A SMALL scale hydro electric scheme near Crianlarich is to be the first of its kind to benefit from a funding arrangement which could signal a new phase for the small scale renewables industry.

The £60million funding package, aimed at 'community-scale' developments of two megawatts or less, is being led by the UK's Green Investment Bank with additional investment from the Strathclyde Pension Fund.

Nick Green of Savills Energy said: 'Scotland, so rich in the natural resources of land and water, is well placed to take advantage of the incredible opportunities that lie ahead in the green energy sector.

"In addition, the involvement of institutional investors, such as Strathclyde, has demonstrated that renewables projects are a credible option in terms of offering sound returns.

"However the realisation of this potential is being hampered by a number of key issues including consenting delays, grid connection, contractor availability and funding," said Mr Green. "For those projects that are eligible, this new funding scheme will be welcome news indeed. However there remain a large number of proposed projects that may struggle to secure the required funding in an era of falling tariffs."

Savills is currently working with a number of 'entrepreneurial' landowners, and developers who are looking at alternative funding vehicles and proactively working with private and niche investors where more traditional sources may not be available.

Said Mr Green: "The aggressive reductions we have seen applied as part of the government's degression of the Feed-in tariff scheme may impact on project returns to the point that more traditional bank funding avenues are not open to developers. There is talk about reviewing the degression methodology, particularly for hydro, but developers and landowners should not rely on UK Gov to make improvements to FIT funding.

"They need to be proactive if they want to get viable schemes off the ground in a reasonable time frame and consider all options, including entering joint ventures. The industry has now matured and there are a growing number of niche investors who have the capability and experience to invest at stages of the development cycle. They understand the additional pressures being faced by the sector over the coming months, such as grid delays and, contractor availability."

DECC figures indicate that 70MW of new hydro projects are currently approved for construction UK-wide - potentially doubling the 59.9MW of projects which have been constructed since the start of the Feed-in Tariff support mechanism in 2010.