WITH AVERAGE annual rainfall approaching an incredible two metres in some areas, the Isle of Arran off the west coast of Scotland can provide challenging conditions for farming - however, for Dougarie Estate, that amount of rain is just what their newly commissioned hydro-electric generation project needs.
Estate factor, Bill Bateman, explained that the estate was looking for additional income streams, but the local development plan for the northern part of the island where Dougarie is located had suggested renewables were unfeasible.
There were, however, a number of significant water courses with good catchment areas, which pointed them towards hydro-electric generation, which was more acceptable to the planners due to its low visual impact.
Bill said: "Applications for grid connection for four possible water sources were submitted to our local provider SSE in 2008. At the same time, at the request of SEPA we started a 12-month project to record flow rates more comprehensively."
Grid connection offers were received by the end of 2009. One watercourse on Dougarie, just south of Pirnmill, stood out - it had an average annual flow of around 300 litres per second and a fall from the intake to the powerhouse of 230m, giving the potential to generate the maximum 500 kW for the restricted grid connection.
This became the chosen site and project managers Allt-Energy were contracted shortly after to provide the conceptual design, with hydro specialist Charlie Bateman - Bill's son - coordinating the work to secure consents, negotiate tenders, manage construction works and organise commissioning.
With planning and license applications approved by early 2012, the project generated its first kW hour in June, 2013.
Of the total budget (excluding finance), Bill said that more than three-quarters went on civil engineering, mechanical costs, infrastructure, access, pipework and the turbine and generator.
The grid connection was just over 5% of the total costs, and the remainder was spent on site assessments, environmental reports, consultants, management, insurance and fees.
"We were thankful that there was very little concern about the project locally - in fact, there was enthusiasm!" said Bill.
Now the scheme is up and generating, annual running and maintenance costs including insurance look likely to settle at just over 2% of the total development cost. This is against a projected 27% nett return on total capital before finance, about which Bill sounded a note of caution.
"This scheme is likely to turn out to be financially very productive," he said. "Up to March 31, 2014, the Feed in Tariff payment was 15.98p per kWh, index linked annually. We know FiTs are dropping and as that happens, costs are increasing and so on a strictly like-for-like basis, returns on future developments are not likely to be as high - but there are still potentially good profits to be made."
Bill said he had learnt four important lessons from his experiences:
- The network: Know your grid connection.
Stefan Jackson, contract manager for Dougarie's electricity distribution network operator Scottish Hydro Electric Power Distribution, added: "We strongly recommend that would-be developers speak to their local power provider as early on in the process as possible. They will be best placed to advise you of any network constraints or limitations there may be in your area."
Mr Jackson said the team at SSE was created specifically to provide exactly this service in the North of Scotland. "From a grid connection perspective, we give anyone looking to install renewable generation the guidance on all the aspects they need to consider. This can include pre-application advice, support with making your application and assistance throughout the rest of the process - right up to energisation of your project."
- Consultations: Hold open and frank preliminary discussions with consenting authorities and the local community.
Sally Agass, head of economic growth at North Ayrshire Council, the local authority which handled Dougarie Estate's application, said there were a range of planning considerations for renewable energy developments, such as amenity impacts, design and scale of the proposals.
"All applications are decided in accordance with the Development Plan for the local area, and on supplementary guidance," she explained. She said the council's officers offered free pre-application advice covering a range of issues and were happy to discuss these with applicants. "It's important to take advantage of this as it's critical to a smooth and quick consenting process."
Bill also stressed the importance of keeping the local community advised. A short document outlining the proposals was made available at the Post Office/shop and residents nearest the proposed development were sent their own copies - as was the MSP and Community Council: "We were available at all times for people to contact us if they had any concerns or simply wanted more information."
- Project funding: Find the right lender.
John O'Meara from AMC, lender to the estate for this project, said that the borrowing process can take a while - especially if return on investment, including income from the FiT, is a factor.
"At AMC we tend to take a more straightforward approach, such as this instance where the estate was offered simple loan terms based on overall business income. We've found this to be the best option in many of the renewables schemes we've funded."
While the lending rate is important, so is flexibility and with AMC agreeing to lend 90% of the total cost of the project and advancing it in one tranche at the beginning, Bill and his team were able to broker some very good deals on the purchase of the turbine, generator and pipes. This offered significant cost savings on some of the input costs.
Bill added that it is always worth checking what reporting your lender will require you to do throughout the scheme development and operation.
"As long as we meet our repayment schedule, AMC doesn't need update reports. We can also pay back the loan more quickly than scheduled at minimal charge, which is very helpful if the scheme proves more productive than expected."
- Overall: Expect the unexpected!
Just as commissioning was about to commence in 2013, the west side of Arran was subjected to an exceptional snow storm, blocking roads and bringing down power lines and their supporting structures.
This meant commissioning was set back two months while SEE carried out repairs to grid infrastructure.
Bill said they were fortunate in that the scheme was running slightly under-budget (thanks to Charlie Bateman's project management) so there was contingency to cover the extra cost. "You need to be realistic and allow a little slack," he said. "We're not in control of Mother Nature!"