Thursday, April 14, 2011

Thousands of potential hydropower sites blocked by red tape

The number of new licences issued for hydropower schemes in England and Wales has increased six-fold since 2000, surging on the back of the Feed-in Tariff incentives, according to the Environment Agency. But it could be much higher - why is the Government making it so hard for producers who want to install this technology?

Recent figures released by the Environment Agency reveal that 31 hydro power licences were granted in 2009, compared to just five in 2000. In 2010, that figure is went up to more than 100.

“Hydro power is a great example of a natural resource, which produces few wastes. It’s a reliable and proven technology and increasingly attractive to local communities,” Environment Agency chairman Lord Chris Smith said.

Around 400 hydro power schemes are currently licensed in England and Wales and the Environment Agency estimates this could rise to around 1,200 by 2020.

But this is still a fraction of the potential. Although the surge of interest is due in particular to the Feed-in Tariffs, which pay businesses, communities and individuals to produce their own renewable electricity, researcher Miguel Mendonça has found no less than eight hurdles that potential producers would have to surmount if they wanted to install a hydroelectric scheme.

Damming the hydro potential

In his report, The UK Feed-In Tariff: A User Survey, Mendonça says “the message from producers is that they find themselves in the middle of different policies which are pulling in opposite directions. Harmonising policy so that it creates the outcome of maximising renewable energy generation at the lowest cost is the desired outcome."

He says those wanting to install hydro scheme must deal with the following issues:

1. Obtain permission from the Environment Agency for extracting the water. Although recently streamlined, the process is still complex.

2. Get approval from the local planning authority for the permitted development rights - the delay and up-front cost of this is a strong disincentive to small projects.

3. Obtain certification under the Microgeneration Certification Scheme (MCS), if the installation is below 50kW.

4. Obtain approval from Ofgem, if the installation is above 50kW.

5. Secure documentation for electrical safety, although this is true for all forms of electrical generation.

6. Suffer delays due to problems with the MCS - because experienced installers who previously did the work are now having to apply, at expense for accreditation.

7. Obtain financing: upfront costs of equipment can range from several thousands to several hundreds of thousands of pounds, for systems between 2kW and 500kW.

8. Perhaps pay unreasonable business rates: although this applies to all renewables, it has greater impact on hydro because mills that are homes very often can generate much more electricity than the home can consume. The Valuation Office Agency (VOA) determines that any hydro site doing this is a business, and must pay business rates. As these are based upon rental values, the VOA is obliged to invent a landlord/tenant scenario; so a hydroplant with heavy investment in automated controls, feedback systems and 24-hour trash rack sweeping – which all help to greatly improve energy capture – will be taxed at a higher rate than inefficient plants, creating a disincentive for maximising energy production.

9. Finally, producers must deal with an incentive that perversely rewards smaller schemes more than larger ones. Tiered tariffs are in place under FITs that reduce in order to incentivise maximum production while controlling costs. But Mendonça says this creates a disincentive to maximise production. He quotes various installers as saying that by fixing the rates so that the larger the system the lower the tariff, producers are encouraged to install a smaller system to obtain a higher tariff rate.

The Government argues that the tariff calculation is based on the economic cost of the installation and the technology, so the relative cost per kW generated for a larger systems works out less than a smaller system which is more expensive per kW.

But Anthony Battersby, of the Mendip Power Group, says that as a larger scheme still requires a higher upfront cost, it should be supported accordingly.

Additionally, the British Hydropower Association, the trade body, says schemes under 100kW have the worst rate of return under FITs - which cannot be right.

What is the full potential for hydropower?

This is the potential which is being held back: there are still thousands of sites yet to be exploited around the UK. The quality of the electricity is excellent in terms of being predictable, reliable and deliverable to the grid.

The technology is mature and extremely well understood, it is robust and installations are able to keep operational for decades. With efficiencies greater than 60% it certainly beats solar, with a maximum of 12%, and wind, with a maximum of 20%.

Two recent studies indicate that the maximum untapped potential of hydroelectric generation extends to nearly 1.2GW across 12,040 sites in England and Wales, according to a 2010 study by the Environment Agency - Mapping Hydropower Opportunities and Sensitivities in England and Wales”. Scotland, Wales and the North of England have the highest potential for hydropower.

In addition there is a further 1.2GW across 7,043 sites in Scotland (Forrest & Wallace, 2010).

The realistic potential will be significantly lower than this 2.4GW total - the English and Welsh study indicated that 4,190 sites, representing around 580MW of power, just under half the full potential, could provide environmental “win-win” situations.

Including Scotland, this could provide nationally up to 3660GWh/yr, or 1% of 2009 electricity production, saving 1.5Mtonnes of CO2 emissions (at 0.43kgCO2/kWh of UK electricity) and making a significant contribution to meeting our climate protection goals while providing income for small businesses.

As McGrigors, a legal firm operating on behalf of producers, has put it, "If renewable development is not approached in a positive and pragmatic manner, the regulatory regime may continue to act as a disincentive and preclude the small-scale schemes which FITs are designed to encourage."

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