Galbraith Energy Matters 14

Energy ISSUE 14 | SUMMER 2017

matters

How drones make light work of maintenance PLUS: Is there life after subsidies? | Time to shake up the rating system | Extra value in carbon capture | Where next for energy policy? | The great Crown Estate transfer | Intercity express: the new age of the train?

Welcome

contents

Renewables market needs clarity

4 Step by step to hydro success.

6

Welcome to the latest edition of Energy Matters .

COVER STORY

We are in a climate of considerable political uncertainty with a June General Election followed by Brexit negotiations and potentially another Scottish Independence Referendum.

Irrespective of the political direction taken, life will go on with increasing demand for energy across all sectors.

Renewable power, including for heat and transport, will be a vital part of the energy mix.

Political decisions will affect the direction of the UK and wider energy markets, but the Scottish Government’s draft Energy Strategy has identified that an affordable, safe and reliable energy provision is a prerequisite for healthy living and productive, competitive business.

With the Renewables Obligation (RO) now closed to all new generating capacity and degression in the Feed in Tariff resulting in many smaller projects being shelved, there is currently a lack of support for renewable generation.

A clear vision and deployable long-term strategy for the energy market is needed to encourage innovation and keep the renewables market growing to meet the clean energy challenges ahead.

You may notice a change to the look of this edition. We are now Galbraith, rather than CKD Galbraith, reflecting the continuing evolution of our business and its brand. The label is a fresh one, but the people and the service behind it remain wholly committed to providing the highest quality advice and creative support that is the hallmark of our firm.

Mike Reid

Head of the Galbraith energy and utilities teams mike.reid@galbraithgroup.com 01334 659 984

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 236 people in offices throughout Scotland.

Drones make light work of maintenance.

8 Where next for energy policy?

9 Crown Estate handover questions.

10 Coping with subsidycuts.

11 Carbon capture and added value.

12 The new age of the train?

13 Time to overhaul the rating system.

14 Planning challenges.

Scottish Renewables conference.

16 Digging for data.

18 Castle Douglas move.

19 Current subsidies.

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

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Energy Matters is produced by A ­ llerton Communications, London, and designed

by George Gray Media & Design, St Andeux, France. © CKD Galbraith LLP.

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Is there life after subsidies?

Times are tough for wind energy but, cautions Mike Reid, that’s no reason for landowners to give up their rights in renegotiating terms.

Subsidy changes are making new windfarm developments less attractive than they were, but there is still a future for the industry, and landowners who are approached to re-negotiate previously agreed terms should avoid signing away their rights to any future upside.

Windfarm development in Scotland has all but ground to a halt following UK Government cuts in subsidies that were originally introduced to lessen reliance on carbon fuels such as coal, oil and gas.

The Renewables Obligation (RO) – designed to encourage generation of electricity from eligible renewable sources – closed to all new generating capacity on March 31. Smallerscale generation is mainly supported through Feed-in Tariffs (FiTs), where degression has stopped the majority of developments.

The changes have been introduced in line with Government spending targets and to prevent subsidies becoming the main motivation for new renewable projects. Subsidies helped to fund development of wind turbine efficiency and the significant cuts have been detrimental to this progress. A structured phasing out of support would have enabled the industry to adapt far better. There are still potentially viable wind farms in Scotland, but, unsurprisingly, developers are now using the wholesale electricity price to assess the viability of a project.

Inevitably, this means developers are now offering reduced financial terms to landowners, since a large part of the return has, until now, been made up of subsidy. For some larger projects the reduction in support has reduced the predicted turnover by more than 50%.

There is normally a significant time lag between terms being agreed and the start of any development, often longer than five years.

This means there are projects that haven’t begun development where commercial terms have been agreed that give the landowner a far higher proportion of the return than the developer originally envisaged.

Landowners in this situation are being approached to renegotiate terms. The renegotiation will inevitably reflect the new financial reality, but landowners should include provisions that would allow them to benefit from any subsequent uplift in the scheme’s profitability. It is important to have these discussions before new arrangements are settled; if the situation improves developers won’t have any reason to agree new terms when they have a watertight legal agreement.

Landowners who are unwilling to renegotiate before development starts may find their project abandoned by the developer. For many, a lower overall return will be better than none at all. When assessing the benefit of any development, landowners should take into account the return they currently receive from the land rather than comparing the proposals to what they might have received had the previous development progressed.

Negotiations are a one-off opportunity to set revenues for very long periods and it’s important to reflect on possible alternative scenarios even when short-term financial prospects are less than encouraging. mike.reid@galbraithgroup.com 01334 659984

Stop press: New Electronic Communications Code The Digital Economy Act 2017 became law on 28 April although sections of the Act incorporating the new Electronic Communications Code will legally come into force over the summer.

The code – aimed at extending and speeding up digital communications – gives further power to mobile-phone operators and introduces new restrictions on landowners, including reducing the income they are likely to receive.

Some have refused to consider sites (particularly on rooftop sites) because of the new code. Anyone approached about a new telecom agreement, or where changes are requested to existing agreements, should ensure appropriate terms are agreed to take account of the proposed changes.

The implications will be examined in a future issue.

galbraithgroup.com | Energy Matters Summer 2017 | Page 3

Glen Affric: Step by step to hydro success Care and diligence are rewarded in preparing for energy projects in environmentally sensitive areas.

Toby Kirkwood reports.

Our work in helping to secure a grid connection for two hydro-electric schemes in the Highlands show what’s involved in obtaining consents in an environmentally important area.

Galbraith was instructed by Scottish and Southern Electricity Networks to secure the connection for the Abhainn Gleann Nam Fiadh (2,000kW) and the Allt Garbh (1,800kW) schemes, both in Glen Affric. The scope of the works included refurbishing roughly 7km of existing 33kV overhead line and a section of undergrounding next to the existing Fasnakyle substation.

Glen Affric lies in both the Strathconon Special Protection Area (SPA) due to the presence of the breeding golden eagle and the Strathglass Complex Special Area of Conservation (SAC) to protect a wide range of upland and woodland habitats and an otter population. The SAC area is also part of Glen Affric Site of Special Scientific Interest (SSSI), designated for its pinewood, lichen assemblage, dragonfly and breeding birds.

Though only a small part of the proposal affected the site, it was vital to provide more information on the construction to Scottish Natural Heritage and the Scottish Environment Protection Agency (SEPA) so they could fully understand the potential impacts.

Galbraith instructed both environmental and archaeological surveys along the route prior to submitting applications to the Highland Council.

An early step was applying for a Form B – a notice of planning application under the Electricity Act 1989 (as amended) and the Electricity (Applications for Consent)

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Regulations 1990. We submitted the proposals to Highland Council and in accordance with the Electricity Application for consent Regulations 1990 (SI 1990/4550) regulations 8 and 9, no objections were served.

The next step was to submit a screening application under regulation 5 of the Electricity Works (Environmental Impact Assessment) (Scotland) Regulations 2000, prompting Scottish Ministers to consult with the planning authority unless the person requesting a screening opinion has already conveyed the views of the authority.

Here the Highland Council, the body responsible for the development area, accepted the view

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Diligently following the process allowed Galbraith to provided the client with a “clean” grid connection on schedule.

of the planning authority, Scottish Natural Heritage and SEPA, concluding the development did not constitute an “environmental impact assessment development”.

This allowed us to successfully apply for Section 37 consent without a full environmental statement, and planning permission was granted under Section 57(2) of the Town and Country Planning (Scotland) Act 1997 for the overhead line development by the Scottish Ministers, subject to the contractors following a strict mitigation programme during the works.

Our ecologist came up with mitigation techniques for the contractors to adhere to after further consultation with both SNH and SEPA. These included avoiding the March to August bird breeding season for vegetation clearance – especially relevant in connection with helicopter

use. We contacted the Highland Raptor Study Group for information on nest locations. Two eagles’ eyries are still being monitored.

Diligently following the process step by step allowed Galbraith to provided the client with a “clean” grid connection on schedule.

These beautiful, remote and ecologically sensitive areas have vast potential in terms of the siting of small-scale hydro schemes, but it is important to take the time to gather all the necessary information and put appropriate consultation and mitigation programmes in place to ensure all relevant interests are well informed and agree with the proposals.

Sensitive landscape: A picturesque burn running into Loch Beinn a’ Mheadhoin, and a 33 kV H-pole waiting to be installed in a forestry ride.

toby.kirkwood@galbraithgroup.com 01786 434635

galbraithgroup.com | Energy Matters Summer 2017 | Page 5

Keeping the lights on in Scotland’s energy sector Drones are fast becoming the survey tool of choice for utility providers. Stuart Thomas, survey manager at Cyberhawk, reports.

The infrastructure for electricity generation, transmission and distribution requires constant maintenance, upgrade and renewal to ‘keep the lights on’.

Ensuring power from new developments is available to the consumer means high quality information is required to plan, design and track progress of these infrastructure projects.

The use of drones (Unmanned Aerial Vehicles) is providing a huge boost to utilities companies and contractors in acquiring accurate, actionable data.

Types of drones Drones come in two main types: multirotor and fixed-wing, and are fitted with still cameras, video cameras and thermal sensors. Multirotor drones are small helicopters with multiple blades, vertical take-off and landing and the ability to hover, and are most suited to aerial inspection tasks. Fixed-wing drones are small aeroplanes which are used to generate aerial survey data (using photogrammetry) of large tracts of land or long linear assets. Both types of drone are piloted remotely from a team on the ground.

Drones in action One of the main benefits of using drones is improved safety. Where inspection tasks often require engineers to climb tall and often dangerous structures such as transmission towers or hydro dams, drone inspection not only removes the need for working at height, but also any temporary power outages. Armed with comprehensive visual information about the condition of the assets, utility companies are equipped to prioritise manpower to areas of highest concern.

Drones used for land survey tasks allow large areas of land to be surveyed accurately in a fraction of the time required for a ground-based surveyor. Many utilities projects are in remote, hostile environments so the reduction in site time is a welcome benefit.

The aerial survey imagery acquired by drones is incredibly detailed (down to 2cm/pixel) and provides invaluable visual information on the land condition and use. The speed of data acquisition, which typically sees more than 200 hectares surveyed in one day, and inspections up to four times faster, also incurs a significant reduction in cost to the client.

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Drones used for land survey tasks allow large areas of land to be surveyed accurately in a fraction of the time required for a ground-based surveyor.

Typical drone projects Drones can be used to complete a staggering variety of tasks, and in the utilities sector Cyberhawk is involved in: • Aerial surveys of proposed or existing powerline/cable routes, substations, hydro power stations, access tracks, windfarms, etc.

• Construction progress imagery to track the development of a site from start to finish.

• Aerial inspection of transmission towers, cooling towers, chimneys and onshore and offshore wind turbines and met masts.

• Aerial video for site selection or marketing purposes.

The potential is huge Drone technology is rapidly developing with the launch of improved hardware, software and sensors. Currently, 40 megapixel imagery and 4K video are considered standard, however this will undoubtedly improve.

All commercial drone operations are regulated by the Civil Aviation Authority, which requires that a drone is always within line-of-sight of the pilot and is flown no higher than 400ft above ground.

With the correct safety mitigation (and CAA permission) these limits can be exceeded in some cases. In the future, more permissive rules may come into play for experienced operators with a proven safety record and appropriate mitigation measures.

About Cyberhawk Founded in 2008, Cyberhawk Innovations is the world leader in UAV inspection and survey and the conversion of UAV data into powerful management information. An industry pioneer, we have completed more than 25 world firsts since our inception. With headquarters in Scotland and offices in Houston, Abu Dhabi and Kuala Lumpur, we operate worldwide in more than 20 countries.

Main picture: Drone operators keep their feet safely on the ground to check the turbines of a Scottish wind farm.

Above: Drones can provide close-up views of pylons and other inaccessible infrastructure, or allow large areas to be surveyed in a fraction of the normal time.

Cyberhawk conducts close visual and thermal inspections of industrial assets both on- and offshore, with results delivered through our innovative software, iHawk. Cyberhawk also delivers state-of-the-art aerial land surveying solutions through iHawk. stuart@thecyberhawk.com

01506 592214

www.thecyberhawk.com

galbraithgroup.com | Energy Matters Summer 2017 | Page 7

Energy policy: Where next?

Jamie Grant sets out some scenarios.

Few things are as unsettling as reading a crystal ball.

And as I ponder the future of energy policy, things look pretty hazy…

Given the current turmoil of UK politics, it’s not surprising that questions over how to power our future are more pressing than ever. Energy tends to work on a generational timeline, but the European Commission is unlikely to wait quite so long for a pronouncement on Article 50. In reality, energy won’t wait a generation either; only a run of mild winters has prevented energy policy from becoming a crisis topic, as surplus capacity cover is at a very low margin.

Present indications as to the direction of energy policy are scant, with the most meaningful comments coming from two consultation documents; UK Government’s DBEI Industrial Strategy and Scottish Government’s Draft Energy Strategy.

As long as the single market remains for energy, Westminster’s support tariffs and other market levers will ensure it remains the dominant driver of development. Energy is given limited cover in the current consultation document, but there is a clear message: decarbonisation of the energy market is a given, but perhaps the easy wins have been had in power generation.

The focus now seems to be heat and transport, which consume 53% and 25% of our energy. Of course, if you decarbonise transport through electrification, unless you have suitably decarbonised power generation you have merely kicked the can down the road.

Heat still feels like a hot topic after the dash for ash, and the practicalities of reversing a dispersed end market tied to a significant gas network will be challenging. Furthermore, heat networks are likely to see the customer tied to an incumbent supplier that will be hard to leave should service or cost prove unsatisfactory. This does not seem an easy transition.

One of the easier means of decarbonising heat could be through injection of gas to grid that comes from renewable sources, such as anaerobic digestion. This allows the continued use of current infrastructure as a wider transition occurs.

Meanwhile, Scottish Government’s focus remains onshore wind, with a will to drive cost reduction in the sector to bring parity with other generation sources. While support mechanisms were vital in allowing this sector to develop and flourish, it does seem that latterly they caused a distortion in the price of plant and other elements of development.

It feels entirely plausible that costs can be dramatically reduced. However, the maturity of the sector means that a lowered cost base must be achieved on sites that have presumably not been developed due to other challenges. For example, cheap grid is likely to be one of the keys to keeping costs low, but few such opportunities remain.

So, for now, the picture is unclear, but DBEI appears committed to a further energy specific consultation later this year. Hopefully, with this document to hand, the haze in the crystal ball will start to disappear. jamie.grant@galbraithgroup.com 01786 434638

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The Crown Estate own almost half of Scotand’s coastline, and has been heavily involved in both off-shore wind and tidal energy production.

Crown Estate handover raises many questions The great Crown Estate transfer has begun. But, suggests Anna Zahedi, be prepared for complications.

have to be submitted to different councils.

At least for now, it is likely the interim body will retain control over all major decisions and applications for offshore renewables and infrastructure.

April opened a new chapter in Scotland’s bid to exert greater autonomy, without the need for a referendum.

The changes throw up further questions: Should MSPs have the right and ability to lease out seabed sites as far as international waters or sell assets to generate revenue elsewhere in the portfolio? Could the long-term strategy of the Crown Estate now be subject to the fluctuating whims of politicians with shortterm or localised objectives?

Devolution of the management of the Crown Estate assets to the Scottish Government has begun, with revenue generated being retained by Holyrood. The ultimate aim is to hand over responsibility to local communities, but a temporary body, Crown Estate Scotland (Interim Management), has been established to handle the transition.

The Crown Estate comprises land, maritime and commercial assets belonging to the reigning monarch, but it provides no financial benefit to the Queen. Surplus revenue generated by the Estate is paid annually into the Treasury. With the formation of the Crown Estate Scotland surplus revenue will be retained by the Scottish Government instead of passing to the Treasury.

Crown assets in Scotland provided a gross revenue of £14 million in 2015/16 from a diverse portfolio taking in commercial property in Edinburgh, 37,000 hectares of land and almost half of Scotland’s coastline.

The Crown Estate was an early and substantial investor in renewable energy including onand offshore wind farms and tidal energy.

Local authorities may soon have the opportunity to manage Crown assets including foreshore rights, leases for wave and tidal energy out to 12 nautical miles and management of ports and jetties. For developers of offshore projects, this could mean fewer applications are needed, due to a simpler process, with local government acting as a one-stop-shop, deciding on planning, permits, wayleaves and leases, and leading the resulting consultation process.

Existing developers may welcome the opportunity to submit plans to only one or two government entities, but others may fear the possible straight-out rejections by councils if there are fewer but more powerful stakeholders.

On the plus side, decentralisation can lead to greater self-governance within communities, especially those that are more remote. But a key question is whether local councils have the means, capacity, experience and technical expertise to deal with all these additional requests. A further issue to consider for larger projects is whether multiple applications will

One concern yet to be addressed by the Scottish Government will be how to redistribute the wealth generated by Crown assets. As long as the interim body controls management, this should not prove a contentious issue, but it is one that will have to be resolved. As assets are handed over, Scottish Ministers could use their new powers to fund projects outside the immediate area which are considered more pressing. For

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This new revenue stream will provide the Scottish Government with a muchneeded boost now that estimates of income from North Sea oil and gas have been significantly revised. example, income from leases for electrical cables running to Shetland and Orkney could be used to fund sustainable initiatives and housing requirements in urban fringe developments on the mainland.

Scottish Crown Estate revenues for 2015/16 included £3.2 million from energy and infrastructure, showing how important renewables are to Scotland from both an economic and environmental perspective.

This new revenue stream will provide the Scottish Government with a much-needed boost now that estimates of income from North Sea oil and gas have been significantly revised. All eyes will be on the Crown Estate Interim Body as it will determine the success or failure of Scotland’s ability to manage its own resources.

anna.zahedi@galbraithgroup.com 0131 240 2286

galbraithgroup.com | Energy Matters Summer 2017 | Page 9

Cutting costs to stay on track

The ability of trees and forests to absorb carbon is well documented, and woodland carbon capture can be an attractive option for companies, organisations and individuals keen to compensate for their carbon-emitting activities.

Investing in woodland carbon projects not only offers a carbon offsetting opportunity but also delivers wider environmental and social benefits such as improving air quality, providing wildlife habitat, timber and woodfuel and creating sites for public recreation.

Bigger, but fewer, turbines are Moray East’s answer to subsidy changes.

Toby Kirkwood reports.

The growing appetite for carbon credits has created a potential additional income stream for woodland creation projects, one facilitated by the Woodland Carbon Code.

After a long period of speculation, the Department for Business, Energy and Industrial Strategy (DBEIS) has finally published the Budget Notice for the second Contracts for Difference (CfD) allocation round.

The Woodland Carbon Code is a Governmentbacked UK Standard for afforestation projects that aim to achieve net emissions reductions.

Certification against the code creates real and verifiable carbon ‘rights’ which can be sold, helping the owner to recoup some of the costs of woodland creation. It also provides assurance for those wishing to invest in carbon that the carbon capture estimates of a project are site specific and confirms that the woodland is being managed sustainably and to high standards.

The second round opened on April 3 to Pot 2 (“less established”) technologies, which covers offshore wind, advanced conversion technologies (with or without CHP), anaerobic digestion (with or without CHP), and dedicated biomass with CHP, wave, tidal and geothermal. DBEIS has announced there is a budget of £290 million in both delivery year 2021/2022 and delivery year 2022/2023.

The strike price for offshore wind projects to be delivered in 2021/22 is £105/MWh, and for those that will start generating in 2022/23 the strike price is £100/MWh. The onus is on developers to specify the estimated date within the delivery year when they will start generating electricity. This is known as the target commissioning date.

Since our last article (Energy Matters 13), Moray Offshore Renewables Ltd has changed its name to Moray Offshore (East) Ltd – known as Moray East – following the split between the eastern and western development areas.

The Government’s newly announced auction parameters set the timescales by which the project, if successful, must be constructed. For example, to meet the obligations of the CfD, activities such as the acquisition of land rights must be completed within a limited timeframe.

Galbraith is working to secure servitude agreements with landowners along a 34km cable corridor from Boyndie Bay to a proposed new electricity substation south-west of New Deer.

Projects being built today qualify for £145/MWh under the first CfD which was allocated without auction. The first auction in 2015 reduced costs to roughly £120/MWh, indicating a sharp decline in support for the technology.

This gives developers like Moray East five years to find a way to cut costs by at least a third if they are to remain viable.

Their sea-area hasn’t increased; nor has their 1,116MW consent, so they need to generate more power from the same area at less cost. They aim to do this by using newer, larger turbines, but fewer of them. These turbines will generate more electricity more consistently, giving the developer more energy to sell and, more importantly, providing mitigation for the lower price the project can earn.

The future of offshore wind in the Moray Firth is still bright, and it will be interesting to see the outcome of the CfD bids when the winners are announced later on this summer.

toby.kirkwood@galbraithgroup.com 01786 434635

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The Galbraith forestry department is now initiating Woodland Carbon Code certification of a number of new schemes, working with Forest Carbon, a

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Recent Woodland Carbon Code schemes have earned between £500 and £1,500 per hectare in the sale of carbon rights, depending on location, quality of land, species mix and management regime.

New woodland: Capturing carbon – and extra value Using woodland to generate carbon credits can generate revenue while addressing the problem of harmful emissions. Georgie Brown reports.

project developer and consultancy based in Co Durham, and the Forestry Commission.

Crucially, carbon finance is intended only for marginal schemes which would not be viable otherwise. The client can sell the rights to the carbon captured in advance, helping to fund the woodland establishment.

As the trees grow and sequester carbon, carbon units accrued will be independently verified. James Hepburne Scott of Forest Carbon points out his firm has helped develop over 100 projects, together representing 4,000 hectares of new woodland creation certified under the Woodland Carbon Code.

Recent Woodland Carbon Code schemes have earned between £500 and £1,500 per hectare in the

sale of carbon rights, depending on location, quality of land, species mix and management regime.

Both native and productive conifer schemes are eligible under the code. This therefore represents an additional financial resource for the creation of new woodlands which will capture carbon and help mitigate climate change, while also delivering a multitude of other benefits.

Landowners interested in woodland carbon capture and woodland creation are advised to contact the Galbraith forestry department for further information.

georgie.brown@galbraithgroup.com 01738 456 066

galbraithgroup.com | Energy Matters Summer 2017 | Page 11

Intercity express: The future age of the train?

Improvements to the railway network won’t just affect the railways. Mike Reid explores the issues.

Infrastructure improvements to Scotland’s railway network as part of the Intercity Express Programme (IEP) should bring significant improvement in the next few years ­– but it won’t be just the railway that is affected.

In 2007 the Department for Transport began the procurement process for what it termed the UK’s most significant investment in rolling stock for more than 30 years. Bidders were asked to design a fleet of trains which will eventually remove the high speed train from the network after about 40 years of operation.

The project brief is characterised by the expectation that the trains will have the flexibility to go virtually anywhere on the high volume long distance route of a network in transition, with no presumption of comprehensive electrification. It is likely a battery/diesel hybrid engine will emerge capable of

using the electrified sections of the network and running under diesel power in other areas. The IEP designates two core routes: the Great Western Main Line and the East Coast Main Line, work on which which affect Scotland.

The new trains will be wider, longer and taller, so they will hopefully also be more spacious and comfortable.

The IEP has implications for the network infrastructure, which is managed by Network Rail. These include changes to platform length, signalling power upgrades, raising the height of bridges and various other improvements, some of which require access to adjacent land.

Some land adjoining the railway network will be impacted by the infrastructure proposals, particularly for raising bridge clearance heights to accommodate future electrification of the railway network as well as the

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increased height of the new trains.

Landowners on both sides of a bridge will be affected. Network Rail will need to take temporary occupation of areas adjoining their works for safe working areas, storage compounds, welfare units and other access requirements.

Careful consideration needs to be given to the terms of any temporary agreement including an appropriate rental payment, accommodation works to reduce the impact during the works and in the longer term as well as compensation which will include any fees incurred.

These changes should improve the rolling stock for the travelling public, but full electrification of Scotland’s railways is still a distant light at the end of a long tunnel. mike.reid@galbraithgroup.com 01334 659984

Rates shake-up is long overdue The rating system is unfit for purpose.

Calum Innes assesses the revaluation introduced in April.

Above: The new trainsets for the Intercity Express Programme are being built by Hitachi.

Below: The project will involve a range of infrastructure works which will affect land adjoining the rail lines.

A rating revaluation is never welcome, but the system which came into force on 1 April has caused more unrest than its predecessors.

Some sectors face reducing values, reflecting lower rents post-recession, but others, such as renewable energy operators, are dealing with unprecedented increases – in some cases of up to 600%.

An outcry persuaded the Scottish Government’s Finance Secretary, Derek Mackay, to announce a range of reliefs covering limited property sectors, including small-scale hydro electricity generation. But these are simply a one-year discount – a sticking plaster instead of a solution to a widening disparity. For hydro generation the disparity is even wider due to an upper limit of 1MW on eligibility to claim. So a scheme of 999kW is granted relief while one with a couple of kW of additional capacity is excluded.

There is increasing concern that the rating system is no longer fit for purpose. Established in the mid-19th century, the current framework has been adapted to meet social, economic and political aspirations. Manufacturing, for example, was treated favourably in the earlier part of the 20th century to encourage economic activity, but such benefits have now ceased, while agriculture enjoys exemption, presumably due to historic concerns about food security.

Disparity in the treatment of certain property sectors is further distorted by a complex range of reliefs and penalties applied by the rating authorities responsible for collecting the tax.

Of course, these taxes have their place in the Chancellor’s toolbox. Property is an easily identified, immovable asset, making collection relatively simple and inexpensive. However, rates appear to be increasing to the point where they are an overly punitive burden.

Government incentives and encouragement persuaded developers and landowners to invest in hydro generation, generally incurring substantial debt to do so. Rate increases have left many schemes with insufficient free cash, after debt obligations, to pay the rates demanded. This impacts on banking covenants as the increases are beyond forecasting.

There is no easy fix. Doubtless hydro operators will appeal, but the process is likely to be slow to resolve. The pressure will be to deal with shops, offices and industrials where the evidence is greater and the process more straightforward.

Complex issues such as hydro generation may be

left until much later in the process, possibly years.

In the meantime the tax must be paid.

A further flaw in a system designed to maximise the tax-take is that vacant property, previously exempt from rates, is now liable even without beneficial occupation. The Government claims this will encourage landlords to make property available for let, but lack of tenant demand results in vacancy, not landlords withholding property from the market. The result is the destruction and demolition of property to avoid punitive tax. As with roofless rural cottages that were a legacy of a similar historic rating regime, surely it can’t be in society’s interests that potentially useful property is destroyed.

The Scottish Government has tasked Ken Barclay, former chairman ofthe Royal Bank of Scotland, with reforming business rates to better support business growth and long-term investment. Will his recommendations be sufficiently far-reaching to restore an equitable tax burden?

Public services require ever-increasing levels of funding and Government wrestles with how to raise the necessary taxes, but property is already worse off than other potential sources. Land and buildings are a ‘sitting duck’ and adding a further catastrophic burden can only hasten the demise of the high street, manufacturing, hospitality and real estate in general, with all the social implications.

Tinkering by successive legislators means the tax burden is shouldered by fewer enterprises that also pay a surcharge to cover the shortfall, resulting from fewer subjects being granted relief.

For the current rating system to persist and be equitable, it must be less punitive and shared more widely among businesses.

Tax on housing also has glaring inconsistencies.

Council Tax – introduced after the ill-fated Community Charge replaced domestic rates – is based on capital values in 1991 and is now seriously out of date. The Government is unwilling to improve transparency or reconsider anomalies, such as no change in liability resulting from improvements until a property changes hands.

One argument is that all property be put back into a single ‘pot’.

Nothing will change quickly. Property owners and occupiers will have received Valuation Notices advising of the assessment to be effective from April 1, 2017 and corresponding rates bills. They should be mindful that there is a six-month window to lodge an appeal to ensure that their proportion of the tax burden is appropriate.

calum.innes@galbraithgroup.com 01738 456075

galbraithgroup.com | Energy Matters Summer 2017 | Page 13

Challenging times A revised site submission process is bound to affect energy projects.

Jamie Grant reports.

issued for comment. Given the fiveyear lifespan of LDPs, if challenge isn’t made to policy, it will be a lengthy period of time before the next formal opportunity to improve policy arises.

Galbraith recently submitted a large number of calls for sites submissions to the Cairngorm National Park Authority’s emerging local development plan (LDP) process.

This, together with the new Scottish Government planning white paper, has led us to reflect on the opportunities that exist for the energy sector with LDP representations.

Energy assets, by their nature, seldom exist in settlement boundaries and thus do not generally benefit from allocations, although there may be spatial guidance or direction as to where assets should be located.

The emphasis is therefore on the framework of local policy to deliver consents. If policy is incoherent, inflexible or overly restrictive this can make bringing forward consents without resorting to the expense of appeal challenging.

And the relevance of the initial reference to the white paper? Well, having just created LDPs on a fiveyear cycle (in response to some very elderly local plans that lingered in the system), the Scottish Government now suggests that one of the potential ways to improve planning would be to move LDPs out to a 10-year cycle.

Although it is proposed that these longer-term plans could subject to ad hoc revision, this sounds like a cumbersome process that could easily be slowed by challenges to contentious changes. In such a situation, ensuring the right policies are in place at the start of the plan will be even more important to prevent a long-term sterilisation of opportunity, especially given that the market of energy generation itself appears to be in a process of evolution at the moment.

There is therefore notable value in engaging in the consultation opportunities offered during the evolution of the LDP. From this sector’s perspective this is probably most effective once the draft LDP is LDP process stages Evidence and info gathering

Main issues Report (MIR)

A note of forthcoming draft LDP intended timescales is shown in the graphic below. jamie.grant@galbraithgroup.com 01786 434638

Typical time period

Local authorities in this LDP process stage

6-18 months

Aberdeen City Council, Angus Council, Argyll & Bute Council, Cairngorms National Park, Clackmannanshire Council, East Ayrshire Council, East Dunbartonshire Council, City of Edinburgh Council, Fife Council, Inverclyde Council, Loch Lomond & The Trossachs National Park Authority, Moray Council, Scottish Borders Council, Shetland Islands Council, South Ayrshire Council, West Dunbartonshire Council

6-12 months

Proposed plan 6-18 months

Dumfries & Galloway Council, Falkirk Council, Highland Council, North Ayrshire Council, Perth & Kinross Council, Renfrewshire Council, South Lanarkshire Council

Dundee City Council, East Lothian Council, East Renfrewshire Council, Comhairlenan Eilean Siar (Western Isles Council), North Lanarkshire Council

Midlothian Council, Stirling Council, West Lothian Council

Examination

Scottish Renewables Annual Conference

6-12 months

Aberdeenshire Council, Glasgow City Council, Orkney Islands Council

LDP adoption 6 months

5-year life-cycle

Page 14 | Energy Matters Summer 2017 | galbraithgroup.com

The industry gathered to hear views on the future at a crucial time for renewable energy.

Toby Kirkwood reports.

More than 250 delegates joined the two-day 2017 Scottish Renewables Annual Conference to hear from industry leaders shaping the next chapter in the growth of renewable energy in Scotland.

The speakers debated Scotland’s new draft energy strategy, carbon targets, changes to the FiT and the RHI, and the next CfD round, as well as Britain choosing to leave the EU. The recurring theme at the Edinburgh conference was that once again, the renewable energy sector finds itself in a state of evolution against a backdrop of economic and political uncertainty.

Ivor Catto, CEO of the renewable energy company RES, told the conference: “The past is often a good predictor of the future and we have consistently underestimated the industry’s ability to reduce costs and the ability of innovation to drive percentage growth. Those cost reductions show no signs of tapering off or reducing, and we can now say with real conviction that in future renewables will be the most affordable energy technology.”

‘ We can now say with real conviction that in future renewables will be the most affordable energy technology’ Onshore wind and solar remain locked out of the CfD process, despite UK Government figures showing that both represent the most cost-effective way to decarbonise the country’s electricity supplies, and cuts to the Feed-in Tariff have left smaller-scale projects facing a challenging and uncertain future.

The UK Government’s strategy, which closed to submissions in April, has presented an opportunity for the sector to demonstrate how it can help drive the shift to a low-carbon economy by minimising energy costs to ensure that the UK capitalises on its strengths in clean energy innovation. The Government’s long-awaited Emissions Reduction Plan will show how it intends to meet its legal climate change obligations in energy and other sectors over the coming years.

Chris Stark, the Scottish Government’s

Director of Energy and Climate Change, said: “Big ambitions on climate from government must resonate in boardrooms and in living rooms”.

He also described his “tremendous excitement” at the challenge faced in decarbonising heat and transport.

Scotland has seen an announcement of a one-year cap on business rates for small-scale hydro schemes and relief for district heating, but some projects continue to face steep rises, with many more likely to see substantial increases from April 2018. It is therefore vital that government and industry work together to review current arrangements to ensure that the rates are fair and proportionate.

In all, The Scottish Government’s Draft Energy Strategy presents an ambitious view of Scotland’s future, with 50% of the country’s energy demands,

as set out in the paper, to be met by renewables by 2030.

An unprecedented push to deliver low-carbon heat and transport will be crucial in meeting this target, as well as the continued development of mainstay renewables such as onshore wind in a subsidy free world in order to double the renewable electricity capacity by 2030.

Paul Wheelhouse, the Minister for Business, Innovation and Energy, reaffirmed the Scottish Government’s support for renewable energy and announced a £10 million fund to help innovative local energy projects in rural areas to develop business plans.

toby.kirkwood@galbraithgroup.com 01786 434635

galbraithgroup.com | Energy Matters Summer 2017 | Page 15

Recent recruits Two wayleave officers have recently joined Galbraith to work on a wide range of utility and renewables projects throughout Scotland.

Michael Forrest, above, joined the firm from Green Cat Renewables, where he worked as an assistant engineer on wind turbine developments across the UK. Gregg Forbes, below, previously worked for Johnson Poole & Bloomer as a consultant land and minerals surveyor involved in planning, design and development.

They will both provide wayleave services to a number of clients which will include land referencing, acquiring all necessary consents, land acquisition, and both landowner and stakeholder liaison during the lifetime of a project. michael.forrest@galbraithgroup.com 01738 456097 gregg.forbes@galbraithgroup.com 01786 435045

Digging for data Whose property is that? Identifying landowners can be crucial in planning and executing any utility or infrastructure scheme.

Rachel Myles reports.

Has your proposed scheme come to a halt due to a lack of landowner or occupier information?

We’d like to introduce you to land referencing, a specialist service carried out by a number of our offices; but the focus of this article is the land referencing service provided by the Galbraith Cupar office.

Why do we carry out land referencing?

Land referencing can be carried out for a number of reasons, but in our sector, it predominantly relates to identifying owners and occupiers of land and residential properties for the purpose of clients serving statutory notices, or identifying an initial point of contact for a utility infrastructure scheme.

Page 16 | Energy Matters Summer 2017 | galbraithgroup.com

How much land referencing do we do?

Instructions vary from as little as one property, to over 200 properties and we have carried out land referencing on Shetland, Orkney, Lewis, Harris and throughout mainland Scotland. In 2016, the Cupar office alone received 89 instructions from one client, under which we identified 633 owners and occupiers.

What are we digging for?

The information required varies with each instruction, but many instructions call for confirmation of the legal owner and if relevant, the occupier, including their contact address and telephone number.

We will be provided with indicative scheme plans for the purpose of identifying the properties and proprietors affected by the proposals.

What tools do we use?

You may be surprised to learn that the majority of our land referencing instructions are completed as a desk-based exercise. We have specialist knowledge of where to look for this information, including our bespoke in-house database.

Instruction and scheme specific plans can be prepared as part of the land referencing process, to clearly report the information back to the client.

Will 2024 be the end of land referencing?

The Keeper of the Registers of Scotland has been asked by Scottish Ministers to complete the Land Register of Scotland by 2024.

The Land Register of Scotland is a digital, map-based public register of land and property ownership and this will remove the ‘digging’ element of land referencing.

However, our specialist service will still be required to identify occupiers where this information is required by a client.

A 25% discount for voluntary registration application fees has been guaranteed until mid-2019, and we would urge all property owners to register their land; a modern land registered title is harder to dispute and affords more certainty to the holder.

If you would like more information about our land referencing service, or if we can assist with your voluntary registration, we would be delighted to hear from you.

rachel.myles@galbraithgroup.com 01334 659 989

galbraithgroup.com | Energy Matters Summer 2017 | Page 17

A 10-year journey ends just across the street The firm welcomed guests and gave some pointers on dealing with utilities to mark its move to a new office in Castle Douglas.

Poppy Baggott reports.

The Galbraith Castle Douglas office marked its 10th anniversary in the town with a move to new offices.

Although the new premises are just across the street of the South West Scotland town, the event is testament to the distance the business has come in the last decade. The Castle Douglas team held an office opening and seminar to celebrate the occasion and took the opportunity to show guests the breadth of services the business can provide.

The seminar consisted of snapshot talks from Galbraith professionals, looking at compensation claims; forestry; telecoms; sales and lettings; and finance and building warrants before handing over to local accountants Bell Ogilvy, who addressed HMRC’s move to digital tax returns. Stuart Roan from Roan’s Dairy, concluded the event with an overview of how they have diversified their business to add value in the last few years.

The first talk of the evening centred on three things which you should consider if you have Scottish Power equipment on your land:

A new home for Galbraith in Castle Douglas.

1. Is your paperwork for the equipment up to date? Whether it be on a wayleave agreement or deed of servitude, these sorts of documents can get lost or passed over during sales or transfers of property, and with Scottish Power currently paying in the region of £7 for single poles and £9 for H poles on wayleave agreements, plus a compensatory amount depending on location and land use, the recommendation is to check that your paperwork is up to date.

hourly rate, if agreed at the outset.

2. Your right to compensation.

Should Scottish Power require access to your land for maintenance or upgrading works, then a diary should be kept of time spent in meetings and correspondence. We find that resentment often occurs in a project when it becomes apparent just how much time is involved.

Granting access to Scottish Power to carry out works on your land is not a money printing exercise, but following the works, you should ensure that you are put back in the position you were in before they took access.

Site meetings, phone calls, moving stock around, and ensuring gates are shut are all time-consuming, and so we would suggest keeping a simple diary, and at the end of the project Scottish Power will pay compensation at an

3. Surveyor’s fees. Scottish Power is prepared to pay the reasonable fees of a professional to negotiate and liaise with them on a landowner’s behalf.

Compensation claims against companies such as Scottish Power are based on the quantifiable impact that works have on an individual, their land and livelihood and the level of compensation due will come down to individual circumstances.

By appointing an agent, we can ensure that you are satisfied with both reinstatement and financial compensation at the conclusion of works, at no expense to you. poppy.baggott@galbraithgroup.com 01556 505346

Galbraith clients had the chance to inspect the new premises in Castle Douglas during the opening ceremony and seminar.

Page 18 | Energy Matters Summer 2017 | galbraithgroup.com

Current renewable energy subsidies

Feed-in Tariffs (FiT) Generation & Export Payment Rates*

Installed Banding capacity kW Hydro

≤100 >100≤500 >500≤2000 >2000

The renewable energy industry is undergoing a major shake-up as the Westminster Government reviews incentive entitlements across the board.

The Galbraith energy team has researched the current subsidy regime to produce this reference guide for the most popular technologies.

Solar** ≤10 Higher

Middle

Lower

>10≤50 Higher

Middle

Lower

>50≤250 Higher

Middle

Lower

>250≤1000

>1000 Stand-alone solar PV**

Subsidy levels are subject to change, so the figures given here are for guidance only. Current details of FIT rates, ROCs and CFDs can be found at www.ofgem.gov.uk/environmental-programmes.

Contracts for Difference (CFDs) Strike prices as of 13/3/2017 (£/MWh, 2012 prices).

Technology

2021–2022 2022–2023

Onshore wind

105

100

Advanced Convesion Technologies*

125

115

Anaerobic Digestion* (>5MW)

140

135

Dedicated biomass with CHP

115

115

Tariff p/kWh 1/4–30/6 1/7–30/9 7.80 6.26 6.26 4.54

7.80 6.25 6.25 4.54

4.14 3.73 0.48 4.36 3.92 0.48 1.99 1.79 0.48 1.63 0.48 0.35

4.07 3.66 0.43 4.29 3.86 0.43 1.94 1.75 0.43 1.59 0.43 0.32

Wind

≤50 >50≤100 >100≤1500 >1500

8.39 4.95 3.22 0.83

8.33 4.92 3.20 0.81

Anaerobic Digestion

6.24 5.90 2.24

6.19 5.86 2.21

Wave

310

300

≤250 >250≤500 >500

Tidal Stream

300

295

CHP

≤2kW

13.95

13.95

Geothermal*

Renewable Obligation Certificates (ROCs)

140

140

Export Tariff

5.03

5.03

For period 1/4/2016 to 31/3/2017*.

* Publication date: April 7, 2017. Source: Ofgem.

* (with or without CHP)

Technology

ROCs/MWh

Anaerobic Digestion

1.8

Hydro

1.0

** FIT payment for solar photovoltaic installations have been determined by the Gas and Electricity Markets Authority (Ofgem) under Article 13 of the Feed-in Tariffs order 2012, in accordance with Annex 3 to Schedule A to Licence Condition 33.

Offshore Wind

1.8

Onshore Wind

closed

Domestic RHI

Solar PV**

closed

Technology

Tariff p/kWh

* F or the 16th obligation, or compliance period CP16, which runs from 1/4/2017 to 31/3/2018, the ROC buy-out price has been set by Ofgem at £45.58/ROC.

Biomass boilers and stoves

4.28

** Small-scale Solar PV (<5MW) closed as of 01/04/2016 and to additional capacity added to existing accredited stations that does not take it above 5MW in total installed capacity from that date.

Air-source heat pumps

7.63

Ground-source heat pumps

19.64

Solar thermal

20.06

The availability of grace periods in line with those provided for Solar PV projects above 5MW back in 2015, enabling projects to be accredited up to 31/03/2017 where preliminary accreditation or significant financial commitments have been made on or before 22/07/2015, and for projects affected by grid delay. Source: Scottish Govenrment.

Source: Ofgem.

Non-Domestic RHI* Tariff name

Eligible technology

Eligible sizes

Small commercial biomass Solid biomass including solid biomass

contained in waste Medium commercial biomass

Large commercial biomass Solid biomass CHP systems** Solid biomass CHP Water/Ground-source heat pumps Ground-source & water-source heat pumps

Air-source heat pumps** Air-source heat pumps All solar collectors Solar collectors Small biogas combustion Biogas combustion Medium biogas combustion**

Tier 1 (<200kWth) Tier 2 (<200kWth) Tier 1 (≥200kWth <1MWth Tier 2 (≥200kWth <1MWth ≥1MWth All capacities Tier 1 Tier 2 All capacities <200 kWth <200 kWth ≥200 kWth ≤ 600 kWth

Large biogas combustion**

≥ 600 kWth

Tariff p/kWh 2.85 0.75 5.24 2.27 2.05 4.33 8.95 2.67 2.57 10.28 3.20 2.51 0.95

* Source: Ofgem. Tariff rates are in displayed in pence per kWth and apply from 1/4/2017. ** Commissioned on or after 4/12/2013.

galbraithgroup.com | Energy Matters Summer 2017 | Page 19

our expertise l Valuations l Investment in ­renewables/

financial incentives

l Planning l Land referencing l Telecoms l Utilities l Wind power l Biomass l Solar energy l Hydro power l Sales and purchases l Battery storage

our experts Our energy experts can be contacted in the following 8 of our 11 offices: Aberdeen Tom Stewart 01224 860714 tom.stewart@galbraithgroup.com Ayr Bob Cherry

01292 292303

bob.cherry@galbraithgroup.com

Cupar Mike Reid 01334 659984 mike.reid@galbraithgroup.com Edinburgh Richard Higgins

07717 581741

richard.higgins@galbraithgroup.com

Inverness Dougal Lindsay 01463 245380 dougal.lindsay@galbraithgroup.com Perth Calum Innes

01738 456075

calum.innes@galbraithgroup.com

GALASHIELS Harry Lukas 01896 662829 harry.lukas@galbraithgroup.com Stirling Toby Kirkwood 01786 434635 toby.kirkwood@galbraithgroup.com For a full list of our energy experts visit galbraithgroup.com

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