Scot-Govt. faces Scottish renewable energy crisis as business rates ‘fiasco’ threatens to sink small-hydro power in Scotland

A small-hydro power scheme
A small-hydro power scheme

EXCLUSIVE by Scottish Energy News

The Scottish renewables sector has been stunned by five- and six-fold increases in business rates and the new regime of business rates in Scotland has marked out hydro power for “special punishment”, threatening to end independent development of schemes north of the border, Scottish industry representatives at Alba Energy warned.

Alba Energy is a collective of independent hydro operators in Scotland.

Small hydro-businesses now face an increase in rates of up to 650%, with bills on some energy projects rising to as much as 25% of their total turnover.

Scottish Energy Minister Paul Whitehouse last night was caught in a flood of rising anger last night over the Scottish renewable energy business rates ‘fiasco’.

With some operators facing insolvency, others have been left to calculate the cost of a future in which renewable energy ceases to be financially sustainable.

An average hydro scheme – such as the 500kW Buckny hydro power project in Perthshire – has seen its draft valuation rise from £32,000 to £93,000, a sum that represents 29% of its overall turnover.

The worst hit schemes have seen increases up to seven times their original value, with rateable valuations of up to  50% of turnover.

The 1.9MW Ederline scheme on the banks of Loch Awe had a previous valuation of £98,000, which has now been revised upwards to £405,000.

Many in the hydro industry fear that the Scottish Government has abandoned its green agenda.

In 2015, while attacking the UK Government for removing subsidies for renewable energy, SNP ministers removed their own system of support.

Alba Energy, representing hydro operators in Scotland, accepted the loss of rates relief and argued that the industry should pay its fair share, in line with other businesses. What Alba Energy cannot accept, however, is the “sudden, exponential increase” in valuations now being applied to hydro by assessors – out of all proportion to the economic realities of these sites.

While many businesses in Scotland have suffered relative increases, hydro operators are preparing for bills to double, treble, or quadruple. 

Martin Foster, Chairman of Alba Energy, said: We are not seeking special treatment – but we do want to know why we have been singled out for special punishment.

“Hydro power is the original Scottish renewable energy source: the cleanest, most efficient, least obtrusive and longest-lasting.

Yet the Scottish Government has facilitated a rates regime that will cripple the independent hydro industry it once claimed to support – while leaving the big energy companies unaffected.”

Alex Linklater, Director of Buckny Hydro, added: The new rates regime contradicts the Scottish Government’s own energy strategy. Hydropower is not merely crucial to this strategy; it has brought significant growth to some of our remotest rural communities.

As independent operators find themselves threatened with punitive levels of taxation, we are seeking Government support, until a longer term solution is agreed. All Alba Energy is asking for is an equitable model of valuation, one that will allow our industry to remain financially viable, while paying its fair share of rates.”

Scottish Assessors responsible for the rates revaluation have refused to publish a clear account of the method they are using to calculate the new valuations for hydro.

Alba Energy is calling on the SNP Government to rectify an indefensible lack of transparency in the light of “extreme perversities” resulting from the assessors’ system.  In contrast;

  • In the current rates revaluation, the Scottish Parliament building has had its valuation reduced by 21%; Edinburgh Airport has been reduced by 18%; and Tayside Joint Valuation Board offices have awarded themselves an RV reduction of 16%, resulting in bills being reduced by 24%.
  • The big energy companies such as SSE and Scottish Power pay business rates under a preferential “cumulo” system, which leaves them with less than 50% per megawatt of the amounts being charged to small hydro.

Linklater added: “Alba Energy will be assisting members to pursue formal appeals against valuations for hydros which have been hit by “off the scale” increases.

“But Government attempts to deflect criticism onto the appeals system, administered by the independent assessors and funded by local authorities, are being greeted with scepticism.

A court appeal against the Tayside Valuation Board, raised in 2012 (which argued that the assessor had, even then, applied a flawed approach to small hydro) is still awaiting a second determination by the Tayside Appeals Committee –  nearly five years after the first court hearing.

The ongoing case of Alba Energy versus the Tayside Assessor, first brought in 2012, argues that Scottish assessors are using an inappropriate method to calculate valuations for small hydro.

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