Official Report 499KB pdf
Good morning, ladies and gentlemen, and welcome to the 15th meeting in 2012 of the Economy, Energy and Tourism Committee. I welcome all members, whom I ask to be quiet during my opening remarks, our witnesses—I will introduce them in a moment—and visitors in the public gallery. I remind members to turn off their mobile phones and BlackBerrys. We have apologies from Rhoda Grant.
I just welcome the opportunity to be here today and to answer any questions that the committee has.
Thank you for coming.
Before I start, I should perhaps mention that Colin Anderson and I have been friends for 40 years or so.
The success of the limited number of projects that have gone forward was based on the fact that the communities in those areas were very keen on the projects. A community proposal is never as speculative as a commercial proposal.
I was interested to hear Communities Against Turbines say at a previous evidence session that, in general terms, it is supportive of community projects and would not oppose them. However, I have experience to the contrary, and I am aware of a number of quite contentious community applications in the Highlands and Islands region, which I represent. That is why, while I do not doubt what you say, it strikes me as a wee bit odd.
On your first point, many of the successes so far have been in island communities. It has been easy to define such projects and to identify the support that there has been for them. Contention creeps in to a greater extent with mainland turbines. Although we have successful developments on the mainland in Udny and—soon, we hope—in Fetterangus, it is harder when a community turbine does not have that island focus.
Mike MacKenzie’s question perhaps hints at the issue of class differences in communities and more progress among more advantaged communities. I have heard those concerns aired elsewhere.
I do not have anything to add.
More than one written submission has recommended a national analysis of the performance or practice of various planning authorities—to try to ensure greater consistency, I suppose.
We have certainly encountered the issue, as we said in our submission.
When we heard from councillors who represent local authorities, it struck me that their evidence was largely anecdotal. Would our planning system benefit from a far more rational approach? Whether we do it through e-planning or in some other way, should there be a more rational analysis of what each local authority ought to contribute to the overall energy supply and a more rational means of measuring reasonable capacity for each local authority area?
There absolutely should be. In our submission we said that it would be interesting to add up the notional capacity of each local authority and see whether the total matches the Scottish Government’s target. I have doubts about that, but there is no visibility in that regard, so we do not know.
I will join the dots between two subjects that have come up. We are talking about local authorities’ role in planning. Should we be asking much more of local authorities than just that they administer the system? Should we be expecting them to provide capacity for communities that have not yet been able to come forward?
I understand that Orkney Islands Council has a stake in one of the wind farms that has been built recently—I cannot remember which one, but it is one of the bigger wind farms in the Orkneys. That is perhaps because Orkney has been at the forefront of wind energy development in Scotland. I know of no other local authority in Scotland that has identified such an opportunity. We must be the only country that does wind energy that does not take such an approach. Our approach is unusual.
Will the other witnesses comment on the additional role that local government could fulfil?
I can see some positives, and there is a need for a more strategic approach. However, there is a risk of conflict—or accusations of conflict—or favouritism, with Government-backed schemes getting approved and private schemes not getting approved. You could get into a can of worms there.
Local authorities have a potentially important role in helping communities organise themselves. We have spoken to private sector representatives who sometimes find a real obstacle in trying to consult and negotiate with communities that might want a stake in a commercial development: communities do not have the organisational capacity behind them, but local authorities could help with that.
Local authorities could try to put across the idea that, for locally owned—whether by a farmer or a community—small or medium-scale renewable developments, the only point of contact is not an adversarial planner, but someone in the local authority who is looking at economic development and the social benefits of these developments, as happens in Fife Council with its route map, and not just holding them up with bureaucracy. I have personal experience—which is not anecdotal—of a local authority that has been positively obstructive in relation to photovoltaic arrays for urban buildings. That is not helping—we need PVs on urban buildings that are community facilities to allow them to cut their bills and encourage them down energy efficiency routes. The only folk that we are dealing with are in planning and building control.
On the relationship between local ownership and community ownership, the target covers both. When I have asked the minister to unpack the balance between local ownership and community ownership, I have sometimes found ambiguity. Ought the Government to strike a balance between those two things, and should the target be more specific? Should the Government require a community stake in commercial developments, which would be one way of ensuring that community ownership is more prominent in the target?
On your first point, yes—absolutely. Last month’s Energy Saving Trust report estimated that, of the 147MW of capacity that is already operational, only 13 per cent is community owned. The rhetoric around the target is often about community ownership, but community ownership is actually contributing a small amount of the overall target so far. The target would be more transparent if it were unpacked.
On the second point about a community element being compulsory, that might be absolutely fine for larger-scale developments, but it does not seem appropriate for a single turbine that a farmer is putting up. Perhaps there needs to be a banding above which that approach is applied.
When I mentioned commercial developments, I was implying larger-scale developments.
I suppose that one of our issues is that commercial developments are perceived to be larger-scale ones: there is the small scale and the large scale but no middle scale. That is an issue for planning people, who have to take their pick. If something is not a very small turbine, it is categorised as a wind farm and the hands go up. We certainly suffer from that, and the costs involved are similar. It would be good if there was recognition of multiple categories and of what Nicola McEwen said about the distinction between the community and others. Finance will be involved whether a farmer or landowner is the owner or ownership is in tandem with a private developer. The farmer might be the owner, but with bank finance. It would be helpful to be a bit more prescriptive about that and create more categories.
That is helpful.
I think that there is a significant community or public ownership stake in some of the largest wind farm developments in Denmark, including the offshore ones. I do not know exactly how things are done there, but around 40 per cent of the Middelgrunden wind farm off Copenhagen is in public ownership. Denmark is in the European Union, and I do not think that it flouts competition laws. It would be useful to find out how it does things. For Denmark, community ownership does not just mean community ownership of a small turbine on a hill outside town; it means the whole thing. That is the whole policy, really.
The benefits of community ownership are much greater than the benefits from part ownership or community benefits from commercial developments. A 900kW turbine in Orkney, which is one of the five completely community-owned turbines that went up last year, has reached its production target of 2GWh in six months. That is significant for CO2, it is significant in terms of income and it is significant for a peripheral area. We are not talking about a toy machine. Such turbines have a lot to contribute to meeting the targets.
Do members want to ask supplementary questions on planning before we move on?
I asked a question about and explored the possibility of Scottish Water, for example, creating a subsidiary company like its Business Stream subsidiary. There are strict state aid provisions—whether we agree with them or not—that inhibit central Government’s involvement. I support co-operatives and community ownership to a certain extent, but the question has been raised and there are pretty severe inhibitions. I do not know how Denmark is doing things given European state aid provisions—I do not know whether it is simply ignoring them—but they are certainly a problem.
That was more of a comment than a question.
It was.
As no one is desperate to respond, we will move on.
Good morning, panel.
Most of us think that more intervention is certainly required; I have not thought a huge amount about whether it should go to the level that you suggest. However, in principle, if the targets are to be delivered, something such as that will need to be implemented to get the momentum going. Broadly, my answer is yes.
There must be a central directive that tells local authorities that they are part of Scotland and must contribute to the targets. I do not know whether that should impinge on local democracy. Some submissions suggest that some commercial-scale developers pretty much want applications to be called in and to end up being decided by the Scottish Government, because they think that that is the only way to get applications through. That would defeat the current planning system.
In relation to local democracy, I am sure that the panel recognises that there would be a tremendous backlash if a Scottish Government of whichever hue decided to call in every application or put out a central diktat. That could have an adverse effect on wider community thinking about renewables technology.
Whether a decision is made locally or nationally tends to affect larger projects. I am fairly familiar with Aberdeenshire, where quite a lot of wind energy activity is going on. It is unusual in Scotland because most of that activity involves one, two or three farm-scale turbines, whether they are owned by farmers, communities or whatever. All the decisions on such developments are made locally—none of them is passed up to the Scottish Government, unless they are referred because of a radar issue, for example. That area is doing pretty well on the targets.
One issue that has arisen is inconsistency in implementing national policy. I would not want to suggest anything that undermined local democracy—far from it. However, in talking to people in local government and in community groups, we have found a need for more clarity and more guidance on implementing policy. As can be seen from their submissions, planners desire greater resources and the acknowledgement that judging such things involves an awful lot of technical expertise that they have not had. The issue is broader.
My final question follows on from that but takes a different perspective. We have touched on empowering local authorities. The 32 local authorities are of all different shapes, sizes and capacities. Some smaller local authorities might not have the capacity or the funds to invest in commercial activity. Would creating regional hubs across Scotland be worth while, so that local authorities—particularly smaller ones—could pool resources to invest in private developments and get the community benefit gain, rather than sitting on the sidelines if they do not have the capacity or the funds to invest?
I think that that is a slightly higher level than most local authorities are at, in my experience. Most local authorities have vast estates of buildings that are relatively energy inefficient and cost a lot to maintain. A lot of local authorities’ spend-to-save activity just now involves installing wood-fuel boilers in places that are off the gas grid and currently use oil—a lot of that is happening in the Highlands—and installing PV panels. If a local authority has money to spend, it should think about how it can make its estate more energy efficient and what renewables can be installed in order to lower the operational costs. That is the way in which local authorities can get the most out of renewables.
We are picking up that there are planning inconsistencies among the 32 local authorities. Written evidence to the committee discusses aspects of the process of submitting a planning application for a wind turbine. It says that the decision can be delegated to an individual planning officer. It is hinted that, if there are more than five objections, the proposal goes to a planning committee. At that point, on appeal, it goes to the local planning authority, which is made up of councillors. If that fails, it can land at the door of the director of planning and environmental appeals, who can make decisions about planning applications.
You are answering your own question, in a way. If we are looking for consistency, there will have to be a collaborative approach among the Scottish Government, the local authorities and the national parks. Whatever the outcome is, we need there to be a consistent approach so that people know what they are dealing with. From our perspective as a private developer, there is a fairly substantial amount at risk. A recent case that we were involved with concerned a single, medium-scale 500kW turbine on a farm that did not get the single farm payment and so wanted to have the turbine in the interests of rural diversification. The cost of the planning process for that turbine—which ultimately failed to gain approval—was £35,000 to £40,000. That is a lot of purely speculative money when you do not know what your chances are and you are dealt with differently in different areas.
There is an issue with the cost of putting schemes through planning, whether they are large or small. In this country, we have created a consultancy industry and it is expensive to put schemes through the planning process because that is what an awful lot of people do. We do not manufacture much of the wind energy equipment in Britain; in the countries that do—Germany, Denmark and wherever—I do not think that it is expensive to put schemes through the planning process. They have a different focus. I do not know all the reasons for this—I would have to do a bit of research—but if there is a scheme to incentivise or subsidise wind energy and it has a high price attached to it, it will create a market for consultancy in this country. That is a kind of Adam Smith argument. If we want things to go through the planning process more easily, maybe we need to think more about the whole picture and what we are trying to achieve.
Does anyone else want to comment?
One way in which the Scottish Government has sought to overcome that is by providing community and renewable energy scheme loans to communities and farmers to meet a large proportion of the cost of taking a project through the planning process. For many projects, that has been the only route. However, we are still telling community groups and farmers that they are being given a loan to do it and that, if everything comes off correctly, they will have to pay it back. That is a significant risk and a significant cost for them to take on.
Dr Anderson, you referred to the establishment of consultancy businesses around the planning application process, and we have heard that it could cost £40,000, £50,000 or £60,000 to put together a planning application. Is that a worthwhile use of money? Should we have a better system of getting planning applications through the process without having to spend up to £60,000? I do not know how much of that would be spent on consultancy fees. Could we develop a model planning application that would apply throughout the 32 local authorities and the national parks authorities instead of having that much money spent on getting each individual planning application through the process?
In theory, there is a national planning policy that guides all the local authorities. However, to give you an elliptical answer, most of the objection to wind energy is pretty much about the visual impact. All the other objections that come in when something is proposed are secondary and may even be tacked on to improve the chances of a refusal. If wind turbines were invisible, there would be almost no objection to them at all—people would not be worrying about badgers, bats, noise and stuff, all of which problems are quite solvable. The visual impact is the only serious obstacle to more widespread acceptance of wind energy. We come back to where we started: the way to solve that is through ownership. Planning applications are often a foot thick and a cost of £50,000 is quite modest for some schemes nowadays. That is way out of proportion to what we are trying to achieve.
I broadly agree with Colin Anderson’s point. One issue is that relatively small schemes are being required to carry out pretty extensive environmental studies. That is disproportionate. Colin is right that the main obstacle is the visual impact. From the planners’ perspective, we are being asked to spend a lot of money on detailed environmental studies that are perhaps more appropriate to a much larger development. It is about proportionality.
I have one thing to add. First, I echo the points that have been made. I take on board what you have said, but community groups feel frustrated at having to go over the same hurdles and through the same hoops as commercial developers despite the fact that they do not have the resources to do it. We have also heard a lot about a desire for planning decisions to take into account community resilience criteria or what the Community Energy Scotland submission calls “socio-economic impacts”. There should be an ability to weigh up what would produce the best long-term outcomes for the community and for that to be a little bit more integrated into planning decisions, which I do not think that it is now.
I will move on. My next question is about community benefit. We have the target, within the overall renewables target, of 500MW of community and locally owned renewable energy capacity by 2020. One issue that I have picked up from the discussion is the question of what a community is. We have heard the argument about a community being a village, but it could be a local authority and we have heard that, in some cases, even a Government could be seen as part of the community and therefore it could contribute to the community renewable target. I am concerned that we are changing our use of the word “community” and widening its definition. If, for example, the Scottish Government is investing in a wind-farm development, is that a genuine community development? What do we mean by the terms “community” and “community benefit”?
Like any concept, it is open to interpretation and definition. The Scottish Government has defined community quite broadly, to mean local neighbourhood-based communities, local authorities, housing associations, local businesses, estate owners and so on. Most renewable energy production is not at that small-scale community level. About a third of operational capacity is on estates, so it is run by farmers and estate owners.
John Wilson’s question is a very good one. It relates in some way to scale, in that in the case of a very large commercial wind farm, which produces a community benefit, we have to look quite far to see how that will be utilised, whereas some smaller commercial schemes can look to pay a relatively small but consistent amount over a long period of time to a very local organisation. That can be particularly valuable. Putting £2,000 into a small community every year for 20 years can be particularly useful, but there are other models. In South Lanarkshire, the local authority has set up a wind farm trust that allows commercial developers to pay in centrally; it then has a remit to disburse those funds.
Chic Brodie wants to come in on that subject, but I am conscious that Mike MacKenzie has a question on planning, so we will deal with that first.
So far we have talked primarily about wind, but some of the written evidence suggests—as was mentioned earlier—that there are some planning inconsistencies and difficulties around solar thermal and PV systems, air source heat pumps and so on. Some of those things are microgeneration devices, and some are more efficient forms of heating, but reduction of demand is part of the framework of targets. Does the panel feel that there are similar problems with planning in relation to any of those microrenewable technologies?
Yes, very much so. The change to permitted development rights has not been particularly helpful, especially for community-owned buildings, which are dealt with as commercial buildings.
You touched on permitted development rights. You are probably aware that air source heat pumps now have permitted development rights, provided that they are no closer than 100m to the nearest dwelling.
Certainly, with regard to some of those provisions. The similar provisions for ZVIs—zones of visual influence—and distances from small wind turbines, for example, are rather arbitrary and do not take into account what is actually being put in. The air source heat pump provision disadvantages people in high-density housing and urban folk, who are the very folk whom you want to help and who are more likely to be in fuel poverty.
As Mike MacKenzie said, we are talking about more than wind. Last week, I was at a meeting in Dalmellington at which we talked about wind, coal, sewage and hydro. How do you see the current subsidy regime developing?
I will comment on the subsidy regime. At present, there are two policies—the renewables obligation and the feed-in tariff. The feed-in tariff has some good points but several bad ones. To start with the bad ones, the scheme tends to put a high premium on small-scale renewables and can encourage people to put in a smaller wind turbine, say, than they would otherwise have done in order to get more per unit. That means that we end up with less renewable energy from the site at a higher price, which is a mistake.
So was PV.
Sorry—what was the point on PV?
There was a guarantee of financial support.
There is still financial support, but the level of support at the high end has been reduced, presumably because the take-up was so high.
I do not dispute Colin Anderson’s point about the need for a redesign of feed-in tariffs, but if a reasonable chunk of the proposals in the current consultation on the issue come into force, feed-in tariffs are in danger of not being sufficient to support projects, certainly those of a medium scale. The small wind sector is concerned about that—I am thinking of companies such as Gaia-Wind, which might have given a submission to the committee.
We have one community hydro project that has been waiting for the Department of Energy and Climate Change to conclude its FIT rates. The project is ready to go to financial close, but the lender will not go to financial close until the rates are confirmed—and of course it might not do so. Another project is desperate to get in before support is reduced from 1 ROC per MWh to 0.9 ROC per MWh next March. I hope that it manages to get in, but progress is weather dependent and the project could miss out.
Should we dramatically increase planning fees?
There is currently a consultation on a proposal to increase planning fees. Increased fees would go some way towards resolving the resources issue for planning authorities. However, I sound a note of caution: I would hate fees to be a deterrent, particularly for community groups, which might have fewer resources. Provision in the fees structure for a reduced rate for community or charitable organisations would be beneficial.
There tends to be a lot of duplication in wind energy planning applications, much of which is unnecessary. Much information is asked of every applicant, even though the next guy is sending in the same information. For instance, we might be asked to identify all the projects in the area that would, cumulatively, add to the visual impact of our development. The next guys are asked for the same information. We all independently search the planning register to see where projects are. We think, “Hang on, why don’t we just pay the planners a fee, so that they can search their own register and compile the information?” I would rather do that than try to find the information myself. The fee could justifiably be put up if the money would be spent on making the planning process simpler and quicker, taking out duplication of effort.
Mr Hunter, your company invests in developments—I am not sure what equity you take, if any, but I assume that it is a fair slice. In your submission, in the context of your comments about bank lending, you say that an alternative route is non-recourse funding. We have been talking about the subsidy regime and the potential increase in planning fees. Where does the risk lie in medium-scale or single turbine applications, or indeed in any renewable energy project?
Initially the risk rests with us as the developer, because we fund all the costs up until the project has all the relevant consents—if it gets them; if it does not get planning consent or a grid connection at a sensible price, we are out. In the case that I mentioned, £35,000 to £40,000 was gone. We have to take that risk into account when we consider the prospects for projects.
If Mr Brodie will forgive me, I will interject to follow up on what Mr Hunter has said.
We would probably expect it to be 50:50. Of late, it has been zero—our last three applications have been rejected. You can take only so many hits before you think, “Wait a minute—we need some signs that we have a chance here.” The fact that our applications have not been unreasonable and that very similar applications have gone through elsewhere makes us think that it is just about luck. If a similar application has gone through in the same authority area, it must simply be a matter of timing. If the other applicant went ahead of us, the cumulative allowance must have gone. Perhaps a different set of factors is in play. A proposal might seem fine, but it does not get through. Eventually, companies such as ours will say, “We can’t justify this. We have other things to do with the corporate money. It just doesn’t stack up.” I am sure that the communities and other groups are feeling the same way.
The point that I made about the gumming-up of the planning cycle emphasises how difficult it will be for us to meet the wind element of our renewable energy targets. Local authorities need to look at that.
I am delighted that the funds that were held at Westminster are now being made available, given that the DECC seemed to be the source of so many of the problems with timing. A consultation is under way that seeks input on the sorts of projects that people would like the renewable energy investment fund to be used for. The essential thing about the fund is that it is about revenue generation as well as the social impacts. Both those elements have to be there. We have not said a great deal about renewable heat or district heating schemes.
Forgive me if I am wrong, but I think that we are again talking about the supply side, the economics of energy and hitting our energy targets. What is your view on the demand side and demand reduction? The issue is not just about revenue generation; it is also about cost reduction.
It is important that organisations that receive funds or earn income from renewable energy developments that are in the community use such funds to address fuel poverty in their areas. We have seen that happen. Any beneficiaries should use the funds, not for hanging baskets but to upgrade hard-to-heat houses.
I want to develop the issue of the renewable energy investment fund. I was a little unclear from Mr Watson’s answer how involved Community Energy Scotland is in the development of the fund. With some consultations, the Government sets out what it is doing, asks people to fill in a consultation form and says thanks very much. On other occasions, the process is more participative and the Government will go to the relevant bodies to ask what is needed. How involved have you been in the development of the community aspect of the fund?
I have not been involved personally and I do not know about my colleagues. I understand from Scottish Government officials that PriceWaterhouse Coopers has been retained to seek ideas from a range of stakeholders, but I do not know whether that has begun.
Good morning, panel. I will try to make a bridge between the planning aspects and employment.
We do not do community projects per se, but I guess that the community benefit of a medium-sized turbine going up on a farm is that the revenue generated by the farmer will stay in the local community. I guess that the same could be said to happen with large-scale wind farms, although we do not know where the money goes.
Mr Park, when you said community benefit, did you mean the broader benefit rather than the community benefit payment?
Yes.
For the community groups that we have examined, the main driver of engagement is income generation. That might produce spin-offs in terms of small-scale job creation, but the driver is the income, which can then help to sustain a community in the longer term. The income is far greater from community or co-ownership than it is from the standard community benefit payment.
I have a question that is more about employment. An issue that has come up in most of our evidence sessions—I think that Dr Anderson touched on it in his paper—is the transfer of skills from existing industries and whether there is sufficient skills capacity within the renewables sector to meet the targets. Dr Anderson, do you believe that there are sufficient skills? I am talking not just about the engineering skills that will be needed. For example, you referred earlier to frustrations with the planning system. Can you comment on skills requirements and capacity in that context as well?
There is a lot of enthusiasm in the engineering sector for renewable energy in this country, whether it is wind, wave, tidal or whatever. However, we lose out by not having a strong manufacturing sector. We are world leaders in the marine technologies, but they are very young and at the prototype stage. Wind is the big, hugely mature commercial success at the moment, but we have a very small foothold in it. I greatly regret that, because renewables can be of economic benefit either through manufacturing the equipment or through owning it. We are losing out in both respects in Scotland. We could meet our targets with existing skills, but we will buy in the equipment, which may be owned by overseas companies. In that case, we will have met the targets but will have missed the economic benefit. Manufacturing ought to underpin the policy in order to maximise the economic benefit of renewables, which will happen anyway.
The fact that jobs are already provided by renewable energy development in Scotland is currently underplayed. I admit that, as Dr Anderson said, we are not getting jobs in manufacturing the kit—that applies to wood-fuel boilers as much as it does to wind generators—but even where I stay in Inverness, there is an army of people in renewable energy, whether it is wind-turbine maintenance folk from Nordex or Enercon, photovoltaic panel fitters, people putting in new hydros or the folk putting in the roads for those. Of course, we also have Nigg on the go with the enterprise area up there for Global Energy. Unlocking renewable energy projects and getting them built, instead of only consenting to them or having them on paper, has phenomenal implications for employment. The logjam is in getting them built and sending a clear signal that we want that to happen. We have been talking about community benefit and nice-to-haves, but employment is not a nice-to-have; it must happen. In what other sector apart from renewables does the Government have the opportunity to stimulate employment, but where are we? Stuck with bits of paper, environmental impact assessments and planning delays.
That is a fair point. Dr McEwen referred to the public acceptance of renewable energy and contrasted that with the public acceptance of other forms of energy generation around Scotland.
I should say that I am only a simple engineer.
And I am only a simple electrician.
I do not want to talk about Scotland’s future governance or whatever, but what I would say—and this is a completely blue-sky thought—is that as SSE is the one remaining British-owned utility and is strategically important to this country because it owns all the hydros and a lot of the wind, it would be of strategic importance to have a stake in it. I would hate to see it being sold off next week to, say, Gazprom or, without wishing to be pejorative, any foreign company.
I am sure that, by discussing public ownership of utilities, we have fulfilled one of the convener’s wishes.
Absolutely. A discussion on the nationalisation of energy companies—that is fantastic.
Dr Anderson has for the most part answered my question. However, as far as training and upskilling are concerned, through its colleges and universities, is Scotland in a good place to create more employment, more community ownership and, indeed, more acceptance of renewables? If not, what do we need to do in that respect?
I think that Scotland is in a good place. I do some teaching at the University of Edinburgh and have noticed a huge intake of people interested in studying renewable energy. The university’s engineering department, which majors in the subject, attracts students from all over Europe. People want to study the subject and it is certainly a very active field. As a result, I am very optimistic; indeed, I think that you will find the same pattern in universities throughout Scotland.
So individuals are going through centres of education and getting trained. Given the lack of manufacturing, where do they go when they come out of college or university?
One of last year’s graduates from the course that I was involved in went to work for Enercon in Germany; another went to Denmark to work for Vestas; and others stayed in the consultancy business in this country. Graduates go wherever the jobs in the wind industry are. I should point out that I teach wind energy, not the other renewables, although I know that those who study marine technologies tend to stay close to home. In short, graduates go where the jobs are.
So we need more manufacturing capability. I know that over the past 12 months there have been announcements of major investment and substantial job opportunities in Scotland, but are you convinced that if more such announcements are to be made, more individuals should stay in the country?
Absolutely.
I point out that, at college rather than university level, Inverness College and Banff and Buchan College are putting substantial effort into training up those involved in plumbing and electrical work and, indeed, apprentices in microrenewables such as solar thermal, solar PV and wood. However, after they get their training and find employment with the likes of Highland Wood Energy or Fraser & Sun, they go off for a week to Austria to be trained by the manufacturers of the kits they are going to install. It is a case of good news and less good news; on the one hand, those people get trained and employed but, on the other, we do not get any jobs out of manufacturing the kits.
How, then, do we stimulate more indigenous businesses to develop into manufacturing or encourage Scottish entrepreneurs to establish businesses and create more employment opportunities?
How long have you got?
Not long.
You have a go, Colin.
It is difficult to manufacture anything new in Britain at the moment. We kind of opted out of wind energy some years ago, and I do not know how easy it is to opt back in. After all, the companies involved in that work have been developing their products and techniques for 20 or 30 years and you cannot simply jump back on the wagon like that. There are jobs in the industry and we can get involved again, but I think that it is too late for an indigenous company to challenge at that level. Of course, I hope that I am wrong about that.
That ties in with your earlier comments about wider economic gain. This is not just about reaching the targets—which you have welcomed and which you hope we achieve—but about getting full economic gain from manufacturing opportunities.
I think that it has to be about that.
John Wilson has a very brief final question.
On the issue of kit, which has just been raised, it has been alleged in previous evidence sessions that most of it is imported from China. Who at community—not commercial—level is deciding what turbines or other pieces of kit should be purchased, where they should be purchased from and who should install them?
I pay tribute to Enercon. Community Energy Scotland was faced with a number of community-scale schemes and found it very difficult to find a commercial turbine manufacturer that would sell and deliver the kit. Enercon did so—and did so very well.
Just for clarification, are certain Irish-made machines not bankable because of reliability or for other reasons?
I presume that it is because lenders do not have as much confidence in those machines as they have in others.
That is interesting.
When you say that lenders do not have confidence, are you implying that they decide what kit should be purchased?
Yes.
Unless you are funding the project yourself, the answer to your question is yes, above a certain level. There are many planning applications and approvals for 225KW machines as well as some for 500KW, but the banks in the market will not lend against them. The developers go through the planning process without factoring any of that in; the banks tell them, “Don’t come to us till you get planning approval,” but when they get approval, the banks then say, “Nope—can’t fund that.” There is a real disconnect in that respect.
I appreciate that we have gone a bit over time, but your evidence has been extremely interesting and we have covered a lot of ground. Thank you very much.
I welcome our second panel of witnesses. On my left-hand side, we have Murdo MacDonald, who is the convener of Rosneath Peninsula West Community Development Trust. It is always good to see another Murdo at the committee.
We have got them surrounded.
There are not enough of us.
That is your opinion.
We also have John Booth, the director of Eigg Electric; Alan Hobbett, the director of Gigha Renewable Energy; and Mike Pitman, the director of the Boyndie Wind Farm Co-operative. I welcome you all. I am sure that you have heard some of the previous discussion and are aware of what is likely to come up. Would anyone like to make a statement before we move to questions?
I would like to add a couple of thoughts on the evidence that you heard earlier, if that is not too much like back-seat driving.
I have a couple of points to make to follow up what Murdo MacDonald said. Although I am a volunteer director of Gigha Renewable Energy, I am also employed by Berwickshire Housing Association, where I am responsible for a development in the Borders, and I am involved in a voluntary capacity in a community development in Fife that is not so very far from where Mr Park stays.
I would like to comment on employment issues.
I am wearing a multitude of hats. In my day job, I am an accountant, and I have many clients who are farmers with turbines. I can only echo the issues that have been raised and the concerns about raising funding for turbines. That is a problem. None of the mainstream banks is at all interested, despite promises.
Thank you. That is helpful, because the opening statements have covered a lot that I am sure members would have asked about and a lot that was reflected in the questions to the earlier panel of witnesses.
I take on board the points that the witnesses made about finance. The Scottish Government has set up the community and renewable energy scheme—CARES—to assist communities. It has provided a fund of a little more than £5 million that communities can tap into to assist with the pre-planning process. Is that enough money? Did the witnesses make use of that funding? If they did not, why not? I take on board the comments that were made about Highlands and Islands Enterprise’s involvement in assisting with the establishment of community energy projects, but does anybody wish to comment on CARES?
The Fraserburgh Development Trust accessed CARES for the initial planning. We are beginning to spend that money. In fact, we are writing a cheque for £25,000 for a grid connection this week, which we could not do if we did not have that funding. The funding comes with a cost, but it is the only way to get into the game, so it is a great facility. I am pleased that the scheme has been reopened again for the current year, because we have another project that we might be able to do. It is a door opener.
We have a CARES loan, which is fundamental.
The CARES loan scheme is an exceptionally good scheme. Two of the projects with which I am involved—one with a housing association and one in a voluntary capacity—would simply not have happened were it not for the scheme. It is highly effective.
That has been changed.
Has it been changed?
Yes.
I stand corrected. I am pleased that that is the case.
It is helpful when the witnesses correct each other. It saves us having to do it.
The ceiling is now 11.5MW.
When was that changed?
Last month.
Your suggestion has clearly been taken on board, Mr Hobbett.
I am delighted.
I welcome those responses on CARES. There seems to be universal agreement that the scheme has been highly valuable. However, Mr Pitman commented that it comes at a cost. I ask him to expand on what he means by that. It is a loans scheme. Does he think that the cost is too high or about right?
Putting my accountant hat on, I have to say that 10 per cent is quite a lot of interest to pay on those loans, but it is a means to an end. If that is the price that you have to pay, it is the price that you have to pay. If it could be a bit cheaper, that would be great.
You are an accountant, but you did not read the small print. I will not be employing you.
That is okay.
You have stolen my punchline, convener.
I am just a simple accountant.
This is an important issue. Although you all welcome the scheme, Mr Pitman is raising issues about the level of repayments and when repayments kick in. Do other panel members share his concerns about the level of repayments that are being requested and when the repayment period starts?
In reality, at financial closure you would hope to include the amount of the CARES loan in the borrowing that you are taking from the bank, so you would pay off the CARES loan immediately. In other words, if you borrowed £100,000 from CARES, you would borrow an extra £100,000 from the bank at an interest rate of 7 per cent and pay the CARES loan back. That is the model that everyone would try to achieve, rather than paying 10 per cent interest for any longer than necessary. However, that implies that you get all the way to financial closure. We heard, in the previous evidence session, that that is quite a difficult thing to do. Is it not the case, Mike, that the inevitable outcome is that you would pay the CARES loan off straight away?
If you can, but you have to find 15 per cent or whatever it is that the banks are looking for you to come up with. That is a problem if you have to find extra to pay the CARES loan back at the same time.
The communities that I have been involved with are fairly content with the interest rate, because the risk is largely taken by CARES, although I accept that 10 per cent is fairly high. The issue could perhaps be addressed through the means by which the loan fund is drawn down. Unless things have changed in the past week, the 10 per cent contribution, or whatever contribution the community group has to make, is made on every draw down. If the loan could be drawn down first and the community’s contribution made towards the end, that would assist considerably—certainly in one project that I am involved in—from a cash flow point of view. I also work with housing associations and, in the same way, the housing association grant is always drawn down first—before bank finance, for example.
Good morning, gentlemen. I have a few questions, one of which is on planning. In the previous evidence session, we touched on the issue of the local authority versus the Scottish Government. It was suggested in a previous evidence session that the Scottish Government should have an overarching planning role on the siting of renewable technologies. Would that be welcome? Would it be worth while or would it go against the grain of local democracy and local planning decisions?
Communities start off with two things: no expertise and no money. That is where we start. You instantly have to go around asking for help. One of the first places that you go is to the planners. You say that you have had an idea about a hydro scheme or a wind farm and you ask them what they think. The involvement of planners with communities is vital. The process therefore has to be local, in that we are in Argyll and there would not be much point in our talking to somebody in Edinburgh about what they thought, because they do not know the area or the geography.
That was certainly our experience when we were seeking to set up the Eigg Electric scheme. The local planning department was key to that and it was helpfulness itself.
I reiterate that Richard Kerr, in Argyll and Bute, was exceptionally good—very professional and objective. That has been my experience in the Borders, too. However, I am aware of colleagues in other areas where the reception has been different. Local government officers are also under pressure at times, when decisions are being made by members who are concerned about criticisms that they may face. That tends to lead to a belt-and-braces approach whereby a lot of relatively small community projects are asked to deliver the same sort of information as much larger commercial projects, which can add time and expense. A central monitoring role and a presumption in favour of developments up to a certain size might assist.
The CARES loan people were extremely good at giving general advice on what we were going to do, starting from nothing and not knowing anything. They were very good. It was not just, “We can give you £137,000”; there was a lot more to it than that. That is a commendable scheme.
We started our scheme in ignorance—what did we know about it? We had to deal with a lot of other agencies besides the planning department, including the Scottish Environment Protection Agency, Scottish Natural Heritage and so on. The approach that we found worked every time was simply to invite the planning officer, SNH and SEPA to the island, show them what we wanted to do, ask them what they wanted of us and then do it. It was quite a simple process—not as complex as it might appear to have been.
You all now have experience and information that you did not have when you first started. Have you been asked by other community groups throughout the country to assist them? Is there a central body or point where you can feed in your advice, which other groups can tap into so that they are not starting from zero as you did?
We have met a number of small community groups since we started the electricity scheme. We originally made all the information about our project as it proceeded available to HIE and we now deal with Community Energy Scotland, which we have found to be a good way of bringing people together. We have consulted a lot of communities in Britain and further afield—as far away as Alaska, South America and so on.
The Boyndie Wind Farm Co-operative was the first wind energy co-op to be set up in Scotland and we have been consulted numerous times by other people who are trying to go down that route. I was not involved when the co-op was first set up, but it has been used as a model that has been built on and refined. There is also a community scheme in Udny that gives a lot of help to local community groups that want to develop wind turbine projects. Those involved with the scheme encourage people to speak to them about how they got through the planning process so that they can help those people to do so.
I want to tie that into planning. Argyll and Bute Council has obviously been extremely helpful but, as Mr Hobbett mentioned, in other areas there might not have been such plain sailing.
I can speak only about Aberdeenshire, but I would get the person to speak to CARES, Community Energy Scotland and the Udny group, which has been through the mill so to speak. People who have been there and done it before will always be the best source of information. The Development Trusts Association Scotland has contacts throughout Scotland. I would see whether the person could pick the brains of someone who has set up a scheme through a development trust.
When you start on a scheme, the first thing that you do to try to fill the knowledge gap is to talk to your peer group. That was the first thing that we did. We toured wind farms and development trusts asking for advice. We now pay back for that. Tonight, I am going to Luss and Arden to pay back, because people there want to talk to us. That is the way it works.
I agree.
I agree absolutely with that. There is nothing like the power of example. Communities can learn from other communities, but Community Energy Scotland is absolutely crucial and central. I am aware that, of necessity, the Scottish Government has to tender contracts such as the CARES contract. Community Energy Scotland, which is a membership organisation and a charity, has been fundamental to so many developments. The organisation is seeking to develop its own wind projects to provide an independent revenue stream, but if the Scottish Government was able to provide security of funding for a number of years to come, that would without a doubt be a great help to the movement as a whole.
The Scottish Government has a target of 500MW from community schemes. Is that too high or too low?
It is probably too high, unless community schemes are more encouraged. It is quite a daunting prospect to set up a scheme, given all the planning issues and so on. That is where Community Energy Scotland can come in, as it can facilitate.
If planners were encouraged to look at community schemes more favourably than commercial ones, that might encourage communities to go into such schemes. As far as I am aware, community schemes are looked at in pretty much the same way as commercial ones. There is no preferred treatment for a community scheme in which, for example, 20 per cent will come back to the community. Perhaps the rules can be changed so that planners look more favourably on schemes that have significant community benefit than on schemes that are all about me.
In my view, the target is too low—it should be higher. If it were set at twice the current level, I would be content, particularly if the resources to enable it to be met followed.
The issue of resources that Alan Hobbett raises is the key one. You might think that doing this stuff is easy, but it is desperately difficult for communities to do. We put thousands and thousands of man-hours into doing it. All the time, we are learning and making mistakes. We have to keep going back. We do not have any money, so we spend half our time making grant and loan applications, getting knocked back and trying again. It is not easy. If it were easier, the target might be easier to achieve. It is desperately difficult.
I think that you heard my final question to the previous panel about the wider economic benefits. I am glad that you expanded on that in your opening remarks, because that is certainly where I want to take the discussion.
I would like to put that in a different context, if I may.
Of course.
The community benefits from commercial schemes are a pittance. This country is being robbed. In 25 years’ time, I do not want us to look back and ask where all the money went.
I would not be so sure about that. [Laughter.]
You need to find a way to make communities run these things and benefit from them. I use the word “communities” in the largest sense; it could be a farmer, a village or a local authority. That is the way in which to keep the money in the communities.
I nearly clapped there, but I am not sure whether that would be appropriate in a committee. [Laughter.]
I endorse what Murdo MacDonald said, and I am sure that Alan Hobbett would do so, too. Our scheme is wholly community owned and it operates for the benefit of the community. All the benefits that accrue from that, some of which I described earlier, go straight into our community and all the people who work on the island. To me, community ownership of a scheme results in community benefit.
John Booth and Murdo MacDonald are absolutely right. When we announced the first year’s profits from the dancing ladies on Gigha, the front page of The Press and Journal stated the community benefit payment that had been made for the Farr wind farm, which was more or less the same as the total benefit from the Gigha wind farm. The difference is that the Farr wind farm is 100 times larger by installed capacity. That shows the difference between community ownership of a scheme and the community benefit that might be paid.
A great deal of this is music to my ears. I say to Murdo MacDonald in particular that, if he ends up helping to save the planet merely by happy accident, I will settle for that. On his comments about the idea of local authorities taking an equity stake, such a role for local authorities is something that I have been arguing for, too.
It would be useful if the target was broken down. There are benefits from all those things. Local ownership, regardless of whether that means community ownership, brings significant benefits.
Absolutely, but communities represent something different and have different needs.
They do, and I agree with the previous panel’s comments that it would be advantageous. There are some grey areas, as there are a number of joint ventures between communities and local farmers, for example, which bring mutual benefits, but I think that it would be useful.
It is difficult for community organisations to take a view on that. I mean no disrespect to these gentlemen, but I am interested in getting our turbines set up in Fraserburgh, rather than in what is happening in Gigha. I want to benefit my community, not somewhere 100 or 200 miles away. Everyone in the community wants the best for their locality, and it is difficult to see oneself as part of a big movement. We are trying to be a bit selfish.
I suggest that the Government will be more effective at supporting communities to do what needs to be done to achieve that local success if it is clear about what it hopes will be delivered at the community ownership level.
I agree.
One way of getting closer to that target is to have more community ownership, on the basis that we live where we put our turbines up. We are not interested in spoiling the landscape because we live there.
My question is really for Alan Hobbett. I remember going to the conference that the community on Gigha organised shortly after they switched on the dancing ladies. It was terrific: we admired the dancing ladies, and then we danced with some other wonderful ladies. We also learned a lot.
Interestingly, the first development took literally 18 months from the first discussion to the machines turning, which was very quick indeed. One should bear it in mind that it was essential that we got the money in quickly, which is why we went for second-hand machines. The feed-in tariff did not exist at that time, so the project was funded through the renewables obligation, which meant that the returns were smaller.
Will you give us an idea of how long it took, from when you first decided to go for another turbine, to get to the point of the process at which, had the finance been in place, you would have been able to proceed?
Someone would be doing exceptionally well if they did that in two years.
That is very quick.
That is why I said that someone would be doing exceptionally well to do that in two years.
The guys in Udny took seven years for a single turbine.
How long will it take you, Murdo?
We have been going for two years, and we are hoping—just hoping—to apply for planning permission in the autumn or winter of this year. We are therefore looking at at least four or five years.
Alan, given that Triodos has turned you down, is there a contingency plan? Where do you go next?
We are looking at alternative means of funding. That will potentially be through private placement bond funding as opposed to bank debt funding. We are pleased to be able to access individuals and institutions that are willing to consider that, but a bank debt would be the simplest, least expensive and favoured option.
What is the financial cost to the community to date, including the fourth turbine? What is the social capital cost, including the cost for volunteers?
There is a tremendous amount of voluntary input. At the time of the buyout there were 100 people on the island. There are now 150 people, which is a significant increase over that period. However, with just 150 people, we are operating three community businesses, all of which require the input of volunteer time—not least as board members.
I apologise; I probably did not phrase my question very well. What I want to know are the upfront costs that you have had to meet to get to this stage of the project.
The costs are considerable. I can speak with more confidence about the development in Berwickshire—to reach the stage of submitting plans for consent has cost about £150,000. In my experience, that is a typical amount for similar developments of a 7.5MW scale.
John Park was going to applaud and I was going to do a lap around the table when Murdo MacDonald spoke, because what he said was heart-warming in terms of the commitment to the community.
I can certainly talk about the relationship between CES and HIE. Initially, a community renewables unit was set up within HIE. That occurred at the same time as the developments on Gigha. Given the success of Gigha and the recognition of its potential importance to other communities, HIE and some of us who had been involved agreed that it would be appropriate to set up a new company. At that time it was called the Highlands and Islands Community Energy Company, and was set up as a subsidiary company of HIE, which was the only shareholder. A volunteer board was established, but full control lay less with HICEC than with HIE. HICEC was the forerunner of CES. The intention was always that HICEC would ultimately become independent and after three years we moved towards that, when the new company—CES—was established. It was a membership company—membership was open to any community group or organisation that shared the company’s aspirations. We achieved charitable status and became a Scotland-wide organisation. It is now fully independent of HIE and is fully accountable to its membership, which is open to any community body or charitable body.
I do not know whether the committee has received evidence on this before, but CES has a trading arm—CES Trading—which it hopes to develop to do the sort of investment that HICEC did in Gigha many years ago. However, it needs Government support for that.
In its written submission, CES said that
If you are talking about reduction of consumption, the Eigg Electric scheme, being small, limits the amount of electricity available to our customers. That was decided by consultation and agreement with our customers. We found that the scale of the project that we could afford was insufficient to allow everybody the same amount of electricity as people enjoy on the mainland. Mainland levels are perhaps 20 to 25kW of availability. We felt that it would be necessary to restrict that so that we did not reach a point where consumers could bring the system down in winter. We proposed to limit households to 5kW and businesses on the island to 10kW. Although those amounts sound low, the reality is that if people work with them, they can do everything they can do on the mainland—but not all at once. They cannot be wasteful, either. People can have and use a washing machine, a dishwasher and so on, but they cannot use them at the same time—they need to use them sequentially.
I have a vision of 100 washing machines going at 2 o’clock in the morning.
The system on Eigg is quite a draw because it is unique. People coming to the island want to have a look at the scheme. We do a lot of tours around it. It has also stimulated interest from universities and so on. We have a strong connection with the postgraduate renewables department at the University of Dundee—we are part of the course. The students come for a week to study our system and we provide data and so on. Visitors have a considerable interest in the scheme. It is a big draw.
Mr MacKenzie was across for—
For the dance.
Yes. A good dance it was too, I remember.
You will be glad to hear that I have only two brief questions. The first one does not really apply to Eigg or Gigha, but is for Mr Pitman. Who owns the land that the turbines are built on? Do you buy the land and does it come into community ownership, or is it leased from someone else? As an accountant, how do you cost that into your running costs?
Having access to the land is the most important thing; who owns it is a secondary matter. It is great if the land can be owned; if not, it can be leased, with, for example, a 25-year lease. That gives us the opportunity to get a community-owned turbine up.
Clearly there is a community benefit in that example, in terms of what you will be paying for the lease.
It is the same with us. We lease land from two farmers—local guys, who were born and brought up on the peninsula—for 25 years. First we took an option and then we took a 25-year lease on the land. They get paid a pro rata amount. There are various different models: an amount per installed megawatt, a percentage of the gross revenue, or a percentage of the net profit. In Orkney, a percentage—or residue—of what is left after the community has paid off its bank loan and interest goes to the farmers. There are different models, but they are based on a lease.
We found the same on Eigg. Even though most of the project sits on community-owned land, enough privately owned land was involved to necessitate negotiation of 14 wayleaves for cabling to cross the land, or for transformers to sit on it. That was a time-consuming process—it took nearly two years.
I am currently involved in four projects: one in Gigha and three others. Three of the four are on privately owned land and only one—Gigha—is on community-owned land.
My second question is this: if you each had one minute, how would you respond to Communities Against Turbines?
I would say that we should keep the discussions rational and respectful. Let us not pretend that wind turbines and renewables do not work. Let us look at the evidence and discuss the facts. Yes, wind turbines have a visual impact. Some people like them and some people do not. In some places they are appropriate in the context of the local landscape; in other places they may not be. Let us not pretend—let us be real and discuss the real issues. Otherwise we just end up misleading people, which is in nobody’s interest.
Respect and honesty are the important words here. I said earlier that communities developing wind turbines in their own areas are not in the business of despoiling the landscape—we live there. I respect anyone who does not like wind turbines’ visual impact—that is a perfectly respectable position. People either like them or they do not. It does not make someone a bad person if they do not like them. However, we have to look at the facts.
I would be interested to hear from CATS whether it could provide us with £50,000 income each year from another source. The wind turbines can produce £50,000 of income, which we will spend locally to develop the community.
That is the point that Murdo MacDonald is making. With a community project, we negotiate with the community because we share the same interests. There may be minor disagreements, but we can reach a consensus. The outlook of an external commercial venture is different. Those involved do not live in or belong to the community and they want to make money from the area, so their approach to people will be different and it is quite easy for contentions to arise.
So, we will build a golf course there.
We will just leave that remark to hang in the air, Mr Brodie.
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