Applecross community hydro scheme races to beat UK rule change on funding

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By a Newsnet.scot Reporter

The north west Highland community of Applecross is in a race against time to complete fund-raising for a £780,000 community hydro scheme.

Organisers are halfway through a six week campaign to reach its financial target by the St Andrew’s Day deadline on Nov 30.

UnknownThey are optimistic they will achieve their goal, even as the UK Government signals its intention to attack renewable energy programmes by reducing tax incentives to investors. This week the fund-raising passed the £325,000 mark, with three weeks to go.

The Applecross scheme will qualify for 30 per cent tax relief to those who invest in the community project. But those benefits are to be substantially reduced soon afterwards, making several renewables’ schemes much riskier and therefore less viable, particularly community projects.

This was signaled only in October when the Department of Energy and Climate Change (DECC) announced a change to the rules. Many schemes rely heavily on SEIS and EIS schemes, which provide tax relief of 50 and 30 per cent respectively.

Some of the local group behind the community hydro project
Some of the local group behind the community hydro project

A new scheme, known as SITR, is being introduced by the Treasury, but the DECC signalled on October 26 that community energy projects will not be covered. This takes away a major incentive to potential investors, and will put many such projects into jeopardy.

Now campaigners are likely to call on the Scottish Government to introduce similar schemes to support renewables schemes of the type illustrated by Applecross.

It seems likely that Applecross will slip through before regulations change, but they will rule out any chance of the community group being able to extend its deadline and raise extra funds.

The Applecross project depends on a fixed rate, 21.9p, at which the grid will purchase surplus energy generated by the hydro scheme. That rate falls to 18.3p next month, and falls again to 16p in March 2016, as the UK Government’s support for such projects continues to diminish.

The company behind the project, Apple Juice (Applecross) Limited, is a Community Benefit Society, formed by local people to build and operate a 90kw local hydro scheme in one of the most attractive rural settings of the Highlands.

The scheme, near completion, will generate clean electricity from Allt Breugach, a burn which flows from the hills into Applecross Bay. Surplus income from the scheme will go to the Applecross Community Company to re-invest in local projects. The people behind the scheme forecast that it will generate a gross income of more than £100,000 within a year. Current investors are being offered 4 per cent interest on their money.

“Community schemes like this one are difficult to get off the ground, and the loss of tax relief benefits will be a setback for future projects,” said one campaigner close to the Applecross project.

“There is a real opportunity here surely for the Scottish Government to intervene and continue to make schemes like this attractive to investors.”

Find out more about the Applecross scheme here: http://www.applecrosshydro.scot/the-scheme/

Apple cross Life Blog: https://applecrosslifeblog.wordpress.com