It is time for the hydro sector in Scotland to move on – but to do so, we still need some answers from DECC, and from OFGEM.
The last few months have seen a lot of water go under the bridge, policy-wise, and our sector has had a few months to adjust to the new low tariff regime announced by the Department for Energy and Climate Change just prior to Christmas.
I think we have all accepted there will be virtually no new schemes coming forward after 2017, and 80% of all run-of-river hydro jobs will be gone by 2020.
However this does not mean that the world stops turning, or that all activity ceases today.
At Green Highland Renewables we have a very active pipeline of projects in construction, and our strategy is to build and acquire hydro assets with the goal of establishing a significant operational hydro portfolio by 2018.
Across the industry there is the potential for considerable megawatts to come on stream in the next 30 months – but for this to happen we still need some answers from DECC and from OFGEM.
Over the last year I have worn out a lot of shoe leather in Whitehall, working constructively with our industry and officials to try and put in place sensible measures to protect as much of the industry as we could.
During this process two key commitments were made:
1. OFGEM undertook to provide real-time pre-accreditation data so the hydro industry could monitor how close we were to triggering automatic quarterly degression caps; thereby allowing us to modify our pan-industry deployment into an ‘even stream’ over the next two years. (It was accepted by DECC during the consultation process there was no scope for capital cost reductions in run of river hydro and that if we tripped any degression caps it would make many schemes uneconomic.)
2. DECC committed to providing an annual review of FIT pre-accreditation across all sectors, which would offer clarity on how any unutilised annual capacity would be treated. Would it be ‘rolled over’ to the next year within a technology, be lost forever, or be handed over, for example, to solar PV?
On the first commitment, we have seen partial success. Whilst OFGEM offered to provide real-time data each Wednesday, it is currently provided the following Wednesday. In hydro as in politics, a week is a long time – and in practice this out-of-date data is not much use if the following week lies in the following month.
On the second point, we have seen a wholesale change within the policy team in DECC. Whilst I appreciate the very able officials are ‘getting up to speed’ on policy with a number of sectors all facing radical change, it is time for them to clarify what will happen at the year’s end.
Both decisions – or the current lack thereof – have a material impact on what is still a very significant industry across much of the north of Scotland.
Millions of pounds of investment, and the local jobs that go with them, require clarity on quarterly degression and what will happen to any headroom at the year end.
We are confident our industry can deliver a steady stream of cost-effective green hydro energy over the next few years, but we do require the UK Government and its regulator to deliver their end of the bargain.
Mark Mathieson is Chief Executive of Green Highland Renewables.