Scottish islands renewables – a special case for support

The steady development of wave energy devices should not be underestimated  (Aquamarine Power) The steady development of wave energy devices should not be underestimated (Aquamarine Power)

The Department of Energy & Climate Change (DECC) has published an update report summarising responses to the UK Government’s consultation on additional support for Scottish islands renewables projects.

In 2012, in recognition of the potential for renewable energy in the Scottish islands, DECC and the Scottish Government set up a joint independent study to address concerns that renewable projects (onshore wind and marine renewables) were not coming forward quickly enough. The commercial and economic viability and value, the barriers for development and broadly costed options for tackling the barriers formed the core of a steering group involving: the Scottish Government, Highland and Island Enterprise, the three islands councils (Orkney, Shetland and Eilean Siar), National Grid and Scottish Hydro Electric Transmission Ltd. Ofgem attended meetings as observers. Baringa Partners and TNEI undertook an independent study involving direct contact with actual and prospective renewable energy developers and other key stakeholders. The study concluded that renewable generation in the Scottish islands could make a significant contribution to the UK’s and Scotland’s 2020 renewables targets bringing significant benefits to the economy through direct, indirect and induced jobs. Four key challenges were identified: funding gap, grid access, early stage funding for marine projects and the supply chain.

The cost of renewables in the Scottish islands is recognised as being significantly higher than comparable mainland projects (even accounting for higher load factors) mainly from expensive subsea transmission links required for connecting to the GB grid along with significantly higher operation costs. While not marine related, it is noted that onshore wind project levelised costs on the Western Isles are 50% greater than their mainland equivalents. The study states that the extent of this cost differential is such that major developments would be unlikely to be economic at current support levels. It is recognised that marine renewables are in an earlier stage of their evolution and the study’s analysis confirms that these technologies will continue to require financial support, and other forms of funding, at levels at or above the 5 ROCs/MWh currently being offered. Another challenge is the reliance of Scottish island projects on proposed new transmission links, particularly relevant for small or community owned projects or those with new technologies who are unable to underwrite the liabilities and associated security requirements and are therefore dependent on ‘anchor projects’.

GOVERNMENT RESPONSE

If all this sounds a little negative, DECC state that considering the report, the UK Government, with support from the Scottish Government and intergovernmental steering group recognises the potential of the Scottish islands and is committed to unlocking the potential where it makes sense to do so. The UK Government have also recognised that the distinct characteristics of renewables projects on the islands requires provision of a separate strike price for such circumstances. Referring back to the Baringa/TNEI report there is a general consensus that a higher level of support would be required to bring on deployment of onshore wind in the Western Isles. The reader may be wondering why onshore wind is being mentioned but it has to be remembered that much of the supply chain for onshore wind will overlap with offshore: and of course the maritime transport industry will be involved in shipping components to the islands.

Several respondents to the study argued that an equivalent uplift for marine projects as those proposed for onshore wind should also be agreed, as those projects face similar higher costs than comparable cases elsewhere in the UK. The point was made that the expectation that 400MW of deployment would be the result of the proposed strike price gave the impression of being a cap. The report stresses that they are keen to make clear that there is no cap. They would be happy for more new renewables projects to come to fruition but the evidence and modelling suggested that would not be the case. It adds that it should be noted however that projects in the Scottish islands will be subject to the same potential constraints on allocation as other projects.

CONCLUSION

The conclusion includes an upbeat starter statement saying: “We previously concluded that there is considerable potential in the Scottish islands to develop large projects that are cost effective compared to marginal technologies and that this potential can be delivered in a way which can deliver value for money for consumers.” The report states that the specific set of circumstances and characteristics, along with the unique potential (partly from the remoteness of the islands) warrants separate treatment and potentially a different level of support from other onshore projects.

For marine, evidence from the responses indicated the majority of wave and tidal projects in the UK are located on the islands. The report’s authors do not expect to see commercial-scale marine energy projects deployed during the lifetime of the first EMR delivery plan. As a result an island-specific uplift on the £305/MWh generic strike price is unlikely to lead to an increase in deployment during the first delivery period over that expected. It is difficult to conclude therefore, that additional support is warranted at this time.

Given progress of the marine energy sector towards early commercial deployment, it is anticipated that projects will be developed during the second Delivery Plan period. Future consideration will be given to whether Scottish Island-specific measures for marine energy should be put in place, and at what level, as part of the second Delivery Plan period.

Long lead times for Scottish islands projects mean future uncertainty over pricing is unhelpful for securing investment. Wider EMR consultations have received similar feedback and as a result, consideration will be given to whether earlier assurance on future pricing to enable investment decisions can be provided.

By Peter Barker 

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