Section 6: Generating and Selling Electricity- Community Ownership
6.1 Strengthening Communities through Renewable Energy Projects
6.2 Community Consultation
6.3 Developing a Community Energy Project
6.4 Resources and Feasibility Assessment
6.5 Finalising the Legal Structure for Managing the Project
6.6 Project Design
6.7 Planning Permission
6.8 Environmental Assessment
6.9 Licensing of Hydro Projects
6.10 Grid Connections
6.11 Project Costing and Financial Planning
6.12 Negotiating the Supply of a Turbine
6.13 Financing a Revenue Generating Project
6.14 Construction of Project
This section focuses on projects developed and owned by community organisations.
6.1 Strengthening communities through renewable energy projects
There are approximately 40 community groups across Scotland currently taking forward renewable energy projects which are seen as routes to strengthening communities in a number of ways:
6.2 Community consultation
Community consultation is essential when considering a community developed and owned large renewable generation project. Please see section 8, Organisation, consultation and development planning, for further detail on community consultation. Local support will be essential to gain the commitment of volunteer effort and resources to progress such a project. This stage is also crucial in convincing funders that the community really wants the project. If the project is to benefit the community, the community needs to have a say in how it progresses. The community will also therefore 'own' the project in more than just the legal sense.
There are three main initial areas which should be discussed openly throughout the community.
1. Is there a real need across your community for an energy generation project and / or a long -term source of revenue?
It is essential to have a clear idea of the benefits of a project for the community and why it is needed - if not it may be difficult to keep volunteer effort on board as it meets difficult challenges. Insufficient local support can lead to opposition to the project.
Social needs that require financing might include, improvements in energy efficiency in local housing to reduce fuel poverty, funds for a community centre, investment in training facilities, to employ staff to take forward community projects or facilities for young people.
Energy needs might be related to the community's current fossil fuel demand and high carbon footprint of energy consumption e.g. from inefficient diesel generators or as a result of being run off mains gas. They may also be directly related to current local high energy demands - e.g. fish farms.
Consulting the community is essential in developing a strategy for the future of the community that is based on local needs and priorities and can be used to guide decisions around the investment of income generated from a project.
2. Does your group have the commitment and capacity to take forward a large and complex project?
Before embarking on a project designed to generate revenue from renewable energy, it is essential to be certain that there is a high level of commitment from the group considering it. These projects can be time consuming and complex. They are not projects that can easily be taken forward by one or two people alone. A number of willing volunteers in for the long haul will be required. In the first instance a community development trust, community council or community association can be the body which can serve to facilitate discussions about a renewable energy project.
For more information on development trusts, how to set one up or to find out if there is already one in the area, visit www.dtascot.org.uk. Also, further information on community councils can be gained from the Association of Scottish Community Councils at www.ascc.org.uk.
Large projects can take several years to reach completion and can face technical, regulatory and financial challenges. A community working on such projects will therefore generally require setting up a group dedicated to the renewable energy project (see section 8) which has input from well organised, resourceful and determined individuals. It is important to ensure that participation in such a group can be open to all community members. If there are members of the community that are willing to volunteer and have project development, technical, engineering, financial/accountancy, or legal skills, these could be very valuable to a community project. However, communities should be clear that all the work necessary to deliver a project need not be through volunteer effort. Where there are skill shortages e.g. technology, finance, legal etc, industry professional advice should be bought in. Early recognition of this is essential to ensure provision is made in project budgets and funding applications.
It should be recognised that for all communities the project development process can lead to a massive up-skilling of a community group and give it the confidence to tackle further, even more ambitious projects for the benefit of its community.
For communities that do not have the capacity or desire to take forward a wholly community owned development there may be opportunities to liaise and partner with commercial and professional organisations developing renewable projects in their locality. This is covered in Section 7.
3. What viable renewable energy resources do you have available within your locality?
Wind or hydro power offer the most viable opportunities for generating and selling electricity as the technologies involved are well established. If there is an extensive available source of wood nearby, a biomass-based district heating system may be possible, or perhaps even a combined heat and power plant. This latter option is likely to be quite complex owing to the pipe network infrastructure required although it may be an option if the community has a high density of housing or there are a number of nearby heat and power demands - e.g. school, sports centre, swimming pool, in close proximity (see section 4).
It may be that there is good idea of what the best resources are in the community. On the other hand a resource assessment to identify the best options for the community may need to be undertaken.
For a good example of a renewable energy resources assessment, see the Sleat Community Trust - Renewable Energy Assessment at Sleat Community Trust - Renewable Energy Assessment on the Community Energy Scotland website at http://www.communityenergyscotland.org.uk/userfiles/file/Feasibility%20studies/Sleat%20Communty%20Trust%20Renewable%20Energy%20Report.pdf.
The remainder of this section will deal with wind and hydro power projects.
6.3 Developing a community energy project
6.3.1 Wind energy basics
Please see Section 3.3 on wind energy for very basic information on how wind turbines work. More information is available on the Scottish Renewables website, the RenewableUK (formerly BWEA) website and a detailed guide is available on the Danish Wind Energy website.
www.scottishrenewables.com/Default.aspx?DocumentID=6ebf031d-d976-4f86-9302-ac8375473acd
www.bwea.com
www.windpower.org/en/knowledge/guided_tour.html
The company Energy 4 All has a web resource for any community which would like to assess the potential for developing a community wind farm at www.energysteps.coop. However, the site requires users to register with Energy 4 All and asks for detailed information on projects and documents, although this is optional.
The energy content of the wind is very dependent on the wind speed - the energy content is related to the cube of the wind speed.
So if the wind speed doubles, the energy content of the wind increases by eight ( i.e. 2x2x2=8). The energy is captured by the rotor blades of the turbine, and the greater the swept area, the greater the amount of energy captured.
Swept area is proportional to (rotor diameter) 2
By doubling the rotor diameter, the area is four times larger (22=4) and the power output from the turbine is also increased four times.
For these simple reasons, larger wind turbines are more cost effective as they capture more energy, generate more power and, therefore, income. Care should be taken when analysing sites for turbine location, as nearby large buildings, trees, forests and topographical features (mountains, hills, cliffs etc) can create wind shelter and turbulence in the sites wind flow and impact on turbine production and technical viability. Specific wind characteristics on site (annual average speed and turbulence) require that turbines are designed to the appropriate International Electro-technical Commission (IEC) standard. These measure and assess power quality characteristics of wind turbines can be found at the link below.
www.iec.ch/online_news/etech/arch_2008/etech_0908/store_1.htm
The economic viability of a project will therefore depend on the average wind speed at the site, the size of turbine to be installed and the costs of getting the turbine(s) installed and operational. Large turbines can sometimes be problematic if access to sites is difficult or ferry transport of turbine parts is restrictive in terms of size and weight and port availability.
6.3.2 Wind turbine technology
Most large scale turbines in use today are based on the horizontal axis turbine and there are many such turbines installed across Scotland. Current turbine sizes that could be used in a community project generally range from 850kW to 3 MW with rotor diameters that span from 44m - 100m.
Most turbines available on the market today are geared turbines, with gearboxes and generators located at the top of the turbine. A few manufacturers produce turbines that operate by direct drive, and it would seem that this type of machine is gaining in popularity and is now being investigated by other manufacturers currently producing geared turbines. The advantages of a direct drive machine is that the generator is gearless, with less moving parts so maintenance costs should be lower. However a gear-less generator will therefore need to be quite large, which increases the weight of such components and potentially the capital cost. More detail on turbine manufacturers is available on the British Wind Energy Association's website and company directory
http://www.bwea.com/members/CompanyDirectory.asp.
6.3.3 Hydropower basics
Hydro electricity involves the conversion of potential energy stored in water held at a height to kinetic energy to drive a mechanical shaft which then drives an electric generator.
There is almost 1400MW of installed Hydro capacity in Scotland. The first large hydro-electric scheme in Scotland was built in the 1890s. The establishment of the North of Scotland Hydro-Electric Board in 1943 led to a succession of new schemes in the following 30 years. Scottish and Southern Electricity are currently just completing a 100 MW project at Glendoe beside Loch Ness.
A recent report by the Forum for Renewable Development in Scotland (FREDS, a government chaired body with industry representatives), has been published about the opportunity for new hydro in Scotland which is available at www.scotland.gov.uk/Resource/Doc/917/0064958.pdf.
This report identified that there is about 650MW of unexploited hydro resource in Scotland with a potential generation of 2.77TWh annually. Following on from the study, further research into potential job creation from micro-hydro schemes has been published at
www.scotland.gov.uk/Publications/2010/01/19141527/0.
Interest in smaller hydro power plants is growing and some communities, estates, and businesses now have operating systems or are looking to re-instate old hydropower schemes. For community groups hydro offers a great opportunity to develop a resource that is local and has a long operating life (typically 50 years+). Other benefits of hydro are that it is a highly efficient technology, it is a predictable resource with historical rainfall data available, generally has a high capacity figure of about 50% ( i.e. water is flowing for a good proportion of the year) and has a conversion efficiency rate of 70%-90% as typical.
The size of any installation's potential power output in kW is directly proportional to;
- Volume flow rate - the volume of water flowing through the turbine per second - measured in litres/second, or cubic metres/second
- Head - The vertical distance between the water level at the intake point and where the water passes through the turbine. Hydro projects can be classified as
- Low head - up to 10m
- Medium head - 10-50m and
- High head - greater than 50m
The annual actual energy output (kWh) depends on how much water is available over the course of the year - this will vary with rainfall.
Potential hydro project river
Photo from CES library
6.3.4 Hydropower technology
There are four main types of hydropower installation: run of river, storage, pump-storage, and catchment transfer.
The major components of any hydro installation are:
- The water intake system; This can be a system of weirs, dams and screens that extract the water from its normal flow.
- The delivery system; The pipes that deliver water from the intake system to the power house and back to the river
- Power Generation system; This is the pipe work, turbine or drive shaft, electrical generator, cabling and building; i.e. the infrastructure that converts the potential energy into kinetic energy to generate electricity.
- Tail Race; This is the channel that takes water, once it has left the turbine, back to the river.
Turbines are generally classed as low head or high head. Low head sites typically require turbines that are faster. Turbines are also classified by mode of operation - either impulse or reaction turbines.
- An impulse turbine operates in air driven by a jet of water, and a Kaplan turbine is a good example of a low head high volume impulse turbine.
- The rotor of a reaction turbine is fully immersed in water enclosed in a pressurised casing, and a Pelton turbine is a good example of a reaction turbine, more suited to high head sites. A crossflow turbine is a reaction turbine better suited to a low head site.
- An alternative low head turbine is the Archimedes Screw turbine - which is seen by some as a turbine with lower environmental and fish risks and lower costs. This turbine is relatively new to the UK - but it has been installed a few places and there is more information here: http://www.mannpower-hydro.co.uk/case_studies.htm
- For further information on turbine types and manufacturers please see the British Hydropower Association website at http://www.british-hydro.org
Archimedes screw hydro turbine
Photo from CES library
6.4 Resource and feasibility assessment
A good feasibility study should assess the viability of a project in terms of initial resource assessment, energy production, site location, environmental constraints, grid connection issues such as proximity and ability to export, likely infrastructure costs and the likelihood of securing planning consent. It should enable a community to make a considered judgement on whether it is worth taking the project any further. It is far better to decide not to proceed with a project at a fairly early stage than find after considerable time and expense that the project cannot go ahead. There may be grants available to help with the cost of this work - please see the finance section 9 for further detail. If the conclusion of the study is that a project is feasible, detailed development work can begin.
In addition to resource monitoring it may be advisable to start discussions with some potential financial lenders - e.g. banks as they may have specific requirements in relation to anemometry, turbine suppliers, and consultants used for resource assessments. Information on their requirements at an early stage can help avoid extra work further into a project's development.
For wind and hydro sites there will also need to be a thorough assessment of the available resource and/or a resource monitoring regime so that an estimated annual production figure can be determined. This will help to predict annual income and will be required for securing project finance.
6.4.1 Wind specific assessments
A wind feasibility study should ideally consider a number of site locations and assess each with regard to estimated wind speed and turbulence, different turbine types at each site, likely infrastructure costs ( e.g. access track), environmental and other constraints ( e.g. designated areas, birds, landscape, archaeology, local airport radar), grid connection options, accessibility ( e.g. for delivery of a wind turbine ). It is highly likely that specialist skills will be needed to prepare this study and there are a number of consultancies that specialise in this work. Please refer to the Scottish Renewables website and member directory for consultancies operating in Scotland www.scottishrenewables.com. A good assessment will identify the best sites available to a community in terms of economic and environmental viability, and affordability on a community scale. Ideally the consultant involved will be able to present the findings to an open community meeting so that all issues can be discussed and the community can make an informed decision on whether they proceed to detailed design and if so which site they wish to concentrate on.
See the South Uist Feasibility Study
6.4.2 Wind resource monitoring
A full wind energy yield analysis will need to be conducted if a project is seeking to source project construction finance from commercial banks. A good energy yield analysis will prove to financial lenders that the project will be a viable, income generating investment. Turbine suppliers require differing periods of wind monitoring but periods will generally be within a range of 6-18 months. This is then correlated with local met office data to look at longer term yields. Typically an energy yield analysis will provide a prediction of energy generated over a ten year period. This information will also be required by a turbine supplier to ensure that their turbine can meet the demands of the wind regime at the site.
Turbines are certified to certain wind speeds and turbulence standards. Class 1A IEC (International Electrotechnical Commission is the certifying body) is the standard for high wind speed sites, which are common across Scotland, and in some cases a special certification may be required if a site has a higher level of turbulence or wind speed than the standard Class 1A specification.
To gather this information will require installation of an industry standard meteorological mast and anemometry equipment. The equipment will need to be set up correctly on the met mast so that it is in accordance with international standards (Recommended practices for wind turbine testing: 11 - Wind speed measurement and use of cup anemometry, International Energy agency, 1999). Once the data has been collected it will have to be analysed and verified by an independent specialist - approved by the financial institution from which the community wishes to gain project finance. Please see the Scottish Renewables, and BWEA websites for a list of companies that can provide this service.
Communities should be aware that second hand meteorological masts and equipment may be available and also that meteorological masts can be sold on once wind monitoring is complete.
6.4.3 Hydro specific assessments
A Hydropower feasibility study should examine the site location, assess the available resource, estimate potential energy production, investigate turbine and infrastructure options, and identify possible environmental and other planning constraints, grid connection issues, and likely infrastructure costs. Again it is likely that specialist skills will be needed for these assessments. Please refer to the Scottish Renewables and British Hydropower Association's websites for further information
www.scottishrenewables.com
www.british-hydro.org
6.4.4 Hydro resource monitoring
A flow duration curve or hydrograph will need to be established which gives information on the amount of flow on the river over a year. SEPA (Scottish Environment Protection Agency) has many gauging stations across Scotland and to access data on flow duration curves for gauged rivers you should contact the Centre for Ecology and Hydrology at www.ceh.ac.uk with more information available at http://192.171.153.213/data/nrfa/index.html.
Many rivers however will not have gauging and so communities will either need to undertake monitoring of the river or use estimations to create a flow duration curve. The consultancy service at HR Wallingford can provide flow duration curves from modelling and using catchment rainfall information - please see http://www.hydrosolutions.co.uk/lowflows.html . Once the available resource has been assessed it will then be important to ascertain what the overall power potential will be with annual variations in water flow while keeping within environmental restrictions. A portion of flow from a river will need to bypass a turbine scheme so that the ecology of the natural river is maintained. SEPA will give guidance on what this level will need to be. Resource assessment may be best achieved by working with a hydro consultant and physically examining the proposed development to ensure the project would maximise the potential resource and utilise all available geographical features. On the Isle of Eigg initial proposals looked at a 13 KW hydro system but on closer examination of the site it was identified that a system closer to a 100kW could be an option.
For projects that will require finance from commercial lenders a full energy yield analysis will be required that gives an estimate of up to ten years energy production.
6.4.5 Land ownership
Site selection and design is very important when trying to balance between developing an efficient and economic system and maintaining an acceptable environmental impact. Key to any community developing a site is establishing the land ownership and gaining access. If the community owns the land the development sits within this should not cause any problems. If not, then permission and access will have to be gained from the landlord or landlords of the site. Communities using non -community owned land should ensure they agree with the landlord that the community has the exclusive rights to develop the site and that they gain a lease on the site if the project gains planning consent. This would need to be for the lifetime of the project, which could be between 25-50 years dependant on technology. It is important to secure access and further use of the site before planning consent is granted and to include area for crane hard standings, access tracks, pipelines and construction activity. If the project is being developed by a subsidiary of a community trust then it is preferable that the community trust has the lease of land rather than the subsidiary as this allows early control over the project. A sub lease would then be granted to the subsidiary company. Rental rates will need to be negotiated and a professional opinion and market rates should be obtained. It is important in a small community that that this negotiation is seen as open and fair. If the site is leased then the rent could be a fixed fee or vary according to power output of the site.
Wind turbine and turbine blade delivery will require access roads to have sufficient turning circles to allow the required long base trailers to access the site. If this is not already available on the local road network alterations will need to be made and will require agreement with all involved parties.
Way leaves (the right of way over somebody else's property, for which payment is usually made) may also have to be gained to allow access to construct and maintain site, construct cable routes and maintain access tracks. In Scotland it is also important to establish if the land is under tenure, for example crofting tenure. This means that that the tenant has rights in any lease of land. If the land is subject to crofting law the land will need to resumed or need to have a servitude exacted on the tenure to maintain access for the life of the renewable plant. You should refer to the Crofters Commission who has produced guidance on this www.crofterscommission.org.uk .
6.5 Finalising the legal structure for managing the project
Given the scale of a project like this, it is essential to have a proper, legally recognised group structure in place with a high standard of governance (clear responsibilities for making decisions and transparent decision making). This helps to ensure that those undertaking the project are clearly accountable to the community.
To date, all non-profit distributing community owned wind projects in Scotland have been taken forward by wholly owned subsidiaries of the main community development trust or community organisation. In all these cases, the subsidiary company is a company limited by shares, with all the shares in the company held by the parent community body, which appoints its directors. It is a well established non-profit distributing model which helps to ensure (providing there is good governance) that the community body has full control over the subsidiary company and also that the volunteers involved with the project are not personally financially liable.
Where the parent organisation is a charitable organisation it is necessary to establish a non charitable trading subsidiary body if there is a wish is to become involved in non charitable trading (which energy generation is under Scottish charity law).
For more detail on company structures and governance see Section 8, Organisation, consultation and development planning, and the Scottish Council for Voluntary Organisations ( SCVO) website www.scvo.org.uk/information. It may be necessary to gain legal assistance to constitute a group.
6.5.1 Avoiding conflicts of interest
A conflict of interest may arise when someone who is involved in promoting a project also stands to gain from it personally. For example, a member of a community development company may own or lease land where a project might be sited. If a conflict of interest may arise, the person involved should not be involved in any decisions related to their assets or interests. It is essential to have established rules and procedure for such instances so that all decisions are taken in a transparent manner.
6.6 Project Design
The results of the resource and feasibility assessments will drive the design of the project. For planning permission you will need to submit full detail and design of the proposed project. Communities are also advised to develop a business model during project design to ensure that all costs are accounted for and that the project makes financial sense. See
http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1073869162
http://www.scottish-enterprise.com/se-operating-plans-current
For a detailed design of a renewable generation site it is likely a community will need technical assistance to ensure that the site is incorporated into the surrounding area with minimal impact. The feasibility study should provide a lot of the initial information required for design but additional work will be needed to ensure that all impacts are addressed.
6.7 Planning permission
Planning permission will need to be obtained for all large renewable developments. The Scottish Government has published specific policy documents related to renewable energy to guide local authorities on assessing renewable developments (SPP6 Renewable Energy is the most recent policy guide). Please refer to the Scottish Government's planning dept website for further information
www.scotland.gov.uk/Topics/Built-Environment/planning/National-Planning-Policy/themes/renewables.
Currently for wind projects up to 50 MW the planning consent is dealt with at local authority level, above 50MW it is dealt with at Scottish Government level. Planning applications for hydro projects up to 1 MW in size are dealt with by the local authority, for projects over 1MW in size the Scottish Government deals with the planning application.
Planning Advice Note 45 Renewable Energy Technologies deals with Environmental Impact Assessment (EIA) requirements for renewable projects. Initial screening and scoping meetings with the local authority should be sought to ascertain the level of detail required to submit a planning application for the site and development. This note states that if the proposed development is located within a 'sensitive area' or involves the installation of more than 2 turbines; or the hub height of any turbine, or the height of any other structure exceeds 15 metres then the need for an EIA must be considered. The likelihood of significant effects will generally depend upon the scale of the development, and its visual impact and other potential impacts. EIA is more likely to be required for commercial developments of 5 or more turbines, or more than 5 MW of new generating capacity. For hydro projects - if an installation is to be located within a 'sensitive area' ; or designed to produce more than 0.5 MW; or includes a dam where the area of the works exceeds 1 hectare, then the need for EIA must be considered.
In addition to the physical scale of the hydroelectric development, the potential wider impacts on hydrology and ecology should also be considered. The local planning authority will be able to give you definitive guidance on what is required to submit a robust planning application. Regulations for Environmental Impact Assessments are stated within the Environmental Impact Assessment (Scotland) Regulations 1999 - under these a wind farm in a sensitive area, or one that creates a significant impact may require an Environmental Assessment. The advice note is available from www.scotland.gov.uk/Publications/2002/02/pan45/pan-45.
Communities planning a wind turbine project should, where possible, not base a planning submission on one particular turbine type. It is best to submit a planning application that could accommodate a range of turbine heights and rotor diameters, within reason. This allows a community to approach a number of suppliers when it comes to finalising turbine supply and as long as the turbine dimensions fit the consent, new planning permission will not be required. Also, if the switch gear is to be housed externally, ensure provision for this is included in the planning submission. Anemometry can be undertaken under a variation to full planning permission. Communities are advised to engage with statutory consultees at an early stage to ensure good communication and dialogue is established.
Statutory bodies to be consulted for hydro developments |
|---|
SEPA, the local district salmon fisheries board, the Fisheries Electricity Committee (being amalgamated into SEPA), SNH, Scottish Water, Historic Scotland |
Statutory bodies to be consulted for wind developments |
|---|
Scottish Water, SNH, National Air Traffic Services, Civil Aviation Authority, Historic Scotland, SEPA, Ministry of Defence, Health and Safety Executive |
All of these bodies will be consulted by the planning office, but it is good practice for community groups to establish early dialogue with these bodies before the planning application is submitted. In addition, dialogue with RSPB (Royal Society for the Protection of Birds) is recommended for wind projects even thought they are not a statutory body. They can hold detailed ornithological information which may help ascertain bird flight and roosting patterns on the site.
Many planning consent approvals for renewable projects now come with conditions contained in a 'Section 75 Agreement' including:
- Site specific construction method statements
- Decommissioning bond - a financial bond to ensure there is funds available to decommission the windfarm
- Colour and type of paint requirements
- Reinstatement requirements and decommissioning bonds
- Safety light requirements (passing aircraft)
6.8 Environmental Assessment
If an Environmental Assessment ( EA) is required the impacts of a project during construction and operational lifetime will have to be assessed and can include impact assessments on soil, hydrology, wildlife, visual and noise impact, social and economic factors. An Environmental Assessment can be a lengthy and costly exercise dependant on the detail required. If detailed surveys are required the timelines may need to fit in with wildlife breeding seasons which can cause delays to planning application completion. An EA for a wind project can often require detailed visual assessments, sometimes with cumulative assessments considering all other wind farms in the locality. Impact on radar systems and flight paths can also be required, and noise assessments if the turbines are to be located close to housing. Wind development projects are also often requested to undertake bird monitoring surveys to establish potential impacts to birdlife using the site.
For hydro projects there will need to be assessment of the impact on fish life in accordance with regulations under the Electricity Act that generators of electricity are required to, "avoid, so far as possible, causing injury to fisheries or to the stocks of fish in any waters" (Schedule 9 of the Electricity Act 1989). The effect of a hydro-electric scheme on fish depends on: the site, the type of scheme, and the design of its various elements and how they are constructed and operated. The potential effects on fish are from:
- Obstructions in the river; weirs and impounding dams may obstruct passage of fish unless a fish pass is provided.
- Risk from turbines: Screens are normally incorporated into the design of a system so that fish are not able to enter the turbine, and sometimes the tailrace.
- Changes in hydrology: Hydro-electric schemes change the hydrology within the area of the development, and, in cases of catchment transfer, beyond it. These changes include:
- In run of river schemes there can be a large reduction of flow in the river channel between the water intake and the discharge from the generating station. Also an impounding dam of a storage scheme can result in reduced flow. A required residual flow is usually called a 'compensation flow' and SEPA can give guidance on what this should be.
- If a stretch of river is dammed, the resulting reservoir may create a new fishery for trout or other freshwater fish, but may destroy fish spawning grounds or nursery areas. In storage schemes, depending on the pattern of generation, the flow downstream of the power station may fluctuate markedly and this could adversely affect fish or fisheries. The water level in the reservoir may also fluctuate, affecting fish stocks.
- Fish may be adversely affected by pollution arising during the construction and operation of a scheme. Constructors and operators are required to meet strict standards to prevent such pollution occurring.
6.9 Licensing of hydro projects
All hydro projects will also need to be assessed under the Controlled Activities Regulations ( CAR) and authorised as appropriate. Hydropower plants come under the CAR in that they either abstract or impound water from water bodies.
In Scotland there are three levels of authorisation for abstracting and impounding water depending on the level of water abstracted or impounded:
- General Binding Rules ( GBRs)
- registration
- licences
You must comply with General Binding Rules ( GBRs) if you abstract:
- less than 10m 3 of water per day
- less than 150m 3 of water per year from boreholes.
GBRs provide controls for low risk activities. You do not need to contact SEPA, but you must comply with any rules specific to your activity.
You will need to register with SEPA for:
- abstractions between 10m 3 and 50m 3 per day from inland waters such as rivers and lakes
- abstractions of coastal or transitional water ( e.g. estuaries) of more than 10m 3 per day.
Where the environmental risk is higher, then the activity will be authorised using an abstraction licence, allowing for specific controls to be set out for the site.
If you abstract between 50m 3 and 100m 3 per day you will need a simple licence.
If you abstract more than 100m 3 per day you will need a complex licence.
Fees for the various levels of authorisations are available on SEPA's website and community groups should contact their local SEPA office to discuss their hydropower plans. The fees that are levied are based on licence application charges activities and annual subsistence charges. Please refer to the SEPA website for up to date information on fees. The Water Environment (Controlled Activities) (Scotland) Regulations 2005 - A Practical Guide (pdf) is available from http://www.sepa.org.uk/water/regulations.aspx.
6.10 Grid connection
Please refer to Annex 1 for detailed information on obtaining a grid connection for your project. Large renewable energy projects will need to be connected to the grid - either to the local distribution network (below 132kV in Scotland) or to the transmission network (above 132kV), or if there is sufficient demand in the locality a private wire (private grid system) network could be developed for large consumers. Many community projects will be directly connected to their local distribution network operated by the Distribution Network Operator ( DNO) with 100% export of electricity.
Gaining a connection can be a costly process and communities must have as much information and technical detail as possible before requesting a connection. Currently many parts of the Scottish grid infrastructure are at full capacity and connections for new generation can have quite a long lead in time to become operational. It is important to start discussions with the local DNO company early in the development process.
6.11 Project costing and financial planning
It is important to build a realistic picture of the project's costs and incomes as early as possible in the development process. Early negotiation with turbine suppliers, finance lenders can help develop indicative costs which will allow communities to assess the viability of the project early on.
Project costs will arise from:
- Project development and planning consent - environmental surveys, consultancy work, planning report, ancillary costs for travelling to meetings etc
- Advice for, and setting up of, any trading company
- Grid connection costs
- Financing costs - loan repayments, overdraft interest, preference share dividend Section 75 Bond financing, ROC administrative costs, accountancy advice
- Insurance costs - for both during construction and operation
- Turbine and civil infrastructure costs
- Operational costs -
- business rates
- land rental
- administration - staff salaries etc
- non warranty service and maintenance
- warranty
- turbine monitoring - BT lines etc
- contingency
For large scale projects costs are likely to run over a million pounds, e.g. a 900 kW scale single wind turbine project, taking into account all necessary works, is likely to be cost in the range of £1.3 - £1.5m. It is very unlikely that grant funding will be available for this scale of costs and so borrowing (i.e. loan finance) will be required.
Larger projects could be more cost effective by taking advantage of economies of scale for infrastructure and transport costs, but would require a higher level of borrowing. For banks to lend to projects such as these, they need to be convinced that the community team managing the project is competent and professional in its approach. See Section 9, for further information.
Project income will come from the Feed-In Tariff or for larger projects:
- Sale of electricity
- The Sale of Renewable Obligation Certificates (ROCs), Levy Exemption Certificates (LECs) and Renewable Energy Guarantee of Origin certificates (REGOs)
For most larger generation projects, the sale of electricity and ROCs is organised through the establishment of a Power Purchase Agreement (PPA) with a supplier of electricity to the general market. PPA values will vary between projects and can be supplied on a variety of terms, e.g. 1 year, 3 year or 5+ year PPA agreements. It will be necessary to register the site with OFGEM for ROCs to become payable. Communities developing a project should initiate PPA negotiations once wind monitoring has been well established and planning applications are underway, or earlier, so that an overview of potential project returns can be established.
Please see Annex 1 for more information on ROCs and ROC levels for different technologies.
A number of companies offer PPAs. All are UK licensed electricity suppliers. These include the integrated utility companies, plus a number of other niche businesses, of which some are focussed on the renewables market. The UK wholesale electricity market is a volatile commodity marketplace and as such PPA prices should be checked regularly before conclusion, to update inputs to financial models.
6.12 Negotiating the supply of a turbine
6.12.1 Wind
The specifics of turbine supply and cost will depend on the project site and grid connection requirements. Prior to planning consent, attention should be focused on identifying the most appropriate turbine suppliers for a project. This will depend on a number of factors:
- The wind characteristics of the project site. Some turbines have optimal performance in lower wind speeds and some in higher. Postcodes can be entered in the following UK Government website to gain average wind speed data Windspeed database.
www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/explained/wind/windsp_databas/windsp_databas.aspx - The nature of the grid connection - the turbine connection may require different technical capabilities for grid connection at different sites. The network operator will be able to provide details on what will be required. Some turbines now come with DVAR - dynamic voltage active regulation technologies that can help with weak connections.
- Turbines require regular servicing and if there are certain turbine models already installed in the area, it is likely that there is a service crew located nearby or there is service provision from a regional base. Sourcing turbines from the same manufacturer may prove easier in terms of service provision and local service personnel.
Turbines typically come with a warranty and performance guarantee which ensures a certain level of performance availability per year, with compensation for missed revenue if technical reasons prevent this. However this guarantee depends on the availability of a maintenance crew, and in remote locations distant from maintenance bases this full warranty may not be available - this has been the case for some community projects recently negotiating turbine supply.
Some communities ( e.g. Isle of Gigha) have sourced second hand turbines for their projects. There is a burgeoning second hand turbine market as older sites are re-powered with newer larger turbines, releasing the older turbines for re-use. There is an obvious cost advantage with second hand turbines, but with this comes the potential increased need for maintenance, reduced warranty, potential greater difficulty of sourcing bank finance as the project may be seen as riskier. If there are specific grid conditions on site then it may be more difficult to integrate an older turbine into a weak grid network. Also it can be quite difficult to source turbines that will match the conditions of the site - many of the turbines currently available on the second hand market are from European sites and as such are generally designed for lower wind speeds so may not be suitable for Scottish sites. As second hand turbines will be older models, communities should ensure that there will be a good supply of spare parts to cover repair and maintenance needs over the lifetime of the project. Current second hand turbine availability includes models of rated output from 150kW to 1.5 MW. Further information on second hand turbines is available here:
www.windbrokers.com
www.danishusedwindturbines.com
www.repoweringsolutions.com/english/index.htm
gebrauchtewindkraftanlagen.com
www.pjwindpower.com/idd3.asp
6.12.2 Hydro
As there are not currently many communities developing large hydro projects in Scotland there is not much established community experience in sourcing hydro turbines. Hydro turbines are more normally supplied as part of a turnkey contract with provision of site design and site works construction. Experience from hydro projects less than 500kW has shown that it is easier to source turbines and services than in the wind turbine sector. The design of the site and the hydro resource will drive the selection of turbine.
6.13 Financing a revenue generating project
For community groups developing a revenue generating project the financing of such a project is a large undertaking. Projects of this size can cost well over £1million to install, and have significant operational costs. Good business planning and financial skills, in-house or outsourced, will be required to ensure the project is successful.
There are different stages of financing a large project;
- Pre development
- Planning preparation
- Post planning through to construction
Many of the communities in Scotland currently taking revenue generating projects forward are financing their projects with a mix of debt (bank), grant and equity (investment from the community and social investors). It is likely that most large scale community projects will require a mix of finance to become viable.
The initial stages of pre-development and planning preparation are the riskiest stages, and will most likely require secure funding for these stages - see section 9, Funding and financing your project, for current fund availability. The final phase, once planning consent and a grid connection have been confirmed, should attract commercial finance from banks and other lenders, if the project can be shown to be financially viable and offer a suitable rate of return for investors.
For accessing funding for the final phase from all types of lenders and grantors the community involved will need to have up to date and accurate business plans, cash flow projections for operational project, and projected Profit & Loss and balance sheets. If there is a mix of investors in the project, it is likely there will be differing funding requirements from each which will need to be addressed. Each funder will wish to see their investment safeguarded if the project defaults at any point, and may want to 'step in' and secure the value of their investment if this does happen. Therefore in a project that has a number of financial investors (bank, social investors, and grant funders) it may be necessary to gain agreement between funders (prior to financial closure) with regard to the joint 'step in' rights if the project defaults at any point.
As the project progresses in terms of financing all funders will perform some due diligence on the project - i.e. an independent assessment of the viability of the project. The community will need to be able to supply requested information to help complete this review, and information such as resource assessment certification, turbine contracts, land rights etc will most likely be required. It will be essential for communities to have access to informed legal advice to protect their rights.
6.14 Construction of project
6.14.1 Wind
There are two main project contract structures that communities could use when progressing:
- A turnkey contract is one where a company contracts with the community to deliver the entire project - this incorporates full project management of the entire construction phase, and deals with turbine supply, infrastructure requirements, transport issues etc.
- A second contract structure is for a community to contract with turbine manufacturers for installation of turbine, the district network operator for the supply of the non-contestable (and perhaps contestable) grid connection works, and contract with a balance of plant ( BOP) supplier for the remainder of the works (civils and perhaps contestable electrical).
- A third structure of the community undertaking the contracts with all suppliers and project managing the installation is another possibility, but as this would increase risks exposed to community organisations it could prove difficult to get financial lenders to fund such a structure.
As most wind turbine manufacturers will only provide a warranty if the installation and commissioning is completed by their own engineers it is likely the turbine company will be on site for the construction phase. If a turnkey contract is provided by a company other than the wind turbine company, then the turbine manufacturer would act as a subcontractor to the turnkey company. The project management and risk cover costs for the turbine elements can therefore be quite high and can increase the total project cost compared to a project installed under separate turbine supply BOP contracts. However, this increase in cost may offset the increased risk that the community may be exposed to under the second and third structures. The community involved should discuss and ensure they understand the details of each structure before deciding which option best suits their project. Communities should also be aware of their requirements under health and safety legislation during construction - please see here for more details
http://www.bwea.com/safety/index.html.
6.14.2 Hydro
Project construction contracts for hydropower installations tend to be run on a turnkey contract basis. Crucial to a hydropower project is the match between project design and installation, as the power production will depend very much on the design of the water intake and delivery system. If the project has been designed by a company different to that constructing and installing the infrastructure and turbine, then it is essential that there is a good handover between designer and installer.
6.14.3 Long term operational issues
For revenue generating projects maintenance and servicing of the technologies and infrastructure will be required for the lifetime of the project. It is essential that there is provision for these included in the supply of a turbine, and that this is accounted for in business and financial planning. This may be provided under warranty for the first few years of the project, and can sometimes be extended throughout the lifetime of the project. It is also possible to source such operation and maintenance (O&M) services from other independent companies operating in the sector.
It is also essential to have local support available for minor technical issues, so that these can be managed and rectified quickly without the need to call out the full maintenance team. Many turbine manufacturers are willing to train local people in basic skills needed to identify minor issues and to rectify these. Having this resource locally will ensure that there is little down time in generation for the project, and also increase opportunities for local employment.
It is important that the owners of a wind farm recognise their responsibilities under the Health and Safety and Work Act and how it applies to windfarms. BWEA have published specific guidance on this on their website - http://www.bwea.com/pdf/HSGuidelines.pdf and http://www.bwea.com/safety/index.html.
6.14.4 Key learning points from actual community projects
A summary of developing a large revenue generating project by a community currently engaged in the process will be included in Annex 1.
Information on the Gigha wind farm is on the following link
www.gigha.org.uk/windmills/TheStoryoftheWindmills.php
Information on the Westmill wind farm is on the following link
www.westmill.coop