Galbraith Energy Matters Spring 2012

ENERGY MATTERS THE NEW VOICE IN ENVIRONMENTAL CONSULTING

• Energy: the hot topic

• Keep tuned into current affairs

• Solar power in an uncertain climate

• Hydro benefits to Scotland’s estates

• Alternative energy: the burning issues

• CKD Galbraith forum speaks volumes

• Experts chart wind farms’ progress

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Energy: The Hot Topic A hydro scheme is launched in the Highlands Challenges and opportunities of solar energy Hydro power as a business idea and energy source Complement or Competition: A Case Study Giving you the gen on biomass The future’s bright – progress report on windfarms Rapid changes in sustainable energy Spotlight on our Energy Team

CKD Galbraith is the leading independent property consultancy, with 12 offices throughout Scotland.

The firm provides a full range of property consulting services across the commercial, residential, rural and energy sectors. Drawing on a century of experience in land and property management, the firm is progressive and dynamic, investing in its 200 people and in technology.

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.

ENERGY: THE HOT TOPIC CKD GALBRAITH ADVANCES FIRST MOVERS CAN GET GREAT RESULTS, AS TIM KIRKWOOD REPORTS. CKD GALBRAITH, THE LEADING INDEPENDENT SCOTTISH PROPERTY CONSULTANCY, IS THE NEW FORCE IN ENVIRONMENTAL CONSULTING WITH THE LAUNCH OF ITS ENERGY TEAM. The expert business unit has been established to help clients benefit from the growth in demand for energy production and transmission.

The team helps landowners, developers, utilities and communities to make the most of their natural resources and Government incentives aimed at encouraging participation in this growing area of activity.

A long-established firm of chartered surveyors known for the quality of its work, CKD Galbraith has been increasingly active in renewables over the past decade, advising on biomass, wind and solar power.

Often working alongside other specialist advisers, the firm provides guidance on maximising opportunities associated with the Scottish Rural Development Programme, feed-in tariffs (FITs), renewable obligation certificates (ROCs), the Renewable Heat Incentive (RHI) and the Community and Renewable Energy Scheme.

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WE HAVE BEEN DEVELOPING OUR EXPERTISE IN THIS AREA FOR OVER A DECADE.

The team brings together experts from the firm’s 12 offices across the country and combines specialist surveying, land management and planning consultancy skills, all focused on achieving the best results.

Government incentives have made renewable energy a hot topic in the property world lately – but we have been developing our expertise in this area for over a decade.

The Energy Team’s Sarah Tyson said: “All of us involved in property today have to keep up to speed with developments in renewable energy and the concept of sustainability – from estate agents to farmers and factors of estates.

We have a comprehensive database of knowledge for the larger wind-farm developments and are compiling a wide variety of information on the possibilities for smaller schemes.

Solar panels, smaller wind turbines and hydro electric schemes are all increasingly popular, but with the number of renewables consultants appearing, it is critically important to choose the right one, with a proven track record.

Tim Kirkwood is Chief Executive of CKD Galbraith and is based in Inverness where he provides management services and consulting to a wide range of clients.

An honours graduate in ecology, he has particular expertise in aquaculture work.

Contact him on 01463 245350 or at tim.kirkwood@ckdgalbraith.co.uk Each scheme is different and every owner has particular requirements. Government-backed incentive schemes or integration with other land-management objectives can make the vital extra margin.”

Calum Innes, a partner of CKD Galbraith, added: “It’s not just individuals – often neighbouring landowners are getting together to make things work, such as neighbours collaborating to undertake a hydro-electric scheme on a march burn. Even if you are not going in directly on a joint scheme, you may need to negotiate access or cable routes across your own and neighbouring ground and we have huge experience of this, right across the country.”

With the Government driven to increase the use of renewable energy sources, the firm encourages all property owners and occupiers to consider their options for renewable energy as both a cost saving and a major source of income. With greater understanding, the evidence is that with CKD Galbraith’s advice, clients are able to enter into joint ventures or collaborative schemes yielding greater returns to those involved while generating and retaining additional benefit to the community.

CKD Galbraith is at the forefront of advising clients on all property-related issues and commercial aspects of energy developments. The firm has been involved in direct negotiations on wind-power sites of more than 1,000 megawatts and hydro sites of more than 100 megawatts.

Follow us on Twitter: @ckdgalbraith Like us on Facebook or Join us on LinkedIn: linkedin.com/ company/ ckd-galbraith

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KEEP TUNED IN TO CURRENT AFFAIRS...

NOW PROPERTY EXPERTS LEAD HYDRO REGENERATION GAME CKD GALBRAITH IS ALSO A LEADING LIGHT IN THE HYDRO-ELECTRICITY GENERATION GAME – HELPING A LARGE SPORTING ESTATE IN THE HIGHLANDS AND NEIGHBOURING LAND OWNERS CONTRIBUTE TO GREEN POWER. CELEBRATING THE LAUNCH OF A HYDRO SCHEME IN THE HIGHLANDS. DOUGAL LINDSAY HAS THE DETAILS. The firm helped them in taking advantage of Government incentives for renewable energy, and came to the conclusion that a hydro scheme presented a suitable investment opportunity.

The combined properties featured a march burn with the key ingredients of a suitable head of water [height and drop] and flow that was inaccessible to salmon and sea trout due to a waterfall.

Road access was good, and with estate tracks leading beyond the intake, only a short section of new track was needed.

The powerhouse, containing the turbine and generator, is 20 metres from a public road and five metres from the main transmission line, minimising the cost of private cable connections to the grid.

The completed “run of river” (i.e. no storage lochs) generating scheme has an “installed capacity”, or potential power output, of about 680kw.

Comprehensive environmental and fishery studies were undertaken as part of the planning process as well as technical assessments.

This produces enough energy for about 500 households, assuming an average annual consumption of 4,700 kWh, with the entire output sold to the grid, which is obliged to take all power produced.

CKD Galbraith appraised the scheme, comparing the joint venture approach with rental options and negotiating the JV agreement with neighbours. The firm also liaised with contractors, planning and technical consultants.

The project illustrates how landowners are capitalising upon the Feed In Tariff (FIT) and helping to meet the Scottish Government’s plans to generate all Scotland’s own electricity demand from renewable sources by 2020.

With planning consent granted, contractors had 18 months to build the scheme, during which time FIT was launched, offering substantially improved levels of support for qualifying renewable energy projects.

CKD Galbraith expects demand for renewables to grow, as there is little hope of carbon fuel prices falling in the medium or long term.

Meanwhile, energy prices kept rising, so that now the scheme has been commissioned, its economics are even more favourable than originally envisaged under the Renewable Obligations Order.

The estates formed a joint venture company to develop, own and run the hydro asset, with each party contributing equally.

Both estates have staff able to carry out necessary routine maintenance and the project has created a closer working

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ECONOMICS ARE EVEN MORE FAVOURABLE THAN ORIGINALLY ENVISAGED UNDER THE RENEWABLE OBLIGATIONS ORDER.

relationship between the two, with those involved at ground level genuinely enthused.

We were able to step into our client’s shoes to co-ordinate the project and focus the efforts and contributions of all those involved on their side.

Dougal Lindsay of CKD Galbraith’s Inverness office, led the project on behalf of one of the Joint Venture Partners Contact Dougal Lindsay on 01463 245380 or dougal.lindsay@ckdgalbraith.co.uk

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GOVERNMENT CUTS TO SOLAR PANEL SUBSIDIES HAVE HAD REPERCUSSIONS BEYOND HOUSE HOLDERS. FIONA SAMSON LOOKS AT SOME OF THE CHALLENGES AND OPPORTUNITIES THAT COMPANIES FACE TODAY.

SUNSHINE BREAKS THE OUTLOOK FOR SOLAR ENERGY SUBSIDY IN THE UK HAS BEEN OBSCURED SINCE THE UK GOVERNMENT CONFIRMED IN OCTOBER THAT FEED IN TARIFFS (FITS) FOR SOLAR TECHNOLOGY WOULD BE CUT, NEARLY DOUBLING THE PAYBACK PERIOD FOR HOUSEHOLDERS AND LENGTHENING IT SUBSTANTIALLY FOR MOST USERS. On 21 December the High Court ruled in favour of Friends of the Earth and two solar companies, finding that the Westminster Government’s consultation on solar FIT breached consultation rules and was unlawful. Climate Change Minister Greg Barker pledged to appeal immediately against the judges’ ruling, adding: “Regardless of [the] outcome, the current high tariffs for solar PV are not sustainable and changes need to be made to protect the budget, which is funded by consumers through their energy bills.” In January 2012, the Westminster Government lost its appeal against a judge’s ruling that its cuts to solar power subsidies were illegal. By the end of March, the Supreme Court rejected the Government’s final appeal, meaning that installations which were commissioned between the 12th December 2011 and 3rd March 2012 would be eligible for the existing rate. Thereafter, any installations will be subject to the revised rates. The falling cost of capturing the sun’s energy, against a background of rising fossil-fuel prices, has

PANELS OF EXPERTS: CKD Galbraith’s Fiona Samson and Climate Change Minister Greg Barker.

made investment in this technology far more attractive than was originally anticipated – though some in the industry claim subsidy cuts were always likely.

Householders, investors and suppliers have rushed into the technology. Three times as much solar capacity has been installed as the Department of Energy and Climate Change had forecast, with more than 100,000 installations so far. There were also concerns that under the new scheme, much of the UK’s older housing stock, where its capacity for energy efficiency improvements is limited by the wide use of older, inefficient building materials and methods, would be excluded from higher FIT rates – a particular problem for rural areas where there is generally more space and fewer obstructions for capturing light.

As the High Court action by Friends of the Earth and two companies confirmed, investors are concerned by the scale of the cuts combined with their sporadic timings.

Yet many will sympathise with measures to rein in spending to free funds for other renewables. Solar remains an attractive way to maximise energy resources and cope with the uncertainty around fossil fuels and the changes will affect not just the solar industry but also commercial and residential owner-occupiers who are looking to reduce their carbon footprint.

While the payback for solar is longer, we understand that the capital cost of installing panels will fall as the FIT scheme was keeping prices buoyant, limiting any negative effects of subsidy cuts.

Quality panels, well installed, are a good way to future-proof your home by cutting bills.

On the business side, being seen to be green attracts customers. Commercial landlords might look to invest in solar and then rent out properties with added benefits of tenants using a renewable and free resource to generate electricity.

Fiona Samson is a rural practice surveyor with experience of negotiation of option and lease agreements, joint ventures, access negotiations and wayleave agreements for small to large scale wind projects along with biomass and solar photovoltaics experience from a property owner’s prospective.

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Contact Fiona on 01343 546 362 or at fiona.samson@ckdgalbraith.co.uk

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QUALITY PANELS, WELL INSTALLED, ARE A GOOD WAY TO FUTURE-PROOF YOUR HOME BY CUTTING BILLS.

www.ckdgalbraith.co.uk A version of this article first appeared in the Press and Journal on 11 January 2012

GRID PATTERNS:

POWER PLAY

Investing in new schemes requires expert advice

CASE STUDY CKD Galbraith’s specialist utilities department has huge experience in work connected with power transmission and distribution regularly acting on behalf of multinational utility companies with whom the firm has developed a close working relationship.

HYDRO SCHEMES CAN BRING MAJOR BENEFITS TO ESTATES WITH THE COST OF FOSSIL FUELS RISING, AND LITTLE EXPECTATION OF THIS TREND ALTERING GREATLY, PROPERTY OWNERS WHOSE ESTATES FEATURE RUNNING WATER ARE CHOOSING TO HARNESS HYDRO POWER – BOTH FOR THEIR OWN USE AND TO SUPPLY THE ELECTRICITY GRID. We believe hydro will gain momentum as a viable energy source, but from every perspective – including maximising output and minimising environmental impact – one should remember that no two schemes are the same. Anyone considering investing in hydro therefore should bring in expert help and consider the options carefully.

We have been involved in two hydro schemes on a traditional estate in Perthshire which is involved in farming and sporting activities.

The two schemes were among seven projects connecting to the grid across six estates.

Completion of the schemes was made possible through collaboration between all parties involved.

ENVIRONMENTAL FACTORS A grid connection comprising 20km of new line was required across some of the most dramatic scenery in the UK, various parts of it deemed a National Scenic Area (NSA), Special Site of Scientific Interest (SSSI) and Special Area of Conservation (SAC).

The estates decided to install an underground grid connection.

The joint developers worked closely with the electricity company SSE and the grid connection was installed in 2010.

As the hydro schemes are on burns that flow into the River Tay system, co-operation with the Scottish Environment Protection Agency (SEPA) and Scottish Natural Heritage was key.

DEVELOPMENT CONSIDERATIONS These hydro schemes provide a good example of how the changing regulatory landscape can influence decision making. At first two energy companies, attracted by the local landscape and rainfall levels, expressed interest in the hydro potential, but were put off by the grid connection costs and what was considered the relatively small size of hydro potential.

For the estate, the introduction of Renewable Obligation Certificates in April 2002 made undertaking the project “in-house” a more interesting proposition.

Then, the advent of the Feed In Tariff (FIT) in April 2010 improved the potential for both even more by opening the way for a 10 to 15-year write-off period for tax. However, the risks are not for everyone and there were two other alternatives to consider.

LEASING ROUTE Some estate owners would prefer to bring in an outside property entrepreneur to obtain planning permission, develop and run the scheme. Typically, developers secure a site through an option agreement, then sign a lease agreement after the relevant permissions have been obtained.

The lease fee is normally based on a percentage of turnover which often increases over a 40 or 50-year-term as the developer pays off the project cost.

JOINT VENTURE CKD Galbraith has in its network a number of joint venture companies that are looking for small to medium-sized hydro schemes.

They would share in the development costs and risks and can often contribute their expertise in developing renewable schemes. This option gives the owner more control and a better return, but it does involve an element of risk.

Bearing in mind that the terms of a joint venture should be clearly defined at the start, this option is likely to become increasingly popular.

CONCLUSION Our involvement in the Perthshire project added to our bank of expertise and experience and underlines a number of trends we are seeing in hydro schemes.

Firstly, FIT allows small to medium hydro schemes to be developed even in remote areas. Further, developing a hydro scheme under the existing FIT arrangements can produce a useful return depending on the level of involvement and degree of risk.

Also, the landowner who goes it alone has the satisfaction of contributing to renewable targets and provides useful trading income to assist some of the other traditional activities on an estate.

Finally, renewable schemes can help to support communities by boosting business and jobs.

Contact Alex Jameson on alex.jameson@ckdgalbraith.co.uk

Examples include: Upgrade the transmission line between Beauly and Denny to 400kV to meet demand for power and provide grid connections from renewables.

OBJECTIVES:

• To help construction by Balfour Beatty Utility Solutions of new 400kV overhead line and decommissioning of the 132kV Beauly Denny line.

• Identify and procure planning consent for utility site compounds and helicopter landing areas.

METHOD:

• Site identification in line with consent under Section 37 of the Electricity Act 1989.

• Site procurement (option or lease, legal aspects) of more than 15 sites.

• Pre-planning consultation.

• Preparation and submission of planning application.

• Community consultation and post-application planning consultation.

• Discharge of planning conditions.

MAIN CHALLENGES INCLUDE:

• Planning applications for selected sites.

• Mediating between clients.

OUTCOMES:

• Client acquisition of compounds and landing areas.

CKD Galbraith has been asked to go ahead with the acquisition and submission of planning consents for helicopter areas.

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CKD GALBRAITH’S TIM KIRKWOOD LOOKS AT THE VITAL ROLE SPORTING ESTATES PLAY IN THE SCOTTISH ECONOMY AS WELL AS THE ECOSYSTEM DISCUSSING RENEWABLE ENERGY AS AN INCREASINGLY IMPORTANT PART OF ESTATE MANAGEMENT

COMPLEMENT OR COMPETITION? SCOTLAND OFFERS SOME OF THE BEST SPORTING IN THE WORLD, AN INVALUABLE ASSET THAT HAS ITS PART TO PLAY IN THE WIDER SCOTTISH ECONOMY. Shooting and fishing and, to a lesser degree, stalking generate significant income, however, not just from the revenue from letting the sport itself but from ancillary accommodation, servicing, travel and outfitting revenues, where estimates have put the revenues generated at something like £275 million a year – grouse shooting alone generates some £30 million a year and supports over 1,000 full time jobs in Scotland as a whole.

To put this in perspective, Scottish beef in 2009 had a farming output of £588 million, sheep £226 million and Scottish agriculture overall £2.26 billion. Sport and agriculture are major employers in fragile areas and are significant economic drivers for the uplands.

They can both complement and compete with other land uses and these days the uses of land goes well beyond the owners and occupiers of that land. Our uplands comprise significant reservoirs of a modern fossil fuel, peat, and degradation of the environment can lead to the release of CO2 from the reservoir to the alarm and consternation of those concerned with climate change. The public have pretty much unrestricted access to all of our uplands and moorlands for not only private purposes but for organised commercial purposes too.

Significant parts of our uplands are designated sites of special scientific interest.

Some of our major rivers and their

catchments are a special area of conservation, a European Designation. So our people, through our government and through European powers, have a direct interest in, not only these areas, but in some cases, those adjacent to them too.

deal in a very fragile habitat. Being high ground, and pretty nutrient-poor, management systems have to be extensive and over-use of the resource results in lasting and long term damage, to the detriment of all such uses.

But Scottish agriculture is changing and remains in flux. In the uplands the area registered as rough grazings has remained more or less constant over the last 10 years, the number of beef cattle has reduced by about 9% and sheep 18% – so about two million less sheep.

So, we have to look after the ecosystems and practise sustainable management for whatever priority is set. For example we are re-learning that grouse and sheep can go well together. One without the other, and in the absence of excellent husbandry, can cycle through disastrous boom and bust fluctuations.

Agri-environment schemes, formerly through ESA and now through SRDP aimed at reducing pesticide and nutrient emissions, protecting biodiversity, restoring landscapes and preventing rural depopulation have had the highest uptake in areas of extensive agriculture, as is the case in our uplands, where biodiversity is relatively high. But there is evidence of a mixed outcome. A study in Northern Ireland indicates no demonstrative effect on their target species of mountain hares but an increase in ESA’s of foxes and rabbits. In Britain, the cost of fox losses to agriculture in 2000 was estimated at £12 million and the latest estimate of the economic losses to rabbits alone in Scotland has been put at £12 million. Foxes control rabbits, keepers control foxes – it is all a complex circle.

So what might be going on up a hill? Red deer stalking, grouse shooting, salmon spawning grounds, forestry, renewable energy, valuable habitat, livestock farming, recreation and winter sports; in fact a great

The correct sheep stocking density and hefted grazing regime, linked with a rejuvenating burning programme, results in a productive heather mosaic. Tick and virus disease control in turn creates a superb habitat for livestock and, not only grouse, but also all sorts of upland birds and mammals.

With the prospect of grouse, gamekeepers can be employed – they control the vermin, which makes life easier for the lambs.

Working together, the sheep farmer and the grouse moor manager can complement each other’s enterprise to great effect. In many cases, working independently simply does not yield anything like the best of both worlds. And what about revenues? A brace of grouse, shot driven, might yield £150 – not so very different to a brace of good lambs, but perhaps a bit more challenging in sporting terms!

Continued Overleaf

www.ckdgalbraith.co.uk An edited version of this article first appeared in Sporting Lets 2012.

COMPLEMENT OR COMPETITION?

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SPORTING ESTATES ARE INCREASINGLY INTEGRATING RENEWABLE AND SUSTAINABLE ENERGY SCHEMES.

Red deer stalking generally requires less environmental management but high numbers of grouse, such as required for a driven moor, can mean that deer numbers have to be reduced where louping ill is an issue. In days gone by, many a keeper maintained that the conflict between deer and grouse on a grouse moor was that large numbers of deer trample eggs and nests; the truth, I think, is more likely to be related to the louping ill cycle. But what of ticks? Could it be that increasing tick burdens are related to a warming climate and if so, renewable energy could be part of the solution? Those assets that provide the hills and forests for deer, the moors for grouse and the rivers, lochs and burns, for salmon and trout can also be harnessed for a newly viable and very valuable resource, renewable energy.

Today, in order to make the most of rural property and enable the continued re-investment necessary to keep it in tiptop condition, the balance of potential renewable energy schemes and sporting must be carefully considered.

As a result sporting estates are increasingly integrating renewable and sustainable energy schemes into their existing enterprises, especially since the introduction of the Feed in Tariffs (FiTs) in April 2010.

These can provide a guaranteed income, resulting in relatively short capital payback periods often in a very tax efficient way both in respect of income and capital taxes. The Westminster Government’s bid to reduce subsidy level has been challenged in the courts but whatever the outcome, the incentives are likely to remain generous, in my view.

Whether generating power to use within the estate, selling it into the grid or a combination of both, wind, hydro electricity, biomass and solar schemes can provide key additional income as well as cutting costs and reducing carbon emissions without adverse impacts on existing interests.

Imagine running the estate fleet of vehicles on hydrogen generated from a wind turbine, meeting the energy costs on the farm through fermenting its waste products or heating the lodge from heat in the ground, pumped by energy generated in a hydro turbine. Even the age old practice of burning wood to keep warm is part of the modern revolution and all supported by significant financial support from a government bound to deliver challenging targets in renewable energy production. All this could be possible

in addition to generating significant revenues for the estate.

A development of course requires sensitive handling, hydro-schemes and fisheries can be uneasy bedfellows, wind farms and wilderness can have a difficult relationship, the energy has to be transported by infrastructure over long distances and of course what happens in the countryside is of great interest and importance to all those who enjoy it. A wide appreciation of all the issues, detailed environmental impact and cost-benefit analyses are necessary and often complex legal, tax and practical issues need to be overcome. CKD Galbraith can help in project managing such developments from conception to completion.

There is a global agenda to move away from the carbon economy and many aspects of our own economy need to prove their green credentials.

Finance providers are no exception with many now specialising in backing sustainable projects. There are many ways to share the risks, from standard leases to tailored joint venture agreements.

The CKD Galbraith Energy team can review opportunities, including the financial incentives available, and evaluate the options to provide the solution most appropriate for your estate.

and pleasure we can pass on this valuable and unique asset to future generations in good heart.

Sporting estates, where properly managed – and that requires some pretty deep pockets on occasions – can help deliver a number of key environmental, economic and social objectives. There is a big point here. Much is said about who owns our sporting estates, in fact the key issue is not how they are owned, it is how they are managed that really matters; a huge subject, which my firm and others like us, wrestle with on a daily basis.

I personally feel that it is very unfair that upland sporting management gets such consistently bad press. One case of wildlife crime, however spurious, hits national headlines, the ongoing hard work and undeniable benefits are never reported. It appears that those who govern us conspire to make responsible management of the sporting estate more and more difficult – ultimately at what cost?

TIM KIRKWOOD IS CHIEF EXECUTIVE OFFICER, CKD GALBRAITH LLP, THE LEADING INDEPENDENT PROPERTY CONSULTANCY WITH 12 OFFICES THROUGHOUT SCOTLAND.

CKD Galbraith manages over one million acres across Scotland. Commercial property and agency of all sorts are part of our business but the core is in the rural sector and we are particularly strong in sporting estates.

As experts our rural managers understand the core issues. Our research and personal knowledge of every stage, including planning, give us a considerable advantage in providing practical solutions. It is vital to our philosophy that specialists are engaged at the appropriate stage when developing schemes, appointing trusted contractors and suppliers in order to maximise project success.

Wildlife, agricultural stock, renewable energy, public access, endangered habitat and our own existence are all intricately related but it is up to us as managers to complement rather than compete wherever possible. All users of our natural resources share a responsibility, whatever the prime objective, to work together to protect fragile upland resources and keep production systems in balance so that as well as deriving income

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CRITICAL BIOMASS FOCUS ON A BURNING ALTERNATIVE ENERGY ISSUE In this respect, biomass power generation is perhaps more akin to a traditional power station fuelled by coal or gas.

Of course, the fundamental difference between biomass and traditional fossil fuels is that the supply is a naturally-replenishing resource which has the added advantage of capturing carbon in its growth stage.

The tenor of press reporting suggests that Mr Ewing is fundamentally opposed to biomass energy.

Is the renewable sector’s ‘poor relation’ about to go up in smoke? Calum Innes looks at this energy source in the light of recent developments and ministerial attention and assesses the future.

Contact Calum Innes on calum.innes@ckdgalbraith.co.uk CERTAIN RENEWABLE ENERGY SECTORS HAVE SUFFERED FROM ADVERSE POLITICAL COMMENT IN RECENT WEEKS. Firstly, the Government announced an impromptu review of support for solar PV, and secondly the Scottish Minister for Energy, Enterprise and Tourism, Fergus Ewing, said he saw little merit in burning biomass for generating electricity.

Biomass is a fundamentally different renewable proposition to solar, wind, hydro or wave – the energy source is not a naturally occurring and freely-available resource but something which needs to be harvested and transported to a plant for incineration.

However, on closer scrutiny, the disenchantment may be more related to scale rather than the fundamental principles.

In most commercial Scottish forests, much of the biomass produced is put to little useful purpose, with it either comprising thinned trees of too small stature to warrant the cost of transportation to a faraway market, or by-product in the form of branches and tops which are left in the forest following harvesting of larger trees.

According to research by CKD Galbraith, this lost or relatively low-value product generally comprises more than 50% of the total biomass produced during the cycle, from planting to final felling.

Accordingly, if this waste and low-value product could be put to beneficial use in locally-generated electricity, biomass would appear to warrant a place in the renewables stable – provided it stays local.

The fundamental benefits of local foodstuffs are well-rehearsed.

The same fundamental should hold true for biomass, so that the power station is close to the forest and sized so that its annual fuel requirements are matched to nature’s ability to generate supply within a reasonable transportation radius.

A number of modest biomass generation plants have received planning consent in recent times. However, the limelight has fallen on major biomass proposals which have been promoted on the basis of the supply being imported from other countries, while benefiting from subsidies.

This may be the model with which Mr Ewing disagrees. If massive wood-fuelled power stations are removed from the equation, we may see some more modest biomass plants being commissioned.

However, this may require forestry owners, including the Government’s own Forestry Commission, to sign up to long-term contracts with supplies at a cost that makes economic sense to both the forest owner and power producer.

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A NATURALLY REPLENISHING RESOURCE WHICH HAS THE ADDED ADVANTAGE OF CAPTURING CARBON IN ITS GROWTH STAGE.

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GENERATION GAME CKD GALBRAITH’S ENERGY EXPERTS CHART THE PROGRESS OF WIND FARM SCHEMES

RENTAL INCOME FROM WIND-FARM SCHEMES ROSE BY BETWEEN 10 AND 15% IN 2011, ACCORDING TO RESEARCH BY CKD GALBRAITH. THE RISE IN AGREED RENTS PAID TO LAND LORDS IN THE 10 YEARS FROM 2002 TO 2011 INCLUSIVE WAS 250%, THE STUDY FOUND. Along with rental increases, the firm noted that other financial agreements, such as payments for use of minerals, frequency of rent reviews and option payments, also rose as developers acknowledged the value of land to renewable energy projects.

Wind power enables landowners to generate income from other sources, helping to diversify away from more traditional land use, generating funds to reinvest and creating positive effects in local economies – a major benefit in rural areas especially. Another advantage is the developer’s contribution to communities, often in the form of annual payments to community councils.

In undertaking lease negotiations, CKD Galbraith’s Energy Team identified several key trends in the wind farm market:

• Leases are becoming more site-specific The energy-research department at CKD Galbraith confirmed that 13 wind farms became operational in Scotland during the year, providing an additional installed capacity of 382 megawatts (MW).

This, added to existing installed capacity, means that Scotland has 2,784 MW of wind power potential.

Ayrshire and Lanarkshire saw the biggest increases in installed capacity, with 176MW and 141MW added respectively.

These were primarily due to large developments coming on line, such as the Arecleoch Wind Farm in Ayrshire and the Clyde South Wind Farm in Lanarkshire.

The Highlands retain the highest output – about 500MW installed capacity, with a further 630 MW approved or under construction and another 1,004 MW put to planners for approval. The Highland region is favoured by developers for its space, reliable wind resource, low population density and a new grid connection on the way.

However, developers continued to face challenges in completing projects – 17 wind farms (309 MW) were refused planning permission throughout 2011, demonstrating the stringent planning requirements.

and complex as landowners try to seek to maximise returns and protect assets;

• Negotiation periods are becoming shorter in many cases as legal advisers gain experience in the sector;

Where landowners bring land and can raise capital, developers can add knowledge, expertise and further funding. Owners taking this route benefit greatly from the advice of surveyors and other professionals to ensure asset values are protected, and in most cases, all fees are met by the developer.

In small-scale renewable energy projects, attention has focused on changes to the Feed In Tariff scheme for solar PV payments.

However, landowners should note that rates for small-scale wind farms are also likely to change in the UK Government’s review next year, though on a lesser scale than for solar.

Developers of single-turbine projects are offering landowners rentals of between 8% and 15% of gross income. These are often fixed rents only, with no staged increases or rent reviews.

• Landowners are more focused on the tax implications of deals agreed – primarily because returns are greater than previously, with income payable over long terms, making tax planning essential.

Habitat management agreements and woodland planting are increasingly a condition of planning consent, requiring developers to improve the environment elsewhere on properties, or plant if forestry is felled to accommodate a wind farm.

Developers are reverting more to landlords to extend wind farms because, as the public adjusts to visual impact, there are fewer objections to additional turbines, and with infrastructure already in place, development is more straightforward on an existing site.

Aside from larger, developer-led projects, landowners are increasingly leading medium scale projects themselves, sometimes alongside a developer or investor.

Single-turbine projects remain subject to planning delays as councils decide how to measure the environmental impact.

Mike Reid, a partner at CKD Galbraith at Cupar in Fife, said: “Wind farms are not only a highly effective means of generating renewable energy but they also provide additional investment to create and preserve employment and economic activity in rural areas.

We have developed a significant body of data and regularly share this with clients.”

Fiona Samson, a surveyor at the Elgin office of CKD Galbraith and a member of the firm’s energy team, added: “There is movement at every level of the wind-farm sector in Scotland.

The outlook for 2012 is very positive.”

For more information contact Mike Reid in Cupar on 01334 659984 or email him at mike.reid@ckdgalbraith.co.uk

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CURRENT PROJECTS Our experience in Renewables extends across Scotland including the Islands and into the North of England.

Key:

Wind Farm

Hydro

Bio Mass

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OUR ENERGY FORUM SPOKE VOLUMES...

WE TAKE THE HIGH ROAD TO KEEP YOU UP TO DATE

SPEAKERS AT THE SEMINAR SARAH C TYSON

LEADING INDEPENDENT PROPERTY CONSULTANCY CKD GALBRAITH HAS LINKED WITH OTHER PROFESSIONALS TO PROVIDE AN UPDATE ON RENEWABLE ENERGY FOR THE PROPERTY MINDED

THIS IS A RAPIDLY DEVELOPING SECTOR IN WHICH IT IS CRUCIAL TO BE UP TO SPEED WITH THE LATEST POLICY AND LEGISLATIVE CHANGES. Sustainable energy generation is seen as an important industry for Scotland but the means of funding its expansion is increasingly the subject of political debate, as shown by the recent Feed In Tariff reviews.

Amid all the potential confusion, it is essential that any renewable projects make sense practically, legally and in their finance and tax structures.

The seminar, hosted by CKD Galbraith, chartered accountants Saffery Champness and lawyers Davidson Chalmers, focussed on recent trends across renewables and the progress of the FITs regime, which has dramatically boosted the sub-5MW market.

The lunchtime event in Inverness on 29 February 2012, identified recent changes and outlined, from a property owner’s practical, legal and accountancy perspective, the key issues.

Sarah Tyson is rural practice surveyor with experience of negotiating access routes, options and leases for larger wind farms, valuations and other elements of renewables work.

Contact her on 01343 54362 or at sarah.tyson@ckdgalbraith.co.uk

Speakers underlined the importance of putting in place an appropriate structure with up-to-date terms at the outset of any project, to ensure an efficient tax and legal position from a landowner’s, developer’s or investor’s perspective. Sarah Tyson, a property specialist experienced in energy and based at the Elgin office of CKD Galbraith, said: “The renewables landscape is changing constantly so it important to understand how to make the most of the opportunities, using today’s values, and avoid potential pitfalls.

Deals agreed now are often for the long term, so it is worth getting figures and details right rather than rushing into an agreement.”

The Renewable Energy Seminar, a free event, took place at the Kingsmills Hotel, Culcabock Road, Inverness, followed by lunch. We run seminars and events in Scotland throughout the year.

For details visit our website www.ckdgalbraith.co.uk

A chartered surveyor at CKD Galbraith’s Elgin office, covers rural property matters in the Highlands and North-East and is a member of CKD Galbraith’s energy team.

She has negotiated wind-farm options, leases and access agreements, and is involved with hydro electricity, including joint venture projects.

A valuer for the Agricultural Mortgage Corporation (AMC), she also works with property owners to help secure AMC funding for renewable projects.

SHIRLEY MATHIESON The head of renewables at Saffery Champness, presents at seminars on taxation and accounting issues affecting the renewables sector. She is involved in more than 40 renewable energy projects.

JAMIE YOUNGER Works from the Edinburgh office of Saffery Champness and is a partner providing tax solutions to landed estates and private clients in a range of business sectors.

ANDY DRANE Heads Davidson Chalmers’ Environmental, Waste and Renewable team in Edinburgh, advising on 30 large wind farm projects.

DOUGLAS TAYLOR Specialises in environmental, carbon, renewables and health and safety issues at Davidson Chalmers. He chairs the Scottish Property Federation Renewables Working Group.

www.ckdgalbraith.co.uk

OFFICES & LOCATIONS ELGIN 01343 546 362 elgin@ckdgalbraith.co.uk

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CASTLE DOUGLAS 01556 505 346 castledouglas@ckdgalbraith.co.uk

ABERFELDY 01887 829 446 aberfeldy@ckdgalbraith.co.uk

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CUPAR

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GALASHIELS 01896 754 842 galashiels@ckdgalbraith.co.uk

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AYR KELSO 01573 224 244 kelso@ckdgalbraith.co.uk

CASTLE DOUGLAS

OUR PEOPLE

BILL ROBERTSON PERTH

ALEX JAMESON PERTH

FIONA SAMSON ELGIN

DOUGAL LINDSAY INVERNESS

RICHARDWEDGWOOD STIRLING

MIKE REID

CUPAR

RICHARD HIGGINS EDINBURGH

SARAH TYSON ELGIN

HARRY LUKAS PEEBLES

WATTIE BARBOUR PERTH

TIM KIRKWOOD INVERNESS

CALUM INNES PERTH

www.ckdgalbraith.co.uk