Scottish hydro power chief warns that UK tariff cuts will sink the industry within five years

Green Highland's Allt-Coire-Chaorach-project
Green Highland’s Allt-Coire-Chaorach-project

The UK Government has ‘missed the point’ on hydro energy in its recent review of feed-in tariffs, according to one of the industry’s leading figures. 

And Mark Mathieson, Chief Executive of Perth-based Green Highland Renewables, has warned that Britain’s hydro energy industry will ‘all but disappear’ by 2020.

Last year, Green Highland employed 20 people directly, and worked with more than 250 contractors and subcontractors from over 20 local firms in the construction of over a dozen schemes in the Highlands. In total the industry employs 1,700 people – but Mathieson estimates 80% of these jobs will be gone by within four years. 

Cuts to small-scale hydro tariffs were announced by the Department of Energy and Climate Change just before Christmas last year, when cuts of up to 37% were posted.

Mathieson said: “The review of feed in tariffs has been a bitter disappointment to the hydro energy industry. We provided very strong, independent data to DECC on the costs and benefits of small-scale hydro much of which was disregarded in the final analysis.

“Hydro energy has been a part of Britain’s energy mix for more than a century. Major schemes built in the 20th century still provide green power at peak times, and recent years have seen an upsurge in new, small-scale schemes across the Highlands, with more than 100 MW of new capacity online already this decade.

 “While the industry still has an active pipeline of consented new projects, DECC’s plans will put an end to almost all new projects coming forward. I fear Britain’s small-scale hydro industry, and the thousands of jobs that go with it, will all but disappear in the next few years.” 

In response, the British Hydro Association has now requested a meeting UK Energy and Climate Change Minister Amber Rudd to outline their concerns.

“More worrying, the review betrayed a fundamental misunderstanding of the role hydro plays in the UK energy system – producing rapid, on-demand energy when it is needed most: in the evening, in winter when capacity margins are low,” Mathieson added.

 “DECC is concerned with the ‘headline’ tariff rates for green energy. On the face of it solar energy looks cheap – and therefore did very well in the review.  However, although solar has a low tariff, it does not make any contribution to the winter peak – cold evenings in mid-winter – where margins are very tight.”

During these ‘capacity crunches’ National Grid has to buy in short-term power – including high cost diesel generation – with additional ‘last resort’ gas power being bought at prices as high as £2,500 per MWh (or nearly 50 times the usual cost), the costs of which are borne by consumers.

He said: “DECC is also concerned that we move towards grid parity (subsidy-free) low carbon power, but fails to  recognise that hydro already produces grid-parity power.

“Hydro schemes last 50 years at least, and many of our historic hydro power stations are today still delivering subsidy free-green energy right through the winter – exactly when it is required. 

“Roll forward another 20 years and all of the small hydro schemes we have built in the last few years will be subsidy-free too, producing decades of cheap green power at a time when we’ll all be paying £1 billion a year to the foreign owners of the proposed Hinkley Point C nuclear plant.

 “We are greatly concerned the review failed to take account of evidence provided by industry, and has not recognised the wider benefits of hydro energy.”

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