Galbraith Energy Matters Summer 2014

Energy

matters

ISSUE 6 SUMMER 2014

Energy and independence: What the Ministers say The challenge of heritage buildings Wind power v wild land Biomass on the farm Solar makes a comeback Farming the wind

www.galbraithgroup.com

WELCOME

CONTENTS

Domestic RHI launches at last

4 Sunny delight: A

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he Domestic Renewable Heat Incentive has been on and off the starting blocks since it was first announced in 2009. The scheme was finally launched in April and the detail has now been revealed.

It will provide an annual payment for seven years for approved technologies, indexed by the Retail Price Index. The tariffs will be subject to degression — i.e. reduced over time depending on uptake — in order to manage budgets. The initial tariffs per kWhr of ­renewable heat will be: Biomass boilers and biomass stoves: 12.2p Air source heat pumps: 7.3p Ground source heat pumps: 18.8p Solar thermal: 19.2p Installations made since July 15, 2009 will be eligible to claim, although any grant or government support payment such as the Renewable Heat Premium Payment will be deducted.

The eligibility rules appear complex, with several hoops to jump through, but there are significant potential rewards. The scheme requires a Green Deal assessment to be undertaken and applicants must implement energy saving measures identified in terms of insulation upgrades, subject to restrictions such as listed building status or the presence of protected species.

Payment will generally be calculated on a deemed measurement based upon the Energy Performance Certificate provided as part of the assessment. But if there are other, non-compliant heating systems present, renewable heat must be metered.

Calum Innes, Partner

CKD Galbraith is Scotland’s leading

independent property consultancy. Drawing on a century of experience in land and property management, the firm is progressive and dynamic, employing more than 200 people in offices throughout Scotland.

The firm provides a full range of property consulting services across the commercial, residential, rural and energy sectors.

comeback for solar Vital role of expert witnesses

6 Energy saving in

historic buildings FiT update

8 Cover story:

Fergus Ewing and Ed Davey put the case for and against independence from an energy perspective

10 Getting the best from biomass heating

12 Major

roadworks: time to act Farming the Wind, part 2

14 CKD Galbraith’s new Aberdeen office

CKD Galbraith provides a personal service, listening to clients and delivering advice to suit their particular opportunities and circumstances.

Our associate, CKD Kennedy Macpherson, is based in London.

Follow us on Twitter: @CKDGEnergy Like us on Facebook: www.facebook.com/ckdgalbraith Join us on Linkedin: www.linkedin.com/company/ckd-galbraith

Proposals to protect wild land from wind turbine developments are causing controversy.

Robert Patrick reports.

Energy Matters is produced by ­ llerton Communications, London, A UK, and designed by George Gray Media & Design, St Andeux, France. © CKD Galbraith LLP.

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hose involved in renewable energy will be paying particular attention to the Scottish ­Government’s ongoing review of national planning policy, in particular the third National Planning Framework (NPF), and the updating of Scottish Planning Policy (SPP).

Possible changes to SPP in particular have sparked interest from both the renewables industry and conser­vation groups, largely because of the proposal to protect areas of ‘wild land’ from onshore wind development.

The draft SPP includes a proposal that all future Local Development Plans should include a spatial framework, mapping out areas suitable for onshore wind, and also areas where constraints exist. Within this framework, it is proposed to have two ‘groups’ where particular constraints would apply.

Group 1 would be areas where wind farms would not be acceptable.

This would consist of sites within National Parks or within National Scenic Areas. This proposal has proved uncontroversial, with all sides, including the renewables trade body, Scottish Renewables, accepting

A wild and windy clash of interests

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Some conservation groups hope that designated wild land will be off-limits for wind farms.

that wind farms should not be located in these areas.

But Group 2 has proved controversial. Land in this group, which would be afforded ‘significant protection’, includes not only designated areas such as Sites of Special Scientific Interest and Natura 2000 sites, but also core areas of wild land as identified by Scottish ­Natural Heritage.

SNH have been carrying out research into wild land across Scotland since 2002. This has resulted in 1,599,028 hectares of land now being included as a ‘core area’ of wild land. The process of identifying this wild land has itself been the subject of debate and consultation, with varying arguments that too

much or too little land has been designated wild.

While SNH’s wild land map has been recognised in the draft SPP, there remains some doubt over how the designation will affect future wind energy planning applications.

Some conservation groups hope that designated wild land will be off-limits for wind farms. The John Muir Trust, for example, responded to the draft SPP by arguing that wild land should receive the same protections as National Parks and National Scenic Areas.

In contrast, Scottish Renewables says the policy goes too far, suggesting the proposal reflects a ‘presumption against development’ for wind farms on wild land. They argue that, as a nonstatutory designation, this is too much protection for wild land.

The debate has now reached the Scottish Parliament, with the draft SPP and NPF recently discussed at the Economy,

Energy and Tourism Committee. The question of wild land designations was a key talking point. One of the outcomes of the committee’s discussions was a ­r ecommendation that further clarity needs to be provided on how the wild land designation would be put into practice by planners in a ‘consistent and transparent’ manner.

The committee’s request reflects the desire from both sides of the debate for a greater degree of certainty on what a wild land designation will mean for future wind farm developments.

The finalised SPP is due for publication in June, so the answer should be imminent.

Robert Patrick is a chartered planner at CKD Galbraith’s Perth office. robert.patrick@ckdgalbraith.co.uk Tel: 01738 456 078

www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Summer 2014 | Page 3

Vital role of the expert witness

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landmark legal decision on valuation for rating may have major implications for hydro generating schemes across Scotland.

As we reported in the last issue of Energy Matters, the Valuation Appeal Committee for Tayside dismissed the assessor’s valuation approach and supported the appellants in a case involving six hydro schemes in the region.

Since then, the committee has published a written decision on the five-day case, in which Calum Innes of CKD Galbraith appeared as an expert witness on behalf of the appellants.

The 24-page ruling focuses mainly on two key issues: determining the correct valuation approach, and the proper interpretation of the Valuation for Rating (Plant and Machinery) (Scotland) Regulations 2000.

Solar: a Harnessing the power of the sun is increasingly popular with landowners.

Expect the trend to continue, says Colin Stewart.

The assessor’s valuation approach was on the basis of ‘receipts and expenditure’, while the appellants argued for a comparative valuation based on rental evidence. Having reviewed the submissions, the committee was persuaded that the comparable methodology presented by the appellants provided a reasonable basis for valuation, it being the preferred approach where possible.

The committee agreed with the appellants in their interpretation of the regulations that the vast majority of the plant and machinery was excepted as a consequence of it being used for the generation, storage or transmission of power for consumers.

The appellants’ expert witnesses argued that a ‘penstock’ was an integral part of the hydro system, containing, controlling and regulating pressurised water feeding into the turbine and therefore constitutes more than a simple pipeline. Accordingly, the exemption applied to ‘penstock’ in the regulations, as well as that applied to turbines and generators, resulted in the vast majority of plant and machinery being excluded from valuation.

The net effect of this interpretation is that the only elements which reasonably fall to be valued for rating purposes are the rights to extract water for the purpose of developing and operating a hydro electric generating scheme together with any heritable property, for example the building containing the turbine.

The application of the valuation approach presented by the appellants resulted in a substantial reduction — about 50 per cent — compared with the assessor’s methodology.

Calum Innes, who heads the CKD Galbraith Energy team, said: “This case represents a potentially significant decision, though we will have to await the result of the assessor’s appeal to the lands Valuation Appeal Court (Court of Session) to see if the committee’s decision is upheld. Notwithstanding the ultimate result, this case illustrates the importance of the role of expert witnesses in providing objective and expert opinion to inform the proceedings.”

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n-shore wind has arguably reached its peak of development in Scotland, but solar photovoltaic (PV) installations at a farm level are hotting up and are seen as a ray of sunshine, quite literally, for the renewable sector.

CKD Galbraith has recently been involved in several projects, acting for the landowner on whose land the solar developer wishes to construct a solar farm.

Such sites can extend from five to 250 acres, although between 15 and 35 acres is more usual, thereby remaining within the 5MW capacity limit set by the Feed in Tariff system.

Typical deals, which take the form of a lease between the landowner and developer, provide for an index-linked rental payment of around £800 to £1,000 per acre depending on site-specific conditions.

Leases generally run for 25 years, but developers prefer an option to renew the lease subject to the agreement of both parties. This is because the equipment will continue to provide valuable energy even beyond 25 years of use.

However, recent Government proposals have cast a very dark cloud on large solar PV schemes above 5 MW. The proposals,

ray of sunshine “

Typical deals, which take the form of a lease between the landowner and developer, provide for an index-linked rental payment of around £800 to £1,000 per acre.

which are currently under consultation, look to close spending on these large schemes within the Renewables Obligation. These changes would take effect from April 1, 2015. The upside of the proposals is that spending may increase to promote mid-scale building-mounted solar PV in the Feed-in Tariff Scheme.

This may be of particular interest to landowning and farming clients.

CKD Galbraith also acts for land­owners to promote suitable sites to solar farm devel-

opers and has negotiated the financial package between landowner and developer on as favourable terms as possible.

A number of solar farm developers are now active in the industry, so there can be competition for sites.

Although developers prefer land mounted panels on a field scale, deals can also be negotiated to include a number of roofmounted panels on robust and suitable farm buildings.

The Scottish Government Payments Agency has confirmed that solar panels on a field scale designate certain land as being unsuitable property on which to claim agricultural subsidies, such as the Single Farm Payment. However, land can nevertheless continue to be used for grazing by sheep. This is actually preferred as it maintains the grass cover in good condition and can avoid the need for mowing between panels.

Physical features are important in selecting a site for a solar farm, with mainly flat and clear sites being preferred. Sloping land should have a southerly aspect.

As with most renewable developments, cost-effective grid connection is essential although the developer will investigate this as part of a feasibility study. Good access for construction and maintenance is also necessary.

Industrial brownfield or lower-grade agricultural land is most suitable, with old airfields being particularly popular.

It is hoped that solar farm developments will cause less of the sort of public outcry that has generally followed sizeable wind farm schemes. It will also be interesting to see how the planning authorities view large scale solar farms over the next few years, particularly once a number have been commissioned and the cumulative consideration takes effect.

Colin Stewart is a partner in the Alyth, Perthshire, office of CKD Galbraith, specialising in rural and energy matters. colin.stewart@ckdgalbraith.co.uk Tel 01828 632 786

www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Summer 2014 | Page 5

Old building, renewable solution Reconciling the protection of historic structures with the need for energy conservation is tough, says Calum Innes, but it can be done.

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s part of the carrot and stick measures the Westminster Government uses to reduce energy usage and increase production from renewable sources, building regulations require increasing levels of insulation and air-tightness to minimise heat loss from buildings. However, sometimes when dealing with listed buildings, conservation criteria preclude compliance, and compromise is required.

An interesting example that we’ve been involved with is the restoration of a tiny former croft house near Braemar in the Cairngorms National Park. The property was discovered as a ‘time capsule’ last

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what on the surface appears to be a relatively simple solution requires a great deal of diligence in terms of design and application.

occupied sometime before the Second World War and following liaison with Historic Scotland the property has been listed Category A. It is simply not possible to impose modern standards of insulation on a building with a heather thatch roof (under a protective corrugated iron cover), flagstone floors and rubble walls; but if the building is to meet expectations of modern living, solutions will need to be found.

Working with Historic Scotland’s technical research team, we have been considering how to restore the property

using traditional materials, but incorporating renewable energy technology.

The proposal is to use a ground-source heat pump to supply underfloor heating.

But what on the surface appears to be a relatively simple solution requires a great deal of diligence in terms of design and application.

allow for the incorporation of emerging technologies.

Historic Scotland is using the project as a test case in order to determine the effect on thermal performance of the traditional materials specified and their interaction with alternative energy solutions.

Accordingly, in order to provide baseline data, it has been necessary to measure the performance of the un­restored property.

This information will be used to design the underfloor heating to ensure the heat pump will operate at maximum efficiency.

It will also provide a means of measuring the thermal improvements achieved by the innovative use of traditional materials.

This project has just gone on site, with construction work expected to last six months. There will be further updates in Energy Matters to cover the result of the monitoring and the subsequent design and performance of the ground source heat pump.

As the CKD Galbraith team member responsible for managing the project from a planning and technical perspective, I can say it has taken a long time to get to the point of site works starting. There have been significant challenges in terms of the property’s location in the National Park, together with constraints imposed by ecological and other statutory designations. However, the National Park Authority and Historic Scotland have been very supportive and helpful in progressing matters through a complex process.

Roger Curtis, Technical Research Manager at Historic Scotland, told me: “As an organisation, we are very interested in investigating innovative applications for traditional materials that will allow buildings to be preserved appropriately but

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“This building is of a scale and construction that should allow effective monitoring and will potentially add significantly to our knowledge of how buildings of traditional stone construction work and perform when used for modern living.”

Calum Innes, based in Perth, is head of CKD Galbraith’s energy team. calum.innes@ckdgalbraith.co.uk Tel: 01738 456 075

Feed-in-Tariff update

The million pound drop!

By Mike Reid

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ubsidies for medium to smaller-scale renewable schemes provided under the Feed-in-Tariff (FiT) scheme are now subject to ‘degression’, to ensure incentives do not excessively burden the public purse.

Above: Tomintoul Croft as it was, probably in the mid/late 1800s. Below: An energy sensor measures the thermal performance of the old walls. Bottom: Restoration work begins, but only after much planning and research.

Degression is having a big impact.

Deployment of all wind turbines covered by the FiT between January 1 and March 31, 2014 has exceeded the minimum degression threshold for the full 2014 calendar year. As a result, there will be a 20 per cent degression in April 2015 including a six-monthly interim reduction of 10 per cent from October 2014.

The way FiT rates are calculated means the actual reduction from 2013 tariff rates is likely to be around 36 per cent by April 2015.

The financial effects on renewable energy planning are likely to be significant. For example, a 500kW turbine producing 1,400,000 kWhrs of electricity per year under 2015 rates would be eligible for £90,000 less in annual subsidy than the identical turbine commissioned under 2013 rates. Over the 20-year lifetime of the FiT, ignoring inflation, that translates into some £1.85m less in subsidy payments.

Critics of renewable energy subsidies may welcome this, but the effects on the forward planning of developments are major, considering the lead-in time from conception to commissioning for a wind turbine project, which can easily be more than two years.

So it’s important to note that FiT benefits can be ‘locked in’ once planning consent has been obtained and the grid connection has been paid for. Many projects were pre-accredited before December 31, 2013.

But even then there are potential pitfalls, not least that the turbine needs to be commissioned within 12 months — you cannot ‘bank’ accreditations.

As some have found to their cost, paying for your grid connection does not ensure the necessary rights exist over land required for the connection in third party ownership. Time is of the essence and as the clock ticks towards the pre-accreditation deadline, neighbouring landowners are in a strong position.

To facilitate a grid connection there needs to be a benefit for both parties in any deal and it is important to know the value of the rights granted to achieve an appropriate settlement. Landowners should not focus solely on the financial aspects, as the rights granted could have a detrimental long-term impact on their property ­— these rights must be properly assessed before any agreement is concluded.

While degression levels are having a significant effect on turbine projects, there are still viable returns to be had from wind turbines under the FiT even at the reduced subsidy levels. However,

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unless matters change, potential returns may lead to new FiT wind turbine projects reducing to a trickle or stopping altogether.

unless matters change, potential returns may lead to new FiT wind turbine projects reducing to a trickle or stopping altogether.

As a result of degression we anticipate that site selection for turbine projects will become more focused as locations with higher average wind speeds will be required in order to make projects viable. We also anticipate component and construction costs will come under pressure, particularly the cost of the turbines themselves.

Development decisions will continue to be influenced by the increasingly vocal opponents of wind power and the politics behind the energy market as it goes through a period of reform.

Mike Reid heads up CKD ­Galbraith’s utilities department, with particular expertise in ­telecoms and windfarms. He is based in Cupar. mike.reid@ckdgalbraith.co.uk Tel: 01334 659 984

www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Summer 2014 | Page 7

What impact might Scottish independence near, we asked leading politicians from both

The power of independence

By Fergus Ewing MSP, Minister for Energy, Enterprise and Tourism in the Scottish Government

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cotland generated a record amount of electricity from green energy sources last year — energy that is helping to keep the lights on across these islands at a time of a tightening gap between demand and supply.

Energy from renewable power sources in Scotland made up approximately 32 per cent of total UK renewable generation in 2013, showing that Scotland has some of the best natural resources.

Security of supply in England and Wales is already under threat. OFGEM’s Electricity Capacity Assessment published last June shows capacity margins across Britain could be as low as two per cent by 2015/16.

Since that analysis further concerns have been raised by National Grid,

who now expect to connect fewer new power stations to the grid than previously, further exacerbating the problem.

In contrast it is estimated that Scotland’s capacity margin would be 20 per cent.

DECC and OFGEM have both conceded that, due to this squeeze on capacity, the risk of electricity customer disconnections will appreciably increase.

UK Energy Secretary Ed Davey has suggested that interconnection with other European countries could provide a solution to this problem. It would, however, be foolish to assume inter­ connectors are a short-term or reliable fix.

The UK’s import capacity is limited — about five per cent of total capacity — ­representing less than 4GW compared with total capacity of 80GW, and these interconnectors aren’t always available.

The interconnectors also flow both ways. Indeed, the interconnector to Ireland is regularly exporting electricity and could still be doing so even when the UK has low electricity supplies, as the flows are determined by market prices as opposed to energy security.

Reliance on imports from Ireland is also not an option for the UK. As Irish Energy Minister Pat Rabbitte has pointed out, major energy imports from Ireland ­“cannot be realised by 2020”.

The deployment of renewable energy in

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Scotland is strong for many reasons, including the huge size of Scotland’s clean energy resources, the breadth and quality of the supply chain, the excellence of our higher education sector and the quality of the skill base here. Independence will not change these factors.

In fact, the biggest threat to investment is Westminster’s retreat from renewable energy (in favour of nuclear) plus uncertainty caused by Electricity Market Reform (EMR) and Project Transmit.

This is shown in the fact that SSE linked its decision to delay investment in a planned pumped storage scheme to EMR and transmission costs.

Linking production subsidies to population is a spurious comparison — Scotland’s share is related not to population size but to the huge amount of clean power produced here.

Indeed, Scotland is the most cost-effective place in these islands to produce clean energy, delivering consistently between a third and four-fifths of the UK’s total renewables generation (40 per cent in 2011 and 36 per cent in 2012) in return for about 28 per cent of the total UK subsidy.

This compares to the expensive new nuclear projects being pursued by the UK Government. Payments for Hinkley C, the world’s most expensive nuclear power station, will be up to £1bn a year for 35 years plus a £10bn infrastructure guarantee, and this will push up ­consumer bills.

In contrast, the Scottish Government will use the powers of independence to deliver an ongoing annual cut in household energy bills of £70 per annum — from removing the Warm Homes Discount and the Energy Companies Obligation from bills.

have on energy issues? As voting day draws sides of the debate to set out the arguments

The strength of staying together

By Ed Davey MP, Secretary of State for Energy and Climate Change in the UK Government

is seeking to develop more. The market price is paid for power traded across these inter­connectors.

Scotland is currently a net exporter of electricity to England and Wales, but this is only a small proportion of demand (4.59 per cent) and the UK already imports more (5.03 per cent) from France and the Netherlands.

Ultimately the amount of energy traded would be dependent on the price.

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ith its superb natural and human resources, Scotland is one of the world’s energy hubs, with oil and gas in the North Sea and a thriving renewable energy industry.

Investment The UK is one of the most attractive destinations in the world for renewable energy investment and in first place for offshore wind.

The UK is fundamental to the success of Scotland’s energy industry. The size of the UK economy, the integrated market, its regulatory regimes and the scale of financial support provided, create the conditions for business to invest in the energy industries across the whole of the UK. Scotland, Wales and England currently enjoy a fully integrated Great Britain (GB) energy market. The GB energy market is ten times larger than Scotland’s alone and therefore costs can be spread across 30 million households and businesses.

The scale of the UK economy provides an attractive environment for investment. This makes it easier and cheaper to achieve the UK’s (and Scotland’s) energy goals — maintaining energy security while decarbonising and keeping bills as low as possible.

Energy Trading If Scotland became an independent state the decision to import energy would be taken on a commercial basis and in the national interest of the continuing UK. The UK has interconnectors that transport electricity to and from a number of countries in the rest of Europe, and

Businesses have announced over £34 billion of investment in the renewables industry between January 2010 and February 2014 — over £14 billion in Scotland — ­­ with the potential to support around 12,000 Scottish jobs. Underpinning this success is the support provided by the Renewables Obligation.

In 2012-13 Scotland received 28 per cent (£560 million) of the total paid by all UK consumers to support renewable generators.

An independent Scottish state may also have to address the higher cost of attracting investment to a smaller market with a regulatory regime

with less of a track record and the likely higher costs incurred in balancing demand and supply across the electricity transmission system in Scotland.

Affordability Currently, the costs of supporting Scottish energy network investment, smallscale renewables and programmes to support remote consumers are shared among consumers across the UK. Scottish consumers will benefit from this by at least £38 in 2020. A medium-sized manufacturer will benefit by around £110,000 in 2020.

In addition, if the full costs of supporting large scale Scottish renewables are considered, Scottish consumers benefit by up to £189 for households and a medium sized manufacturer by up to £608,000 in 2020.

By remaining part of the UK, energy bills in Scotland will be lower than those in an independent Scotland.

DECC recently published its energy analysis of the Scotland’s place in the UK and how that would be affected by independence.

More information can be found at: https:// www.gov.uk/ government/ publications/ scotland-analysisenergy

www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Summer 2014 | Page 9

The biomass route to self-sufficiency Biomass heating is adaptable and can bring major economic benefits to farm operations. But, cautions Peter Scott Aiton, care is needed in choosing the right system.

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ike most farmers we have spent some time investigating and pondering the pros and cons of various renewable opportunities. Biomass was the one that stood out for us.

The fact that creating energy by burning natural vegetable matter offered cost savings that would benefit the farm, as well as generating income from the Renewable Heat Incentive and tenants paying for heat, made it an attractive investment.

We installed two batch biomass boilers amounting to 980kW in order to burn straw and timber produced on the farm.

The plant includes a 55,000 litre insulated hot water accumulator tank that acts as the energy store. The system has been designed to provide heat to the farm grain dryer and heating and hot water to eight houses.

Legerwood farm is in the Scottish Borders and has a mixture of arable, sheep, cattle and residential properties.

We had no interest in a woodchip or wood pellet sys-

tem. The higher initial investment on the plant, coupled with the fact that the processed material is likely to track the price of fossil fuels, made it an unattractive investment for us. We wanted a batch boiler that could burn excess straw and timber in order that we were self-sufficient.

We looked into four manufacturers that offered suitable systems. The biggest issue at this stage was that there did not seem to be an independent consultant that could advise us on which system would best suit our demands. All companies approached were helpful but there seemed to be a lot of ‘salesman’ tactics when it came to comparing what was on offer.

As a building surveyor, I have been involved in numerous commercial construction projects and the components of a biomass system are not dissimilar to a commercial heating system. By immersing ourselves in the detail of each of the

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It is certainly rewarding to see the farmhouse attract an income of £500 per winter month rather than an oil cost in excess of this!

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systems and taking the time to go and visit the limited number of completed installations, we were able to see what was on offer and talk to those who had already experienced the process.

Having decided on a suitable system, we then needed to gain planning permission before starting the installation. While there are permitted development rights for biomass on agricultural land, the scale permitted is up to 50kW output. Planning was not straightforward but we were eventually granted consent with only minor conditions.

Our priority was to get the grain dryer linked to the biomass for the 2013 harvest.

We have a modern Graintec 20-ton per hour continuous-flow tower grain dryer and it was adapted by adding a seven-core heat exchanger. The system was not up and running for the whole harvest but we were pleased with the results and a saving of at least 70 per cent of our diesel usage is a welcome reduction in cost. The system also works well on floor batch dryers where it can easily supply 100 per cent of the heat requirement.

The houses are linked by about 700 metres of underground district heating pipework.

Each has its own heat exchanger which takes the place of the oil boiler. Some of our rented cottages only had electric heating and this was a good chance to install central heating to improve the offering.

Tenants are charged a flat rate per month

Wood and straw from the farm arrives at the boiler site (far left) and is fed into the boilers (left and above).

Right: Heat is channelled underground to properties on the farm.

Below: The installation at Legerwood farm during construction.

for the heat and hot water in order that we can offer them cost certainty and gain a regular income. The system qualified for the RHI and we are paid 5p/kW used at each eligible use. It is certainly rewarding to see the farmhouse attract an income of ÂŁ500 per winter month rather than an oil cost in excess of this!

ers eases the pressure, especially at peak times of the year when more than one burn a day may be needed. The refuelling does not suit all farm setups, but it works well with our farming system where the machinery is already required and there is someone on site everyday to check livestock.

The boilers are easily filled with the use of the farm forklift and having two boil-

Our experience has been a learning curve and I have since been able to offer consul-

tancy advice and achieve planning consent for similar systems through my role at CKD Galbraith.

Peter Scott Aiton is a building surveying Senior Associate in the Edinburgh office of CKD Galbraith. petersa@ckdgalbraith.co.uk Tel: 0131 240 6967

www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Summer 2014 | Page 11

Road works ahead: time for action Two of Scotland’s busiest routes are set for major development.

Nick Morgan reviews the implications for local landowners.

The A9 project has been split into 12 sections between Perth and Inverness to minimise disruption over the 80-mile route during construction.

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With the A9, as well as a new road alignment there will be new road junctions, a number of over-bridges, and re-routing of minor roads that would otherwise be cut off by the new carriageways.

he Scottish Government has planned significant capital investment in two projects included in the Scottish Infrastructure Investment Plan 2011. They are designed to upgrade both the A9 and A96 from part into full dual carriageways. With a total budget of £3 billion, the A9 is scheduled for completion in 2025 and the A96 in 2030.

Increasing sustainable economic growth by direct cash injections and improving national transport and communication links to stimulate trade are two benefits at

The A96, which connects Aberdeen and Inverness with more than 88 miles of carriageway, is set to be upgraded by 2030 with the main focus currently between Inverness and Nairn.

Landowners with land to be acquired and those indirectly affected by disturbance such as noise or dust can object to the proposals. Objections must demonstrate why the proposals are considered inappropriate. Consultation will follow, but if there is an unresolved dispute the next step is public local inquiry. Failing that, the parties can seek determination at the Lands Tribunal, but this is a costly approach.

Those who suffer a quantifiable loss are entitled to claim compensation under the Land Compensation (Scotland) Act 1973. This is designed to protect those with a claim so that they are no worse off than they were before the scheme was implemented. Sometimes, betterment to property can be gained during the negotiations, for example accommodation works like screening or fencing.

A single-carriageway section of the A9.

the national scale. From a local perspective it should increase safety and reduce frustration for road users. Challenges remain in managing and accommodating the opinion of the public and directly affected landowners, and also ensuring minimal impact on the environment.

A96 plans are currently at initial stages of consultation. The A9 is more advanced, with the statutory process already started.

So far, CKD Galbraith has been involved in advance consultation meetings to ensure our clients objectives are considered in the initial design process as well as negotiating access for survey works and subsequent crop loss compensation claims for a number of landowners along the A9 route between Luncarty and the Pass of Birnam. In early 2014 these same landowners were issued with statutory documents and plans detailing the land to be bought by Government.

Landowners losing land or property should expect to receive remuneration at market value. So it is vital that they have the most relevant and up-to-date information on land values to hand.

Public exhibitions with project updates tend to be advertised. However most of the information shared can also be found on the project websites via www.transportscotland.gov.uk.

Those who believe they may be affected by either project should adopt a pro-active approach, getting involved in the consultation process as early as possible, discussing concerns with Transport Scotland and seeking professional advice.

Nick Morgan is a land agent in the Perth office of CKD Galbraith. nick.morgan@ckdgalbraith.co.uk Tel: 01738 456 063

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he introduction to this project in the last issue of Energy Matters culminated in a challenge: should we build our own 15kW turbine, or a large-scale turbine either ourselves or in conjunction with a developer, or do nothing?

We chose the 500kW turbine to maximise the farm’s wind power potential. If the planning application failed, we could always fall back on a smaller turbine with a higher chance of approval.

We decided to work with a developer, mainly to reduce the risk of a project with a projected capital cost in excess of £1m. With mid-range turbines being a relatively new technology we weren’t confident we could choose a manufacturer who would be still around in 10 years to fulfil any warranty or operation and maintenance agreement.

We signed an agreement with the renewable energy firm Temporis Wind so it could investigate the viability of the project. This bound neither party but gave Temporis exclusive rights to investigate the potential.

Tax implications: trading or non-trading

The farm was rented by a family owned limited company under a Protected Agricultural Tenancy which began before 1995. The main tax concerns were inheritance tax (IHT) and income tax. Due to the agricultural tenancy the farm benefited from 50 per cent Agricultural Property Relief from IHT. Should the farm enter into a joint venture with Temporis the wind turbine would be a trading asset eligible for Business Property Relief and the IHT position would remain largely unchanged. If we leased the project to Temporis, the wind turbine would not be a qualifying asset for any IHT relief and, with the lease having an estimated capital value in excess of £350,000, at a tax rate of 40 per cent, this could potentially increase IHT liability by at least £140,000.

The risk profile of the business meant we did not want to enter into a joint venture, so the next consideration was how to reorganise matters in the event of a lease.

The limited company’s tenancy did not permit sub-letting for renewables, but it was advantageous for any income from the project to be received by the company as profits to be taxed at Corporation Tax rates which are lower than personal tax rates.

The limited company agreed to surrender its protected tenancy in exchange

The rocky path to planning approval FARMING THE WIND PART 2

Mike Reid continues the story of the wind turbine project on his family’s farm in Fife. for being granted a Limited Duration Tenancy with consent to sub-let for renewables.

The farm ownership was split between generations and the older generation’s share of the option site was gifted to the younger generation to remove it from their IHT estate. This did not trigger a Capital Gains Tax charge as the gain was below the taxable threshold. An added bonus was that the new tenancy agreement enabled 100 per cent Agricultural Property Relief from IHT on qualifying assets whether or not the turbine project was successful.

The tax position will be different for each situation but it is important to consider tax implications early on in a project.

Development progress

A positive scoping report opinion was received from Fife Council and the Ministry of Defence confirmed that a 74m high turbine would be permissible owing to the radar shadow caused by the ground contours between the farm and Leuchars airbase some four miles away. The grid connection looked as though it would be affordable, so it was time to move to the next stage.

While Temporis carried out the planning and other preparatory work, including bird and other surveys, the farm was agreeing heads of terms and then subsequent legal agreements for an option for Temporis to take a lease should it obtain planning consent.

The option and lease terms set out the contractual position between the parties and gave Temporis the right to request a lease should it obtain planning and other consents for a single wind turbine project on the farm.

During the option negotiation, Temporis was clear with us about the impact on the farm, not just in terms of the land required, access improvements and mineral requirements, but also in terms of noise parameters, shadow flicker and a wind protection zone.

MOD objections & micro-siting

Having confirmed a 74m high wind turbine to tip height would be acceptable, the MOD objected that this height of turbine would interfere with the Leuchars radar.

To remove this objection the turbine had

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The tax position will be different for each situation but it is important to consider tax implications early on.

to be relocated and the tip height reduced to 67m. Prudently Temporis’s planning application had allowed for micro-siting so the turbine could be relocated without a new application having to be submitted.

Planning decision

With only one non-statutory objection, the planning application was to be determined by delegated powers by the planning officer. On April 26, 2012 planning consent was refused on the basis of visual amenity. Temporis appealed to the local review body — the only option

as the application had been dealt with under delegated powers rather than by the planning committee.

The local review body made a site inspection in October but deferred its decision until the November meeting as it only had information for a 74m high turbine rather than one 67m high.

The council wanted to determine the application armed with correct information on the effects of ‘noise and shadow flicker’ before reaching a decision, even though noise and shadow flicker were well within permitted levels for a 74m turbine.

On reflection, we believe the delay was a benefit. Councillors had more time to consider the application and were aware of the site as they drove past, and this may have helped, as consent was granted at the re-convened November hearing. It then took until February 27, 2013 before the formal planning notice was issued.

Getting planning consent can be a long, uncertain process, and the eventual decision down to a handful of elected people.

Fife Council followed due process with the necessary press advertisements for the application but this wasn’t picked up in the locality. A number of local residents, not close enough to receive a neighbour notification but certainly able to see the turbine, were unhappy that they had been unable to comment on the application as they were not aware of it.

Some locals understandably just don’t like wind turbines, but others are more frustrated with the planning process for our development.

Gaining planning consent was a major step forward, but there was still construction and commissioning to be completed, and with changes to the Feed in Tariff on the horizon that could potentially reduce income, there was still a long way to go.

To be continued…

Mike Reid heads up CKD ­Galbraith’s utilities department, with particular expertise in ­telecoms and windfarms. He is based in Cupar. mike.reid@ckdgalbraith.co.uk Tel: 01334 659 984

www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Summer 2014 | Page 13

Senior surveyor returns to his roots

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HE energy division of CKD Galbraith has made a senior level appointment with the recruitment of David Clarke from CBRE Global ­Investors in London.

A son of Perthshire from a farming background, senior surveyor David, below, has returned to Scotland, having spent 13 years in the London commercial investment scene with CBRE Global Investors, ING Real Estate and DTZ. He will be an integral part of the energy team, which has grown significantly over the last few years with teams now operating across the firm’s network of offices. David will work alongside partner Richard Higgins and divide his time between the firm’s offices in Stirling and Edinburgh.

David will be involved in a number of ongoing projects, including the firm’s work on the offshore wind farm being developed by Moray Offshore Renewables, and his remit will include delivering specialist energy advice, encompassing detailed renewable valuation consultancy.

Richard Higgins of CKD Galbraith said: “David’s unique set of analytical and valuation skills coupled with his high-level knowledge and experience make him a real asset for the firm as we continue to develop and expand our commercial and energy divisions.”

David said: “I’m delighted to have moved back to Scotland and am very pleased to have joined CKD Galbraith at what is a very exciting time for one of Scotland’s leading independent property firms.

CKD Galbraith opens new Aberdeen office

C

KD Galbraith has expanded its operations in the North East with the launch of its office in ­Aberdeen. Located in Cults, the office provides opportunities to develop the range of services the firm offers in the region.

Richard Higgins, partner in CKD ­Galbraith’s Energy and Commercial teams, said: “We have been active in both the energy and commercial sectors in the North East for many years. The opening of the new Aberdeen office is an exciting move for the business as it allows us to offer the firm’s full range of services to the buoyant North East.

“Our commercial department has a significant workload in the region and we manage, let and acquire property on behalf of a wide-ranging client base.”

Current energy projects include: • Acting on behalf of Aberdeenshire Council in the co-ordination of the planning process for four wind turbine sites; • The firm is appointed by Moray Offshore Renewables Ltd to assist in the onshore land elements for the offshore windfarm, which received consent in March 2014; • As framework partners for SSE, we are active across the region, dealing with wayleaving and compensation issues; • As traditional rural estate managers and agricultural advisers, we have significant experience in micro generation and infrastructure projects both on clients’ land

“I look forward to my new role in the renewables sector, providing advice on the property aspects of some key utilities and renewable energy projects.”

David can be contacted on 01786 434630 or david.clarke@ ckdgalbraith. co.uk.

Page 14 | Energy Matters Summer 2014 | www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy

and where land is affected by schemes.

Tom Stewart, partner, heads up the ­thriving farm sales and rural department in the new Aberdeen office. The ­established team of experienced rural property professionals and land managers provides advice across the full range of rural disciplines such as estate management, valuations, telecoms, renewable energy and subsidies.

Leading the residential team is partner George Lorimer, who has been with the firm for more than seven years. He led

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The new office allows us to offer the firm ’ s full range of services to the buoyant North East.

the firm’s growth into the premium Fife property market when he headed up the launch of the successful residential sales and lettings department at the Cupar office in 2009.

Rod Christie, agency partner in the firm’s Elgin office, will continue to handle sales in Moray as well as Aberdeenshire.

George Lorimer said: “This region has some stunning properties and farmland which, with our strong, trusted brand and excellent track record, we are in an excellent position to represent.

Phone-mast landowners urged to keep cool

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roperty owners should think carefully rather than giving up their rights under agreements with mobile telecoms companies. Landlords told by network operators that their incomes may be at risk unless they agree to revised terms should seek independent advice, says CKD Galbraith’s Mike Reid.

The new Aberdeen team, from left: Yvonne Laing, Tom Stewart, Lynn Trykowski, Andrew Nicol, Diane Fleming. Inset: George Lorimer.

Left and below: The new office, inside and out.

“With our local knowledge and national presence, we provide rural and city clients with a crucial alternative. Over the last quarter we have seen a strong increase in business across our national network of offices in Scotland and believe that this is set to continue throughout the year, especially in the prospering Aberdeenshire market.”

A report published by the Registers of Scotland (March 2014) described positive signs in the Scottish property market, with all seven cities experiencing a substantial increases in the numbers of properties sold in 2013 compared to 2012.

Aberdeen saw an increase of 18.8 per cent, with the average property price in the city rising by 6.8 per cent over the period.

This trend is supported by CKD Galbraith, which experienced an increase in property sales throughout 2013, up by 34 per cent on the previous year’s figures for the firm as a whole.

Prices achieved were on average within 0.5 per cent of the asking price, highlighting the firm’s expertise in setting accurate property valuations, with a recent survey of clients highlighting that 98 per cent of respondents would reuse and recommend CKD Galbraith.

The forecast is bright for those looking to sell in the coming months and the firm believes that the growth demonstrated in 2013 is set to continue in the North East throughout 2014 and beyond.

Vodafone and O2 owner Telefonica have agreed to share infrastructure and have set up a joint venture company, Cornerstone Telecommunications Infrastructure Ltd (CTIL). It aims to improve reception for customers, but also to cut costs.

Vodafone and O2 have been writing to landowners requesting their agreements are assigned to CTIL and proposing changes in their favour. Requests for significant rent reductions, frequent tenant break clauses and more relaxed agreement terms are commonplace, sometimes giving the impression the site will be decommissioned if terms can’t be agreed.

While some sites will be decommissioned as part of the network consolidation plans, agreeing to the operators demands may make little difference to whether a site is retained.

Mike, who heads CKD Galbraith’s Utilities Department, says this does not necessarily mean property owners should concede to the operator’s demands and bear the brunt of cost savings.

“Some landlords will actually be in a very good position to renegotiate to their own advantage,” said Mike, who is based at the firm’s Cupar office. “Often the situation is presented as a problem that only the mobile operators can solve, but even when owners feel they have little bargaining power, there is usually more than one course available.

“Reviewing the existing agreement terms often shows the operator cannot implement their proposals without the owner’s consent. We have helped many property owners in such circumstances reach an amicable settlement with their much larger tenants where, in some cases, rents have been increased and other terms improved in the owner’s favour.

“I urge anyone in a similar position to seek professional advice to ensure they don’t give concessions unnecessarily.”

www.ckdgalbraith.co.uk | Twitter: @CKDGEnergy | Energy Matters Summer 2014 | Page 15

www.galbraithgroup.com

our expertise l Valuations l Investment

in ­renewables/

l Planning

l Wind power

l Land referencing

l Biomass

l Telecoms

l Solar energy

financial incentives l Utilities

l Hydro power

Our energy experts can be contacted in the following offices:

RENEWABLE PROJECTS CKD Galbraith’s extensive experience in renewables stretches across Scotland, including the islands, and into the north of England.

get in touch

Aberdeen Tom Stewart 01224 860 714 tom.stewart@ckdgalbraith.co.uk

KEY to map Wind

Biomass

Hydro

Solar

Ayr Caroline Campbell 01292 292 305 caroline.campbell@ckdgalbraith.co.uk

Cupar Mike Reid

01334 659 984

Edinburgh Anneka Fraser

0131 240 2280

Inverness Dougal Lindsay

01463 245 380

Perth Calum Innes

01738 456 075

mike.reid@ckdgalbraith.co.uk

anneka.fraser@ckdgalbraith.co.uk

dougal.lindsay@ckdgalbraith.co.uk

calum.innes@ckdgalbraith.co.uk

Peebles Harry Lukas 01721 722 727 harry.lukas@ckdgalbraith.co.uk Stirling Richard Higgins

01786 434 625

richard.higgins@ckdgalbraith.co.uk

For a full list of our energy experts go to our website or see our guide to Who’s Who in our Energy team.

Visiting the Royal Highland Show this year?

We are delighted to announce we will have a stand at the show again this year.

Professionals from across the full breadth of the firm will be on hand and look forward to welcoming you to our marquee. Visit us on Avenue O (behind the Grandstand) between 10am and 5pm throughout the show (19 to 22 June).

For details of all the events and shows we are attending this year, please visit www.ckdgalbraith.co.uk

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