The UK Government has ‘missed the point’ on hydro energy in its recent review of feed-in tariffs, according to one of the industry’s leading figures.
Now Britain’s hydro energy industry will ‘all but disappear’ by the end of the decade, says Mark Mathieson, Chief Executive Officer of Perth-based Green Highland Renewables.
During 2015, the Perth firm employed 20 people directly, and worked with more than 250 contractors and subcontractors from over 20 local firms in the construction of over a dozen schemes in the Highlands. In total the industry employs 1700 people. Mathieson estimates 80 per cent of these jobs will be gone by 2020.
In a detailed blog post Mathieson outlines his concerns following radical cuts to small-scale hydro tariffs announced by the Department of Energy and Climate Change just before Christmas. In the review, hydro tariffs were cut by as much as 37 per cent.
“The review of feed in tariffs has been a bitter disappointment to the hydro energy industry. We provided very strong, independent data to DECC on the costs and benefits of small-scale hydro much of which was disregarded in the final analysis.
“Hydro energy has been a part of Britain’s energy mix for more than a century. Major schemes built in the 20th century still provide green power at peak times, and recent years have seen an upsurge in new, small-scale schemes across the Highlands, with more than 100 MW of new capacity online already this decade.
“The industry still has an active pipeline of consented new projects, but DECC’s plans will put an end to almost all new projects coming forward. I fear Britain’s small-scale hydro industry, and the thousands of jobs that go with it, will all but disappear in the next few years.”
In response, the British Hydro Association has now written to UK Energy and Climate Change Minister Amber Rudd outlining their concerns.
“More worrying, the review betrayed a fundamental misunderstanding of the role hydro plays in the UK energy system – producing rapid, on-demand energy when it is needed most: in the evening, in winter when capacity margins are low,” Mathieson states.
“DECC is concerned with the headline tariff rates for green energy. On the face of it solar energy looks cheap – and therefore did very well in the review. However, although solar has a low tariff, it does not make any contribution to the winter peak – cold evenings in mid-winter – where margins are very tight,” says Mathieson.
During these so-called ‘capacity crunches’ National Grid has to buy in short-term power – including high cost Diesel generation – with additional ‘last resort’ gas power being bought at prices as high as £2500 per MWh (or nearly 50 times the usual cost), the costs of which are borne by consumers .
Factor in these costs over the year and solar does not look so cheap.
“DECC is also concerned that we move towards grid parity (subsidy-free) low carbon power, but fails to note that hydro already produces grid parity power. Hydro schemes last 50 years at least, and many of our historic hydro power stations are today delivering subsidy free-green energy right through the winter – exactly when it is required.
“Roll forward another 20 years and all of the small hydro schemes we have built in the last few years will be subsidy-free too, producing decades of cheap green power at a time when we’ll all be paying £1 billion a year to the foreign owners of the proposed Hinkley Point C nuclear plant.
“We are greatly concerned the review failed to take account of evidence provided by industry, and has not recognised the wider benefits of hydro energy.”
“Hydro energy has been a part of the GB energy mix for more than a century and is the most popular of any form of energy in the country. It supports thousands of local jobs in remote areas and has an almost wholly UK supply chain. It produces energy when we need it most, and plant built today can be guaranteed to be subsidy-free for many decades to come.
“We have asked DECC to think again and have requested, via Amber Rudd, a further meeting to explore options,” Mathieson concludes.