Scottish Renewables concerned about potential ‘boom and bust' scenario for small hydropower industry
Hit by significant delays and uncertainty created by the UK Government's comprehensive review of the FiT scheme in 2011-2012, there is a sizeable backlog in the number of licence applications for small-scale hydro in Scotland and in the UK.
Scottish Renewables has expressed its concern regarding a potential ‘boom and bust' scenario which may hit the small hydropower industry if the government goes ahead with plans to cut its financial support.
The introduction in 2013 of a "system of degression" by the UK Department of Energy and Climate Change (DECC), whereby financial support known as Feed-in Tariffs (FiTs) are cut by a set amount every year – dependant on the level of capacity of planned projects – could have a highly negative impact on small-scale hydropower developments in Scotland.
Hit by significant delays and uncertainty created by the UK Government's comprehensive review of the FiT scheme in 2011-2012, there is a sizeable backlog in the number of licence applications for small-scale hydro in Scotland and in the UK. This could result in the FiT for hydro being cut by 20 per cent from April 2014.
Joss Blamire, Senior Policy Manager at Scottish Renewables said: "The system of incentive cuts introduced by DECC was set up to avoid a ‘boom and bust' scenario, but where the mature small hydropower sector is concerned, it actually encourages such an outcome.
"Scottish Renewables understands the need for the UK Government to cut the cost of the FiT scheme. The problem, however, is that this system is unsuitable for hydro.
"In the short term, a backlog of projects – because of delays and uncertainty over the government's FiT review – is significant and could result in a 20 per cent drop in financial support, meaning that a boom in small-scale hydro could immediately be followed by a bust.
"Another longer term issue is that FiT support cuts are linked to expected, but not actual, build of hydro schemes. Unfortunately, due to uncertainties in financing, grid connections and construction in the hydro sector, projects can be delayed. This means that projects in future could suffer from cuts in financial support as a result of schemes which were expected to be, but never were built."
Mr Blamire added: "A possible solution to this problem would be to have a one year hiatus on the capacity-based cuts system, in order to deal with the backlog of hydro scheme applications, and then to introduce annual cuts in financial support based on small-scale hydro schemes which have been built, not on schemes which only gain pre-accreditation."