west facing, and whilst it is important from a planning perspective to have some natural screening from surrounding countryside, there should not be excessive shading from trees.

Brownfield sites such as former airfields or factories provide excellent potential due to their vast flat, less visible nature,

but greenfield agricultural sites are not out of the question as positioning of the panels allows grazing (by sheep) to continue as normal beneath them.

A Government announcement on 13 May has the potential to restrict larger ground-mounted schemes in excess of 5MW (or >25 acres) by changing the basis of subsidy support from Renewable Obligation Certificates (ROCs) to Contracts for Difference (CfD) from 1 April 2015. CfD provides greater uncertainty for the larger scale operators as revenue (ie. sale price of the electricity) is not guaranteed prior to their entering the preparatory and planning process which can be lengthy and with potentially high delivery costs. It is anticipated that this may remove many smaller developers and speculators from the market.

However roof-top arrays still find favour under the new rules and so for those landowners with modern developed south facing steadings, roof mounting panels can provide vast areas of frontage already at the optimal angle for capturing sunlight. Retro-fitting of solar panels should however only be considered after the structural integrity of the building has been confirmed by a qualified engineer.

Whilst SPV technology on this scale has been slow to spread here, the Smiths Gore planning team based in Edinburgh has quickly drawn from the experiences of our offices in the south of England where such developments have reached saturation point. National and local planning policies in Scotland have not quite kept up with this type of development. However, as SPV panels have no moving parts, limited visual impact and low level siting, they provide a relatively benign development in comparison with other renewable technologies.

By consulting closely with local planning through the pre-application screening processes, it is also possible to overcome the need for Environmental Impact Assessments, so saving considerable time and expense in the development process.

Community Heating Systems and new residential developments Tara Cowley t: 0131 344 0888 e: tara.cowley@smithsgore.co.uk As a result of over-dependence on fossil fuels for heat and power, there’s a growing global demand for sustainable energy sources to help tackle carbon emissions and progress the climate change agenda. In Scotland heat accounted for 44% of all energy usage in 2011, with natural gas currently providing 70% of all heat consumption.

In its ‘Routemap for Renewable Energy’, the Scottish Government established ambitious targets to generate the equivalent of 100% of Scotland’s electricity demand and 11% of Scotland’s heat demand to be supplied from renewable sources by 2020. Scotland’s National Planning Framework 3 (NPF3) and new Scottish Planning Policy (SPP) now include a principal policy on ‘Sustainability and Planning’, and presumption in favour of sustainable development is advocated by the SPP. As an alternative to gas and oil, community heating systems (or district heating schemes) are recognised as a way to maximise use of a central heat source. They use a centralised boiler, delivering heat as hot water or steam to properties through a pipe network. Using a range of renewable fuels (biomass, waste and geothermals), heat systems based on local resources can create economic opportunities as well as reducing household energy bills and tackling fuel poverty.

A number of successful residential district heating schemes exist in Scotland but tend to be small/medium scale: •

Kintore, Inverurie

•

Craigie Works, Dundee

•

Strathallan Campus

•

Balgray Estate, Lockerbie

•

Foulis Estate, Ross-shire

Larger projects, such as Lerwick DHS, the Commonwealth Games Athletes’ Village and Pulteneytown, Caithness tend to be owned and managed by commercial

operators, community organisations or the public sector.

New housing and clusters of old buildings provide opportunities for estate diversification using resources already available via local production, including wood and crops, as a fuel source.

The main planning issues tend to focus on the design and installation of the centralised boiler and planning permission is required for the whole system, including elements that lie underground. Generally, permitted development rights don’t apply to district heating schemes and whereas most conventional pipelines are installed by statutory undertakers, like national utilities providers, those for district heating systems will be installed and operated by organisations not benefitting from concessions afforded to statutory utilities providers.

There can also be financial barriers to district heating – start-up costs are high and commercial borrowing can be expensive and difficult for private developers and landowners. The projects have long lifetimes, often up to 50 years, bringing associated maintenance and upgrade requirements. Capital costs are split into the construction of the heating station and the costs of the distribution network.

Local Authorities use ‘heat mapping’ to identify areas of high heat demand and supply. Heat maps show links between planned residential developments and existing or planned heat sources and assist landowners, developers and communities to secure integration of heat networks and associated energy centres, for example schools and hospitals.

While heat mapping can identify opportunities for heating schemes in residential developments, such schemes should be designed into new developments from the outset; retrofitting can be costly and involve excavating large surface areas to accommodate pipe-laying. Where possible, developments should include future proofing of design where connection to a district heating system is not imminent but possible in the future.

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What value renewable energy projects?

Richard Thompson t: 0131 344 0888 e: richard.thompson@smithsgore.co.uk Since the Energy Act 2008 introduced Feed-in Tariffs (FiTs) property owners, large and small, have become involved in the generation of electricity and heat, whether by a simple PV panel installation on the roof of their property, or in more complicated and expensive hydro, PV, wind, biomass or anaerobic digestion projects. In addition to direct investment there is also significant involvement through ‘option and lease’ agreements, some of which are yet to mature.

Whilst some such ventures may be for esoteric or environmental reasons, or possibly out of a desire to help Government hit its climate change target, most are usually pursued to boost income or reduce costs.

Renewable schemes are becoming more prevalent and complex as an asset class and need to be valued, for a number of reasons - loan finance, development appraisal, taxation (Inheritance Tax, Capital Gains Tax, Rating), sale or purchase, asset distribution, compensation and so on. The skills to give such valuations are developing but the demands on the valuer are great as the sector becomes increasingly complex.

There are important considerations for valuing a renewables scheme. The valuer must understand the reason for the valuation and, as a consequence, the most appropriate method of valuation, for example: discounted cash flow (DCF); investment; profits; comparable; residual or depreciated replacement cost (DRC). All methods have their place, and expertise is required in identifying which is right to use. The market has not developed sufficiently to rely on ‘comparables’, and as the factors that drive valuation of renewables assets tend to be very site specific then this method is possibly of limited value.

The valuation of any renewables project will require a good understanding of the technology, its life expectancy, support structure, and crucially the local site data; a valuation must take into account, for example with wind, how the turbine will work in the relevant wind regime; whether it will secure planning consent and on what terms; can it be connected to the grid, at what cost and when? The valuer must identify the project drivers (flow rate/wind regime/fuel supply chain issues) and more. These issues are crucial to identifying the risks to the project. Will support payments continue? How much energy will be generated? How vulnerable is the project to a dry summer!?

The key to valuing most projects is likely to be certainty and level of income, which currently is very support-led. For example, demand for PV sites dropped dramatically with changes in the Feed-in Tariff level in 2011.

The UK Government’s Energy Market Review, with the stated aim of creating a secure and certain energy supply at its core, will see Renewable Obligation Certificates (ROCs) replaced

by Contracts for Difference (CfDs), and for established technologies these will have to be bid for. Expected levels of support have not yet been identified beyond 2019 – and the period of support may only be 15 years although the working life of most technologies and leases will be in excess of this.

These changes will impact on valuations and a detailed knowledge of them and their effects is essential.

Valuing renewable energy projects is complex and often requires close co-operation between Smiths Gore’s specialist teams (Valuations, Renewable Energy and Planning).

The value is often in the detail!

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Hot tip – harnessing energy from landfill

Faye Gonzalez, t: 01343 823000 e: faye.gonzalez@smithsgore.co.uk Traditionally the UK has relied on landfill as the principal means of waste disposal and, whilst this is diminishing with the focus on recycling waste and the requirements to comply with the EU Landfill Directive, landfill remains an important means of dealing with our domestic and commercial waste.

Waste has always been a conundrum for urban society, pressures from waste have increased with the rise of consumerism over the past two decades, and whilst an unpopular choice for many, landfill remains a reality. 3.4 million tonnes of municipal solid waste were disposed of in Scotland last year, with 2.3 million tonnes being sent to landfill, 1 million tonnes being recycled and the remainder incinerated.

Many of today’s modern landfill sites however provide sources of energy production, and landfill gas, which is typically a mix of carbon monoxide and 40 – 60% methane, and are now being used to generate electricity and heat. This serves the dual purpose of both reducing methane emissions, which were traditionally dealt with via flaring, and producing energy.

Indeed, the waste management sector is the single largest generator of renewable energy in the UK producing one quarter of all of Britain’s renewable energy.

A range of technologies are available for recovering energy from waste; wells and a series of pipes are installed in the waste matter and blow units and pumps are used to extract the gas to a central facility and a generator. Because landfill sites are situated away from human activity, the heat element can rarely be used. However the Lochhead landfill site near Dunfermline captures waste heat which is used to provide heating to public buildings and homes in the town.

Landfill sites, whilst an unpopular concept, are now constructed and operated under strict technical standards regulated by SEPA; the Scottish Government has estimated that the 2 million tonnes of food waste produced annually in Scotland could be used to produce electricity to power a city the size of Dundee.

On a site operating in Moray on an estate managed by the Smiths Gore Fochabers office, the gas generated by the break down of organic waste materials such as food and paper at the Dallachy site is collected and used to power electricity generators, feeding into the National Grid. It is estimated that the site generates enough electricity to power more than 1,000 homes.

Opportunities also exist to investigate methane capture from closed and inactive landfill sites in a method commonly termed ‘landfill mining’.

Recovering energy from waste that otherwise cannot sensibly or practically be recycled is a component of a well-balanced energy mix. In Denmark recycling rates are exceptionally high

by European standards, yet 16 per cent of the population’s electricity and heat is derived from energy from waste, demonstrating that both recycling to reduce waste and better harnessing of energy from the remaining waste can create a win/win situation.

Subsidies are available to support energy from landfill and the RHI (Renewable Heat Incentive) will be available on biogas production, subject to state aid approval, to facilitate a further income stream.

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Housing, energy efficiency and reducing heating bills

Henry Grant t: 0131 344 0888 e: henry.grant@smithsgore.co.uk

Callum Rae t: 01387 263066 e: callum.rae@smithsgore.co.uk

When considering energy efficiency and renewable technology for any property, whether new build or refurbishment of an existing building, it’s important to consider each case on its own merits to ensure that the measures adopted are the best suited in terms of structure and lifestyle. A first step should be to see how you can reduce energy demand, and then look at cheaper alternative heating systems than traditional oil boilers.

Insulation makes a significant difference to a building’s energy performance. Also, special consideration must be given to ventilation for buildings that pre-date 1982. Letting in cold outside air can seem counterintuitive but the risk of condensation forming in walls is a no-no for any landlord. Good insulation installers always work to ‘insulate tight, ventilate right’. However, wall insulation in older properties can often only be economical during a renovation.

Loft insulation is often the best value for money measure. The Energy Savings Trust says loft insulation in a ‘typical’ detached house will cost £395 and result in an annual saving of up to £250. It’s available in rolls, ideal for regular spaces and in granulated form that can be poured into irregular areas; both should not be applied sparingly given the returns over time that good insulation will provide. Suitable ventilation above the insulation is important.

A condensing boiler costing £2000 - £3000 according to the Energy Savings Trust will save £490 a year for a ‘typical’ detached house. However, this is a large investment, especially where multiple properties are being considered. In this situation possibly consider an alternative fuel and, as of this April and the launch of the domestic Renewable Heat Incentive (RHI), the Government will pay you to choose this route.

The domestic RHI pays for every unit of heat produced from solar thermal, ground or air source heat pumps and biomass boilers for seven years. The challenge is to get the right system for the property.

Commercial biomass gained much popularity last year and is an excellent solution for those with the space for a hopper, accumulator tank and boiler roughly the space taken up by a small car for a domestic installation.

Ground source heat pumps can be four times as efficient as a conventional space heater and are virtually invisible once the work is done and are best suited to underfloor heating systems.

Solar thermal won’t cover your entire heating demand, but can make a significant impact. Installation is best on south facing, unshaded roofs.

The panels only need electricity and sunlight to operate.

An open fire is popular in traditional buildings, but a modern stove is three times more efficient. These don’t qualify for subsidy but can make a significant difference to the heating bill.

From Spring 2015 the Scottish Government is expected to announce its plans for improving housing stock energy efficiency.

Each property has its own challenges when trying to save money on energy bills. You should do what makes economic sense for your property or properties now, as future legislation may prevent you from receiving a rent from your property assets if nothing is done. Energy efficiency will save money for your own home and increase the attractiveness of let properties to potential tenants.

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Heating Hopetoun Thomas McMillan t: 0131 344 0888 e: thomas.mcmillan@smithsgore.co.uk Ahead of the Non-Domestic Renewable Heat Incentive (RHI) launch in 2011, Hopetoun Renewables Ltd, a renewable energy company based at Hopetoun Estate, saw an opportunity to modernise the heating system to various parts of Hopetoun House, a new estate office and estate cottages.

Most of Hopetoun House was heated by a 50 year old oil-fired cast iron boiler, with eight other boilers heating the wings of the house and other properties. They consumed about ÂŁ85,000 per annum in oil and LPG. As an alternative, an 800kW biomass boiler was identified providing over 1 Gigawatt (GW) of heat per annum, and a top up/back up 400kW oil boiler to provide additional heat in extreme weather events and a heat base load if the biomass boiler was to fail.

Cost predictions were crucial to be certain that biomass was a sound investment before incurring design/ planning costs, and projections indicated a total cost of ÂŁ1M. Smiths Gore provided project management support to the estate from concept to construction with initial work selecting a mechanical and electrical engineering firm for the design of a robust biomass system serving multiple properties with listed building/ national heritage status. Elders LLP was selected.

There was very limited opportunity to locate the boiler within the main property or its curtilage and ultimately it was located at the old Home Farm where construction work coincidentally brought to light an old kiln. Complications included the site falling within the curtilage of a Grade A listed former granary being developed into new estate offices concurrently with the new biomass scheme. This required careful navigation through the planning process, undertaken by Smiths Gore, and also coordination between two adjoining sites with two different contractors.

After securing planning consent, building warrants, mitigating impacts on bats and badgers, and managing asbestos and archaeological issues, completion cost was just 2.6 per cent over budget. Importantly within the budget was management of a competitive tendering exercise involving bids from five contractors with Taylor and Fraser Ltd awarded the contract not just on the basis of price but also the ability to complete the project within a tight timeframe. This was of particular importance to the Hopetoun House Preservation Trust, the charitable trust that owns and manages Hopetoun House, to cause minimal disturbance to visitors and hospitality clients.

The boiler supplies a number of customers, including Hopetoun House, tenants in office and conservation studios, the estate office and four residential tenants. Supply agreements were put in place for woodchip, and heat purchase agreements agreed with the different customers.

Smiths Gore also developed the woodland management plan for the estate to assess whether sufficient timber would be available on the estate to supply the system which requires some 420 tonnes of woodchip yearly or about 770 tonnes of green standing timber. The timber is seasoned for about 18 months (depending on weather conditions, local setting and species type) until moisture content of 30 per cent is achieved and is then chipped into a 1,500m3 store using a hired commercial chipper.

After a six month construction period the project was commissioned in March 2013 and any initial teething problems have been resolved. Income is in line with projections, although operating costs are above initial projections due to unexpected heat loss. As a result the financial results have been less than projected; however this still provides a reasonable return on capital for Hopetoun Renewables Ltd whilst providing savings on fuel cost and longterm energy price security for the customers.

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‘Necessity is the mother of invention’ Thomas Stanley t: 01620 828960 e: thomas.stanley@smithsgore.co.uk In suggesting ‘embodied energy’ as the theme of this article I was thinking of the labour expended by man in the construction of our historic built heritage - and subsequently lost if these buildings are destroyed.

However, in broad terms, just 15 per cent of the energy consumed by a building during its life cycle is allocated to construction; the remaining 85 per cent is in operating costs (heat, light etc) and in demolition. De facto, the element to get right is its operation - a result of the method of construction.

Traditional buildings are poor performers from an energy efficiency perspective, but the question of the place of traditional but unremarkable properties in any portfolio is still valid. An environmentalist I asked said the issue was that fossil fuels were too cheap, traditional labour too expensive, and the scales almost always tip in favour of fossil fuels.

We can probably all relate to that - energy is too cheap as anyone who takes a short car journey instead of walking the same distance must concur. But given the obvious ‘tests’ you could be forgiven for thinking otherwise. Take the Ukraine crisis. From outbreak to mid April the FTSE 100 dropped from 6850 to 6550, or about 5%. Is that an adequate reflection of possibly the greatest confrontation since the Cold War and a threat to the present energy supply to Western Europe? So do we really value our energy supplies appropriately?

A hedge fund manager I asked gave me little consolation.

His anxieties were short term. He understood the renewables sector and thought the twin blockages to growth for renewables were an inability to store surplus energy created and concern about Governments reneging on their

feed-in tariff commitments. But Government default isn’t inconceivable. Still, how does that risk measure up against exposure to the full, open market?

I drafted this on a Blackberry. Five years ago Blackberry manufacturer Research in Motion (RIM) was all conquering, but now its share price is a fraction of its former level. By comparison, invest in renewables and the feed-in tariff provides a Government backed bond for 25 years. That seems a sound bet to me.

Are our assumptions about inflation in the cost of energy too conservative, and should we rely on current market pricing to guide our future business decisions? What would happen if energy was 10 times - or 100 times – its current price, and what would that mean for your business?

Scotland and the UK have come a long way in a few years.

An academic paper from 2006 asserted that Scotland’s target of 40 per cent of its energy coming from renewable sources by 2020 was ‘feasible’. This target was achieved, if fleetingly, at the end of 2013. Now, that’s exhilarating - the pace of development in the renewables sector has been considerable and is only likely to quicken.

To return to the theme of embodied energy, a wind turbine generates the equivalent amount of energy used in its construction within about 8 months. Thereafter in energy terms it’s all positive. That is a good return. In an unstable world the pressure will be on finding home grown solutions for sourcing energy and the attraction of renewables remains strong. If the maths doesn't currently stack up quite as we’d like right now then look ahead for, as we know, necessity is the mother of invention.

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Alastair deighton joins smiths gore in perth

As a former officer in the Royal Navy and Royal Naval Reserve it’s fitting to say that Alastair Deighton has taken over the helm of Smiths Gore’s Perth office.

Alastair moves to Scotland from the firm’s Taunton office. He joined Smiths Gore in 2005 and was promoted to Partner in 2012.

His career with Smiths Gore has seen him engaged in the full breadth of land management activity, from management for large institutional clients including The Crown Estate, the Highways Agency and Ministry of Defence, and varied private clients including the Langford Court & Coombe Lodge Estate and the Sudbury Estate, to ad hoc work including rent reviews, land and residential sales and strategic advice.

Now his move to Perth sees him heading up a skilled team centred on land and estate management, farming and forestry with the ambition to grow that operation and achieve greater penetration for the firm through Perthshire and beyond.

He says:

“This is the ideal place for this business to be. From Perth in every direction is rural land. It’s a dynamic area to be in right now with a whole range of influencing factors, not least the political agenda - but also reform of the CAP, the ongoing landlord and tenant debate, and rural businesses exploring new income streams such as renewables, housing or tourism. There is a lot happening, not least with the economy picking up.

“In particular we are seeing moves into contract farming.

In total this office has 24 contract farming agreements over 15 landholdings, and we believe that an increasing number of owners may look at the contract farming option as a way forward.

“It’s a steep growth curve that we’re on,” he says, “but I’m convinced that we have both the skills and the location to expand over the course of the next two years.”

Alastair Deighton e: alastair.deighton@smithsgore.co.uk t: 01738 479180

People Kay Paton has been appointed a Partner.

Kay joined the Smiths Gore Dumfries office in 2004 from University, and remains based in Dumfries. Her responsibilities include the day to day running and consultancy for a number of rural estates in south west Scotland. She is also an RICS Registered Valuer, is the firm’s Head of Valuations in Scotland, and also Head of Telecoms firm wide.

Thomas Stanley in the firm’s Haddington office has been appointed a Partner.

Thomas moved to Scotland from West Sussex in 2008. His responsibilities include looking after a number of rural estates throughout Lothian and the Borders, coupled with other professional work including valuations and rent reviews. He lives at Garvald, East Lothian.

Rob Murphy has been appointed an Associate. Rob, who is a member of the firm’s Planning Team and based in the Edinburgh office, has worked in both the public and private sectors in planning consultancy and for a number of local authorities.

Caroline Webster, a Chartered Building Surveyor with more than 20 years experience, has joined the firm. Based in the Fochabers office she provides building surveying and architectural services to new and existing clients.

Adam Baxendine has joined the Renewable Energy Team as Renewable Energy Consultant. Adam is a qualified Rural Surveyor who moved into forestry, and latterly the biomass/ bioenergy sector. He is based in Edinburgh.

Henry Grant joined Smiths Gore in February 2014 as a Renewable Energy Consultant. He is facilitating the three year Renewable Development Initiative on behalf of NFU Scotland, and providing technical support and financial modeling for renewable energy projects in which the firm is engaged.

THE Scottish NETWORK Berwick office 8 Castlegate Berwick-upon-Tweed TD15 1JS t: 01289 333030 e: berwick@ smithsgore.co.uk

Dumfries office 28 Castle Street Dumfries DG1 1DG t: 01387 263066 e: dumfries@ smithsgore.co.uk

Edinburgh office 22 Young Street Edinburgh EH2 4JB t: 0131 344 0888 e: edinburgh@ smithsgore.co.uk

Fochabers office 7 The Square Fochabers IV32 7DG t: 01343 823000 e: fochabers@ smithsgore.co.uk

Haddington office 28 Sidegate Haddington EH41 4BU t: 01620 828960 e: haddington@ smithsgore.co.uk

Perth office 13 Marshall Place Perth PH2 8AH t: 01738 479180 e: perth@ smithsgore.co.uk