Welcome to the October issue of Anderson Strathern’s Renewables roundup.
Our Renewable Energy team here at Anderson Strathern continues to play a dynamic and innovative role in advancing our client partners’ ambitions to achieve a green and sustainable energy supply in Scotland.
Our roundup aims to keep you up to date with changes in the regulatory environment and new industry initiatives to support the drive for our low carbon future.
Please click on the links below for quick access to the undernoted items.
Anderson Strathern Projects
The White Paper for Secure, Affordable and Low-Carbon Electricity
Consultation on the Renewables Obligation (RO) Banding Review
Nuclear is safe to go
MPs publish report on carbon budgets
Renewable Heat Incentive (RHI) update
Anderson Strathern Projects
AS advises in major job creating deal
Anderson Strathern acted for the Wakelyn Trust in a deal which will see the redevelopment of Nigg Fabrication Yard which Highland Council predict could generate up to £65m a year to the Highlands Economy.
Nigg Yard is a 238 acre facility situated on the Cromarty Firth north of Inverness. The Yard, originally developed in the 1970s for oil rig production, has fabrication/warehouse buildings, extensive yard space, a dry dock and deep water quayside, all set in a strategic location to serve the developing offshore renewables industry.
US company KBR has sold its freehold interest in the yard to Global Energy. At the same time the Wakelyn Trust has agreed to the surrender of a lease by KBR, which originally commenced in 1972, and has entered into a new 60 year lease with Global Energy. The leased property covers approximately 98 acres of the site including the dry dock and main sea frontage. Global Energy Group plan to create a modern, multi-user facility serving a range of energy sectors, including all oil and gas and renewables which is expected to employ 2,000 by 2015.
David Hunter, Partner at Anderson Strathern LLP, commented:
"We are delighted to have represented the Wakelyn Trust on this exciting project. Our involvment in such a major investment project demonstrates Anderson Strathern's reputation and commitment to providing top level business and strategic advice to clients across the renewable energy sector.”
A spokesman for the Wakelyn Trust said
"The Wakelyn Trust is delighted at this outcome. Global Energy is firmly rooted in the Highlands and has a strong track record in the renewables and offshore construction sector. The Trustees were persuaded that its plans were likely to make the most of this unique Scottish asset for the benefit of the Highlands. It has taken a lot of time and effort to secure this outcome but securing the right outcome often takes time and the Trustees now look forward to the beginning of a new and exciting chapter for the fabrication yard.”
AS behind low carbon conference
Anderson Strathern joined business and political leaders from across the world including Asia, Scandanavia and the USA at the Scottish Low Carbon Investment Conference on September 27/28.
Robert Carr, the Chairman of Anderson Strathern and President of Edinburgh Chamber of Commerce, opened the conference by welcoming delegates and outlining the objectives for the event at which both Alex Salmond, First Minister, and Al Gore, Noble Laureate and former US Vice President, were key note speakers.
The First Minister announced Scottish Government backing for the Prototype Offshore Wind Energy Renewables Support fund, or 'POWERS'. POWERS is a £35 million fund which will provide financial support for capital and operational costs associated with the production of full scale prototypes of next generation offshore wind turbines. The fund envisages making awards, which will operate over a minimum of 4 years, to between 5 and 7 companies at a level of around £5 million to £7 million.
These awards are intended to support the gap between R&D and manufacturing and forms part of the Government's integrated package of support from research to manufacturing.
The First Minister noted that Renewable energy is set to be worth £3.2 billion in Scotland by 2013 - 14 and by 2020, the Low Carbon Economic Strategy shows that there could be 130,000 jobs in low carbon - close to doubling the current number - taking it to over 5 per cent of the Scottish workforce.
Al Gore inspired the audience with his message that climate change was impacting on our lives and the need to embrace solutions to move towards a more sustainable and stable future. He delivered his presentation with the style and substance those of us who have viewed his documentary film "An Inconvenient Truth" expected. He concluded his presentation with an acknowledgement that Scotland was at the forefront of the solution with its ambitious policy targets and abundance of natural resources.
Bruce Farquhar, Head of Renewable Energy at Anderson Strathern and a speaker at the Conference, said "Our lawyers and clients who attended the Conference were delighted to be able to build upon the success of last year's conference and take stock of the progress which has been made. The speech by Al Gore was awe inspiring and a great highlight.”
Anderson Strathern LLP has headed up The Crown Estate legal support in completing Application Window 2 of the “Saltire and Demonstration Leasing Round”. Agreements for Lease have been successfully negotiated for 6 new wave and tidal energy projects off the coast of Scotland, ranging from small technology test schemes for short-term installations to larger commercial projects with up to 30MW potential generating capacity.
The new wave schemes are planned by Pelamis Wave Power and AWS Ocean Energy. Tidal engineering demonstration projects are proposed by DP Marine, Nautricity, Nova Innovation; and Oceanflow Development.
The successful developers will now carry out surveys on the proposed sites, consult stakeholders, perform environmental impact assessments and apply for statutory consent, before signing up to a lease of the sea bed.
These new projects, around the north and west of Scotland, bring the total number of planned wave and tidal energy projects in UK waters to 31, 25 of which are in Scottish waters.
The completion of this round is evidence of the growth of the offshore renewable sector and Anderson Strathern is delighted to be supporting The Crown Estate.
By way of a brief summary, the key elements in the recently published ‘Planning Our Electric Future: A White Paper for Secure, Affordable and Low-Carbon Electricity’ are as follows:
• There’s to be a Carbon Price Floor (announced in Budget 2011) to reduce investor uncertainty, putting a fair price on carbon and providing a stronger incentive to invest in low-carbon generation now;
• There’s to be new long-term contracts (Feed-in Tariff with Contracts for Difference) to provide stable financial incentives to invest in all forms of low-carbon electricity generation. A contract for difference approach has been chosen over a less cost-effective premium feed-in tariff;
• There will be an Emissions Performance Standard (EPS) set at 450g CO2/kWh to reinforce the requirement that no new coal-fired power stations are built without CCS, but also to ensure necessary short-term investment in gas can take place; and
• There will be a Capacity Mechanism, including demand response as well as generation, which is needed to ensure future security of electricity supply. The government is seeking further views on the type of mechanism required and will report on this around the turn of 2011.
Publication of the White Paper marks the launch pad of the reform process. The government intends to legislate for the key elements in the second session of the current Parliament, which starts in May 2012, and for legislation to reach the statute book by the end of the next session (by spring 2013) so the first low-carbon projects can be supported under its provisions around 2014. The CPF will come into effect in April 2013 and the first FiT CfDs are expected to be signed in 2014. The form of Capacity Mechanism has not yet been determined: a further consultation will be issued at the end of 2011.
The White Paper is available for consultation in full on the Department for Energy and Climate Change website accessible here.
DECC and the Scottish Government have issued consultations on proposals for the levels of banded support available for renewable electricity generation under the Renewables Obligation (RO) for the period 2013-17.
The lead banding proposed focuses on scalable lower-cost renewable technologies aiming to deliver the majority of the electricity needed to meet 2010 targets. In the banding, the government aims to show its commitment to offshore wind and marine sectors where the UK has vast natural resource, and has the potential to make development viable.
Details of the English and Welsh Consultation is available on DECC’s website accessible here and the Scottish consultation is available on the Scottish Government's website accessible here.
Nuclear is safe to go
The UK’s nuclear energy safety inspector, Dr Mike Weightman, has given the UK's £50bn plans for nuclear energy the green light. Following the report issued on 11 October 2011, the Minister for Energy and Climate Change has reiterated the government's support for a massive programme of new nuclear reactors. Certain commitment had been put on ice pending the health and safety check investigation commissioned in the wake of the Fukushima disaster.
DR Weightman travelled to Japan to inspect the Fukushima site after publishing an interim report in May. Full details of his report can be found on the Health and Safety Executive website accessible here.
MPs publish report on carbon budgets
The UK parliament’s Green Watchdog in its report on carbon budgets, says that the review of the UK's carbon budgets in 2014, announced at the Conservative Party conference in Liverpool in September, threatens to undermine certainty in the future direction of climate policy.
At the conference, it was suggested that the 2014 review could result in an “easing” of the carbon budget set if the UK's emissions reduction progress is better than that required by the EU's Emissions Trading System.
Whilst the report by the Watchdog, the Environmental Audit Committee, broadly welcomes the Government's decision to lay out the fourth carbon budget (obligatory under the Climate Change Act) at the level recommended by the independent Committee on Climate Change, a decision to review the budget in 2014 may be more politically motivated than necessary in terms of efficiency. The decision to have a review may have been inspired by business lobbying groups who fear that the budget as set to be bad for business. Nevertheless the message coming from monitoring MPs is clear, the prospect of a review could weaken investor confidence in low-carbon industries as it creates uncertainty about the future trajectory of emissions reductions.
Chair of the Environmental Audit Committee, Joan Walley MP, believes that the desired certainty in the provision of long term carbon-cutting commitments as required by the Climate Change Act – an 80% reduction in emissions by 80% - by 2050, is weakened by potential reassessments and is a big mistake. That is particularly so when a review which could reduce the set target is to take place within three years of the creation of the initial target.
The report also criticises the government for dropping its plans to have its departments and local authorities produce budgets for the carbon emissions produced by their policies and operations.
Details are available on the Report are available on the UK Parliament’s website accessible here.
Renewable Heat Incentive (RHI) update
As part of the much heralded “Green Deal” announced by the government in March 2011, the innovative incentive scheme to subsidise low-carbon heating, RHI, took centre stage. As heating the UK’s building stock accounts for nearly half of its overall energy consumption, creating a financial climate in which renewable heat technologies may become viable propositions to the UK business and consumers, was seen as essential. Only then could a meaningful assault on our carbon emissions be made before 2020.
In the RHI, the DECC, sees the potential to raise the proportion of heating energy which comes from renewables from its current level of around 1.5% to 12% by 2020. With that increase will come a corresponding reduction of some 44 million tonnes of carbon emissions.
With these targets in view, £860 million will be made available for RHI between 2011 and 2014. In Phase One of the scheme, it will only be the non-domestic user that can apply for the finance. However, what is known as an advanced “Renewable Heat Premium Payment”, to a fund maximum of £15 million, will be made available to domestic users who put in renewable heating systems.
The RHI covers energy produced by new technologies and fuel uses including solid and gaseous biomass, solar thermal, ground and water source heat pumps, on-site biogas, deep geothermal, energy from waste and the injection of biomethane into the grid. Those schemes which were installed or commissioned on or after 15 July 2009 will be eligible for support, with the owners eligible to receive payments quarterly for a 20 year term.
Phase Two of the RHI will be available for domestic users who can apply for grants to assist in the installation of solar thermal, biomass boilers, ground source or water source heat pumps. In both Phase One and Two, applicants will need to meet certain eligibility criteria. In brief, they will have to show that the heat being supplied from the renewable technology actually meets an existing requirement for heat from a non renewable source – this is to avoid any sham applications.
The start date for Phase One was to be 30 September past. However, that date was put on hold late in the day when the government announced that elements of the RHI could not go ahead without EU approval on the grounds of competition policy – the tariff attaching to large-scale biomass facilities was set too high and could have contravened the EU state aid rules had it gone ahead without approval. That approval has now been obtained but the UK parliament will need to consider and approve changes to the regulations implementing the RHI as a result – and that will take time. It is hoped now that the RHI will be up and running within the timeframe originally envisaged save for the commencement date which will be in November, in a fair wind.
Details of the RHI and the latest on timing can be obtained from DECC’s website accessible here.
A group of UK businesses, made up of energy suppliers, constructors and financiers has come together to facilitate the Green Deal announced in March.
A memorandum of understanding has been signed by companies including British Gas, Carillion, E.ON, EDF Energy, Goldman Sachs, HSBC, Kingfisher, Lloyds Bank Corporate Markets, npower, PwC, RBC Capital Markets and SSE with the aim of setting up a not-for-profit organisation, to be known as The Green Deal Finance Company (GDFC).
The GDFC would create a national hub organisation to provide finance for all Green Deal providers, thereby reducing operating and administration costs. The Group believes that the benefit of setting up one UK wide body will be that accredited Green Deal providers will be able to access the most cost effective and reliable sources of finance. The government hopes that the development will potentially reduce interest rates on Green Deal finance and engender healthy competition amongst Green Deal providers including small businesses.
Details of the Consortium and the development can be found on DECC’s website accessible here.
The UK Energy Research Centre (UKERC) has agreed to make available in excess of £2M to support new research addressing some of the most important energy developments in the UK and overseas.
Six new research projects will cover:
• the take-up and design of offers under the Government’s Green Deal initiative promoting energy efficiency in homes;
• the impact of UK energy activity on “ecosystem services” provided by natural ecosystems globally and in the UK;
• a detailed analysis of global gas security and the prospects for global gas governance;
• scenarios for the development of smart grids;
• a risk assessment of UK energy policy.
The research teams chosen have are experts in ecology, biology, energy policy, psychology, engineering and marketing drawn from 12 research institutions across the UK, including the University of Aberdeen.
Details are available on UKERC’s website accessible here.
Scotland to trial new tidal energy system
The Scottish Government has announced that Kawasaki Heavy Industries (KHI) will test its new tidal energy system in Scottish waters. It will do so at the world-leading European Marine Energy Centre (EMEC) in Orkney, using its expertise in engines, marine propulsion and gas turbines systems to develop a tidal power generation system.
Details are available on the Scottish Government website accessible here.
If you need any advice on renewables projects and the law and regulations driving the industry, please get in touch with Bruce Farquhar, partner and head of our Renewable Energy Team.
This bulletin is for general information only and does not constitute legal, investment or other professional advice. Please contact us should you require advice on any particular legal issue. Anderson Strathern LLP accepts no responsibility for any loss that may arise if reliance is placed on any information or opinions expressed in this bulletin.