Powering ahead: Reflections on Onshore Wind Week 2018
Last week was Onshore Wind Week 2018, and the positive messages coming from the Scottish Renewables onshore wind conference, as well as the BVGA Associates “The Power of Onshore Wind” report (commissioned by ScottishPower Renewables, Statkraft, Innogy and Vattenfall) are as encouraging for the onshore wind sector as have been heard for some time.
There appears a greater acceptance of the market in which developers are operating. Costs have reduced towards a level at which subsidy-free projects are going into the planning process and development pipelines; evidence suggests public support for onshore wind is widespread; Scotland as we know has a substantial wind resource, and the potential further economic benefits (building on what has already been achieved) for jobs, the supply chain and local communities that will arise as the sector pushes into a new phase of development are significant.
While it is true that the developers we see looking to progress new development are of a stature and scale to be able to bring the projects through (in a subsidy-free world), it remains the case that some level of Government subsidy would further support the necessary development by providing a form of revenue stabilisation. Island wind is of course to be part of the next Contract for Difference round in 2019, but it remains to be seen whether the process will be opened up to other onshore wind generation in subsequent auctions. In the interim it does, however, appear that developers are embracing the sentiment of “lets just do it” - which represents a positive and welcome view on the market – with an element of speculation on whether it will be on a merchant basis, or backed by some form of Government support.
Along with new development sites, thoughts also turn to existing wind farms that will shortly be reaching the end of their planned operational life. The term “repowering” is often talked about, although it can be taken to mean different things in different contexts (happily there seem to be discussions taking place to formulate a meaningful and understood description(s) of what the phrase will encapsulate).
Some intriguing discussion was provoked at the conference – much of which will require detailed consideration, and inevitably be different on a project-by-project basis – e.g. whether developers seek to extend the life of an existing project using the same equipment, or whether repowering in certain scenarios will involve the complete removal and replacement of turbines. Either way there are clearly significant planning concerns, in particular around what baselines and considerations will be applied to effectively considering whether to consent a “new” project.
With new targets being set for the reduction of carbon emissions in Scotland by the draft climate change bill recently published, it is important to remember the role that each and every project plays in achieving those. The targets will not (and indeed should not) go away, nor should they be pared back – and so it seems critical that projects contributing to achieving the climate change goals continue, otherwise there exists a potential fall-back in generation levels should projects (in particular a large number of projects commissioned around a similar time) reach the end of their planned life and not be extended or repowered.
As a property lawyer we have traditionally worked with the 27/28 year lease (albeit with rights to extend if financial terms can be set, where a landlord agrees to that), based generally around the time-limits placed on projects by planning consents. As examples emerge of turbines operating well beyond a 25-year life, and with technology improving and better understood ongoing maintenance/refurbishment procedures applied, one can see clear possibilities in projects continuing with the kit originally installed.
An interesting example was raised of a project in Texas whereby the lease term is 45 years and the consenting system is generally geared towards and favourable to repowering of projects. It will be intriguing to observe whether we see a change in consenting conditions in Scotland, towards recognising the potential life of the equipment and combining that with a requirement to ensure sufficient projects exist to continue to meet climate change targets in the future.
It should not be forgotten that although energy policy is devolved to a certain degree - e.g. the Climate Change (Scotland) Act 2009 - key drivers such as subsidy or support mechanisms are wholly retained by the UK Government, and dictated to a large extent by the Treasury. From the Scottish Government’s perspective, although without the power to drive forward a support mechanism, it can have an impact on incentivising renewable energy developments through the application of a robust, consistent and efficient planning regime for new and repowered projects.
Will we see the Scottish Government use its power in this area to lay the groundwork for the next stage of onshore generation? It is clear that onshore wind will continue to have a significant role to play, and one cannot help but think that wider renewable energy policy and frameworks will require to be updated to provide the best chance for this to continue.
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