In post-subsidy environment, renewable energy businesses have to adapt
20 March 2017
Speaking at the Scottish Agricultural Arbiters & Valuers Association Conference held in Dunblane on 15th March, Nick Green, Savills Head of Energy in Scotland said:
“The Scottish Government is currently consulting on the direction of travel of the energy industry in the UK. The consultation documents set a challenge of 50% energy consumption from renewables by 2030, and includes a focus on onshore wind, fracking and energy efficiency. The consultation document restates a number of policy objectives, gauges performance against that of the UK Government as well as setting a number of new policy objectives.
The Scottish Government highlights the significant ground made toward renewable electricity targets but also the lack of progress regarding heat and transport which represent approximately 75% of Scotland’s annual energy consumption.
While it could be argued that the Scottish Government’s influence on renewables is limited, as it does not control the energy purse strings, it does have an effective planning policy at its disposal which is pre-disposed to support the sector. It make it clear that for projects to be successful developers need to think ‘out of the box’, looking at ideas such as shared ownership and collaboration with other proposals in the area.
It is clear that in a post-subsidy environment businesses have to adapt their methodologies and identify alternative routes to market, to reduce their dependency on subsidies.
Those considering projects need to take a whole-business/holistic approach to projects in order to integrate them with their wider business processes; for example, integrating an AD plant into a dairy farm to assist with slurry management and provide power back to the business”.
Current issues being faced by renewables businesses include the following:
- Business rates – many businesses did not budget for the sizeable increases to come in April. Businesses need to be certain of their grounds before appealing
- Power prices – low wholesale prices only tell half the story, operators need certainty to secure finance against counterparties with good covenants
- Performance – in many cases projects have not performed in line with expectations, owners should take a proactive approach to this
- Route to market – there is a need to innovate if a project is going to be successful in a post-subsidy market
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