Blow for Scottish renewables as London slashes support for Hydro electricity

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By Martin Kelly

The Scottish renewables sector has been dealt a blow after Whitehall announced a thirty per cent cut in support for hydro-electric projects.
 
The announcement of the cut in Renewable Obligation Certificates (ROC) made yesterday, has led to Scottish and Southern Electricity, also known as Scottish Hydro, shelving plans for major construction projects north of the border.

A Renewables Obligation Certificate is valued at £40.71 in 2012-13, and renewable energy developers only receive ROCs in exchange for actual electricity produced.  Hydro-electric is particularly strong in the north of Scotland given the mountainous terrain and several projects were already earmarked by SSE and another company, RWE/nPower.

As well as shelving its Highland build plans, the SSE also warned that the massive cut could cause significant damage to other green energy industries such as biomass and windfarms.

The company stressed that ongoing projects would not be affected but added: “Nevertheless, it means SSE no longer expects to develop any new conventional hydro electric schemes and the scope to increase generation of electricity from biomass at coal-fired power stations is significantly reduced, “

A spokesman said that the cuts to support: “introduced a new uncertainty that could potentially restrict the future development of this technology”.

The claims of uncertainty follows last weeks delayed announcement by the UK Government of a ten per cent cut in the level of support for windfarms.  Confirmation of the cut by Chancellor George Osborne followed reports of in fighting amongst senior coalition figures over the UK government’s carbon emission targets.

The ten per cent figure was in line with industry expectations after a report by the Department of Energy and Climate Change recommended a 10% reduction to the wind generation sector.  However the announcement contained a warning that the level of support faced a review in twelve months, giving rise to more uncertainty.

The threat of a review prompted green energy body, Scottish Renewables to warn that the sector could face further difficulties with planning.

Niall Stuart, Chief Executive of Scottish Renewables, said: “The cut in support for onshore wind strikes the right balance between keeping energy bills down for consumers and ensuring we maintain investment in this sector.

“Onshore wind has become increasingly competitive and evidence supports the 10 per cent cut in the RO finally confirmed by government from 01 April 2013.

“However, the announcement that government is launching a further review of support for onshore wind later this year only creates further uncertainty and makes it difficult for the industry to plan ahead, though we are pleased that the decision on any changes in 2014 will be based on evidence rather than political views.”

Commenting on the announcement from Energy Secretary Ed Davey that hydropower will see a 30 per cent cut in financial support, Mr Stuart said: “The considerable cut in support for hydro means that companies will have to re-consider some major investments.  Feedback from the industry suggests a number of planned schemes may not go ahead unless the Scottish Government increases the levels of support for hydro in Scotland in its own Banding Review.”

Two projects thought to have been scrapped include one on the Kildermorie Estate near Alness in Easter Ross which was ready to start and would have had a capacity of 7.5 megawatts, sufficient to power 9,400 homes.

The other was an even bigger project at Glenisla near Alyth on the Perthshire-Angus border which was rated at 10 megawatts.

The cancellation of the construction projects comes at a time when the UK and Scottish construction sectors are facing severe problems due to the current economic climate.  Last week the UK economic situation worsened when new figures showed growth had contracted by 0.7% for the last quarter and meant the UK was now in the worst double dip recession for half a century.