Over the threshold

“Scotland has a proud tradition of generating hydroelectricity,” says Jim Mather, Scottish Minister for Enterprise, Energy and Tourism. “Many of the projects installed in the post-war years continue to provide clean and reliable power. While the refurbishment of many of our larger schemes, along with recent developments like Glendoe, will ensure that hydro will play a part in Scotland’s energy story long into the future.”

Although there is still some potential for large-scale schemes, the future development of hydro is likely to be on a small and micro scale. Estimates suggest that there could be 1.2GW of financially viable new hydro capacity across 7043 schemes.

“Today the development of Scotland’s vast renewable energy potential is at the heart of the Scottish government’s vision for a low carbon economy,” Mather adds. “The Scottish government has granted consent to a number of smaller projects in recent years, in recognition of the contribution such schemes can make towards both our renewables targets and our core objectives of increasing sustainable economic growth in Scotland.”

Mather commented that although hydro offers vast potential it is important that development is not pursued at any cost to the environment. However the government still has a responsibility, as detailed in the Renewables Action Plan of 2009, to provide clear leadership for the renewable energy sector, drive progress and identify and overcome any obstacles to energy generation.

It was with the above in mind that the Scottish government put the idea of changing the 1MW threshold for hydropower applications out to consultation. The hydro industry had identified this as being an obstacle to developing schemes. The consultation, carried out between September and December 2010, set out the implications of raising the consents planning threshold, as stated in Section 36 of the Electricity Act 1989 (Order 1990), for onshore hydropower from 1MW to 50MW.

Scottish developers welcomed the news that changes were afoot to simplify and streamline the hydro planning process. One such company was TLS Hydro Power which operates five schemes ranging from between 100-700kW, along with several more at varying stages of development up to 1.5MW. The company said it warmly welcomed the proposal to raise the threshold to 50MW and such action would be appropriate and beneficial to its business.

What is Section 36?

Section 36 of the Electricity Act 1989 details that any generating station with a capacity over 50MW requires planning consent from Scottish Ministers. However, the threshold for hydropower was lowered from 50MW to 1MW in 1990 and extends to Scotland only.

Historically, the reason for setting the section 36 threshold for hydro schemes at over 1MW was to ensure that the Fisheries Committee for Scotland would be able to comment, have oversight, and suggest conditions for any new hydro scheme proposals that would have an impact on fish and fisheries. The government acknowledges that the impact of hydro schemes on the ecology of an area should and does rightly remain at the centre of any decision to consent applications.

However, these decisions are now regulated and supervised by the Scottish Environment Protection Agency (SEPA), under the Controlled Activities Regulations (CAR), regardless of the size of the proposed scheme. Under CAR, SEPA now has a duty to consider licence applications for all new hydro schemes. The water licence covers fish and fisheries issues based, among other things, on the advice received by SEPA from the Fisheries Committee. However the UK Flood and Water Management Act of 2010 led to the abolition of the Fisheries Committee (Scotland) and it has since dissolved. SEPA is now the primary environmental regulatory body consulted during the hydro application process.

Many believe that the abolition of the Fisheries Committee, along with the advent of SEPA, means that there no longer is the rationale to retain this historical 1MW threshold.

The question of increasing the consent threshold, and the roles played by local planning authorities and Scottish ministers, has been debated since 2007. The Forum for Renewable Energy Development Scotland (FREDS) Hydro Group was heavily involved and it was at the instigation of this stakeholder group that Scottish ministers undertook the consultation in 2010.

The amendments to the hydro planning process would:

• Shift the determination of all onshore hydro scheme applications up to and including 50MW to planning authorities. The Scottish Government Section 36 Consents and Deployment team would then determine any schemes above 50MW.

• Encourage developers to size their scheme appropriate to its environment. The hydropower sector view the current 1MW threshold as a barrier which may discourage some developers from creating hydro schemes over 1MW, thus failing to optimise the capacity of these smaller schemes.

• Eliminate the perception that hydropower has a greater impact on the environment than other generating technologies of a similar capacity. This is due to the fact that other renewable energies operate with a 50MW threshold whilst hydropower has a 1MW threshold.

• Bring Scotland in line with England and Wales where the hydropower consents threshold is set at 50MW.

• Allow planning authorities to recover more of their cost from application fees than they are currently able to do.

“At the moment planning authorities already consider hydro applications, sometimes at committee, before responding to ministers,” says Mather. “Rather than making a recommendation, councils will now apply local knowledge to make local decisions on hydro applications up to 50MW, cutting out another layer of bureaucracy.

“Our tough target to determine energy applications within nine months has made a noticeable difference to the speed of decision making,” he adds. “While every application has its own characteristics, planning authorities are experienced in hydro schemes and I expect developers will now get even quicker decisions and be able to contribute further to Scotland’s low carbon economy.”

In agreement

Over 90% of respondents to the consultation paper agreed with the proposal to raise the consent threshold from 1MW to 50MW. One such respondent was Inver Farmers, an imbedded distributed generator in Argyll which has a wealth of experience in building and operating low impact, dam-fed mini hydro generation. It has six hydro schemes in total with a combined output of 1.4MW and 8.5 GWh/yr.

The company states that it appears totally nonsensical that at present you can apply for planning for a 50MW wind farm through the local authority but that relatively modest hydro schemes are subject to Section 36. With the advent of SEPA and the high level of environmental scrutiny that it brings there is no reason at all why hydro schemes larger than 1MW cannot be assessed competently at a local level.

The company feels ably qualified to comment on the very issues the above proposal is seeking to resolve. It recently received planning approval for a 999kW storage hydroelectric scheme on the Isle of Jura from Argyll & Bute Planning. Updated professional energy analysis work has indicated that the present proposal would be operating at over 90% capacity factor in an average year. This would prevent the generation of additional energy in a wetter than average year. The company is therefore actively looking at increasing the proposal’s capacity closer to 2MW but this would require a whole new application under Section 36 regulations and delay the project by up to a year.

Inver Famers agrees that deliberate under-sizing of schemes is an issue. “Our present scheme is a perfect case in point,” the company stated. “Without this artificially low ceiling on development our scheme would naturally have grown to closer to 2MW from its present 1MW level. We sincerely hope that this proposal is widely supported and legislation is passed in time for us to increase our output before coming on line in late 2011.”

RWE Npower Renewables is a leading developer and operator of run-of-river hydroelectric schemes in Scotland. Deliberate under-sizing of schemes is an issue, the company agrees, but it would disagree that it is currently as a result of the 1MW Section 36 threshold.

“With the advent of CAR and its application by SEPA, the consenting process is onerous, demanding and risky regardless of the planning process embarked upon. It has been our experience,” the company states, “that schemes have been undersized to meet the requirements of SEPA and the Controlled Activities Regulations. In theory this may be desirable for environmental regulators, but the industry has long held concerns that the environmental standards and regulatory methods upon which CAR are applied are flawed. Therefore, many projects could be considered not to be utilising the full potential of rivers due to unnecessary regulatory downsizing.”

Furthermore RWE NPower believes that the environmental standards upon which the implementation of CAR is based need to be reviewed. They need to properly assess the actual environmental impacts of hydro schemes on the water environment.

The company, along with others, also believes that the appropriate authority needs to be responsible for determining the various issues that fall both under CAR and Section 36/Local Planning. This will make hydro developers feel more confident that contentious issues will be dealt with fairly by the appropriate responsible authority. Developers will then have more faith to pursue appropriately sized projects which fully utilise hydro resources while ensuring environmental protection.

The Scottish government acknowledged that concerns were raised about ensuring a consistent and informed approach from planning authorities and avoiding duplications between planning and CAR licence requirements. Updates to planning advice and to SEPA’s operational guidance for considering social, economic and environmental considerations are currently underway.

A question of fees

Also underway are possible amendments to the fee structures for hydro applications. At present applications of 1MW and over which require approval from Scottish ministers incur a fee under electricity regulations of 2006. Those not exceeding 10MW pay £5000. However, transferring the consents process for schemes sized up to 50MW to planning authorities will allow the local authorities to recover more of their costs than under current arrangements. Planning fees are generally based on the size and scale of the development, with a current maximum fee of £15,950.

A number of industry developers think that a switch to this fee structure may impact on schemes up to 10MW. In July 2010 the Scottish Government published a consultation paper called Resourcing a High Quality Planning System. It sought views on possible new ways of calculating planning fees, an increase in the fee maxima, performance and alternative ways of working. The consultation closed in October 2010 and officials are currently considering possible amendments to the fees structure as a result of the responses received.

RWE NPower Renewables says an increase in fees would be a significant issue for developers of hydro schemes. Hydro schemes already endure very high application fees and costs compared with other renewable technologies due to requirement to apply for a water licence under CAR. Further to this, the cost of advertising applications through the water licence process is adding significant costs to developers.

“We are concerned that planning authorities will view hydro schemes above 1MW in the same light as other renewable technologies such as wind and therefore assume that developers can afford similar fees,” the company said.

Development costs to hydro developers are much higher per MW than for other renewable technologies. As such the viability of hydro development is much more sensitive and even small increases in cost can have a substantial impact on the viability of the development process.

“The hydro industry is characterised by many smaller development companies that would not have the resources to progress developments if similar application costs were applied as those considered appropriate to the wind industry. Higher application fees under local planning would deter many developers from progressing hydro schemes as they would consider other renewable technologies to provide better rate of returns given the level of development cost and risk. We would therefore ask,” RWE NPower added, “that application fees under local planning be maintained at a limit £5000 for schemes less than 10MW.”

Scottish Renewables accepts that there is likely to be an increase in fee maxima when local planning authorities, rather than the Scottish government, are the responsible authority for determining hydro applications under 50MW.

However, the proposals mean that planning fees for smaller schemes could potentially increase threefold. The hydro industry is characterised by many smaller development companies that may not have the resources to progress developments if application costs rose significantly. It is important that the increased financial burdens on hydro developments are acknowledged.

In response to the planning fees consultation, Scottish Renewables stated that the Scottish government may wish to review the current fee structure if it is found that planning authorities genuinely do not have sufficient resources to adequately fund their development plan and management services. Any increase in fees however, should reflect an increase in service provision.

“We would be strongly against any increase in fees if these were disproportionate to the scale of the application and/or if the increase in fees was subsequently used to subsidise other council services,” Scottish Renewables added. “Planning fees should therefore be ring fenced as a revenue stream that is to remain in the planning authority’s account. The concerns over disproportionately high fees for hydro developments should be considered under any such review.”

Monitoring closely

As of 1 June 2011 any new applications for hydro plants of 50MW or below will be for the local planning authorities to determine. The Scottish government says it will monitor the new arrangements closely to help ensure a smooth transition. Primarily this will be done through the FREDS Micro Hydro subgroup and discussions with stakeholders.