Financing the Growth of Renewable Energy in Scotland

This is a follow-up to my previous blog post ‘The Exciting Changes Taking Place in Scotland’s Energy System’ that discusses how Scotland’s already impressive and steadily increasing deployment of renewable energy systems is being financed.  While technology costs  will always be an important part of the total cost of deploying renewable energy systems, as these costs come down with technological advances, large scale manufacturing, and increased deployment experience, financing costs imposed by lending institutions, whether private or public, take on increasing  importance.  Financing of emerging technology options has always been recognized as a critical barrier, and demonstrating the ‘bankability’ of proposed projects requires careful attention in the planning phases. Finance issues are a major focus of the annual meeting of Scottish Renewables, the representative body of the Scottish renewable energy industry since 1996. It has over 300 members and member organisations, ranging across all technologies and supply chains.

As reported in the previous blog post, Scotland now generates enough wind energy to meet its entire residential electricity demand, and renewables are Scotland’s largest source of electrical power, with much more to come. How this came about is a case study in the importance of national policy in support of renewable generation, a policy still needing implementation in the United States.

Scotland, a separate country with its own parliament even though formally a part of the United Kingdom, has set two important energy goals: to achieve 100% renewable electricity generation by 2020 and achieve zero carbon emissions from all power generation by 2030. In support of these goals the Scottish Government has set up several financing programs that offer assistance to renewable energy projects in both the planning and deployment phases. These include the Scottish Government Community and Renewable Energy Scheme (CARES), Scottish Investment Bank’s Renewable Energy Investment Fund (REIF), and Home Energy Scotland. Community Energy Scotland is a registered charity that provides practical help for communities on green energy development and energy conservation. It is supported separately by local communities. Each program is described briefly below.

CARES is a loan fund established in 2011 “ provide loans toward the high risk, pre-planning consent stage of renewable energy projects which have significant community engagement and benefit.” It is managed by on behalf of the Scottish Government. A part of CARES, the Local Energy Challenge Fund, was established more recently “ demonstrate the value and benefit of local low-carbon energy economies.”

CARES financing is designed to to support high-risk early planning stages widely recognized as principal barriers for resource-limited small businesses and community groups. Its key features include:
– financing of initial planning of any renewable energy project up to 5MW in size in a competitive process
– unsecured loans of up to £150,000 (£1 = $1.55) for up to 90% of project costs
– a fixed interest rate of 10%

Phase 1 of the Local Energy Challenge Fund attracted 114 applications and 17 were funded. Phase 2 is currently underway. Phase 1 projects include a community district heating scheme, community use of hydrogen, ground source heat pump projects, and development of community microgrids.

The Renewable Energy Investment Fund, established in 2012, supports projects at the demonstration and commercialization stage that
“- Deliver energy from a renewable source, reduce the cost of renewable energy or provide key solutions for renewable energy generation
– Provide benefit to the economy of Scotland
– Have a demonstrable funding gap for REIF to consider
– Be at a sufficient stage of development to require REIF funding before March 2016”

Some of the project types that REIF can support include marine energy, community owned renewables, and renewable district heating. The REIF team also provides technical advice and assistance in finding other funding sources. Its £103 million fund is available to provide commercially priced loans, equity investments, and loan guarantees. Initial projects include
– a £735,000 loan to the Islay Energy Community Benefit Society to install a community owned, 330KW wind turbine on the island,
– a £615,000 loan to a village in Stirlingshire in support of their efforts to become a zero-carbon, zero-waste community,
– a £700,000 loan to support the first phase of the 0.5MW Shetland Tidal Array, and
– a £250,000 loan to support development of the AWS-III wave energy device.

Home Energy Scotland provides up to 75% of the total cost of installing a renewable energy system up to £10,000, and up to 100% of the total cost of connecting to a district heating scheme up to £5,000. Loans are available to owner occupiers in Scotland for existing and new residential buildings. Loan amounts and repayment schedules vary by technology – e.g., the maximum loan amount for installation of a PV system is £2,500 and a maximum loan repayment period of 5 years, while the maximums for installation of a ground source to water heat pump are £10,000 and 12 years. In all cases a Green Deal Assessment of the proposed project is required and installers must be certified.

Community Energy Scotland supports community-owned projects by providing funding for feasibility studies, planning, community consultation, and help in finding funding sources. Supported projects include energy audits, energy efficiency improvements, micro-renewables installations, and installation of wind turbines.

All of the above paints a clear and exciting picture of a country committed to a clean energy future that is willing to back up its words with substantial and ongoing budgets. Scotland may thus prove to be an example to the rest of the world as we leave the fossil fuel era and move into the new era of renewable energy.

Note: readers of this blog may find it curious that I’m posting a comment in a language other than English – it happens to be Croation. Not being sure if it was a legitimate comment I explored the attached URL and found a serious comment in Croation that I then translated to English using Google Translate. It is reproduced below. Please note the Disclaimer at the end – quite interesting.
“About us
← Energy contracts Russia and China, and the European Union and Morocco Minister of Energy announces UK solar revolution →
Renewable energy in Scotland: the first 100% and then further development
Posted 12th May 2015 by Zoran Oštrić
Scotland is a country like Croatia for many parameters values: somewhat higher (20-30%) on the surface, population and electricity consumption. There are large reserves of fossil fuels, as well as great potential for renewable energy, but it certainly is not an essential reason, which has a much larger GDP. Much more serious and also takes the protection of the environment and climate change.

The Exciting Changes Taking Place in Scotland’s Energy System

Škotska- obnovljivi rujan 2014

The link is the story of an American, pensioners who previously served as head of the US Department of Energy’s renewable energy electricity programs. Talk about current events in the Scottish energy.

In September 2014, Scotland has with 1,516 MW hydropower plant (just under Croatian) had installed 4,921 MW of onshore wind (14 times more than the Croatian), and other renewable power plants.

It’s just part of the potential. It is estimated that the total potential wind farm (land and offshore) 36.5 GW of tidal power plants and 7.5 GW to 14 GW of ocean waves.

Two and a half years ago we wrote about the intention of the Scottish Government that already in 2020 produced from renewable sources as much electricity as consumed. (See: “Energy Strategy of Australia and Scotland”, 22 November 2012., . Australia is unfortunately completely changed the direction of the energy strategy after the elections in 2013, but Scotland continues in the same direction.) Plan to completely eliminate fossil fuels from power by 2030, and also to close the nuclear power plant.

It will not be the end. Scotland has a role in the joint planning of renewable energy future ten countries in Western and Northern Europe (“North Sea Grid”). The axis of the future system would be 150 GW of offshore wind farms in the North Sea, which would annually produce about enough to satisfy all the needs of Germany.

Scotland is at the orientation, and that goes for Scotland at a national party that triumphed in the elections for parliament last UK, Thursday, significantly different from the UK’s ruling Conservative Party. The elimination of the Liberal Democrats in government could bring the rotation policy quite conservative government towards lower support “clean energy” (see commentary on the website of the Financial Times: Beyond the election – the energy agenda for the new government ).

Appendix (Wednesday, 13 May 2015):

Continuation of the article by the same author in his blog: Financing the Growth of Renewable Energy in Scotland .

Sources and methods of financing is one of the key issues and possible big barrier for emergent (emerging) technology options. Financial issues were the main focus of the 1996 annual meetings of the “Scottish Renewables”, the representative body of Scottish renewable industry, which brings together more than 300 members.

The Scottish Parliament passed two important goals: to cover 100% of the consumption of electricity production from renewable energy by 2020, and to achieve zero carbon emissions from all power plants by 2030 ..

The government has offered a number of financial support programs. The article describes in detail how to operate the Scottish Government and Community Renewable Energy Scheme (CARES), Renewable Energy Investment Fund (REIF) and Home Energy Scotland.

[DISKLAJMER: Croatian readers should bear in mind that this does not concern us. Our government is fortunately not throw money on nonsense. She knows that it is much smarter to pay strangers to build a power plant, and then import coal from Australia, than to bother with our domestic wind and sun.]”