Subsidy cut hits new hydro plans

27 July 2012 Last updated at 02:06 ET

The main operator of Scottish hydro power stations said it does not expect to build new ones due to a subsidy cut.

SSE, which trades north of the border as Scottish Hydro, had planned several new hydro schemes in the Highlands.

It also warned changes to Whitehall's support regime for renewable power could significantly harm biomass burning and wind farm development.

RWE/nPower, which was also planning new hydro, is understood to be considering freezing its plans after subsidy cuts.

The news comes after the government announced a 30% reduction in the Renewable Obligation Certificates companies receive per unit of energy produced.

That has been awarded at the same rate as onshore wind farms, and after a Whitehall battle, they are also facing a cut of 10%.

The Department of Energy and Climate Change (DECC) announced the reductions on Wednesday, which were less than had been expected for wind farms, but on condition that could be reviewed again soon.

'New uncertainty'

Although the DECC statement only applies south of the Border, industry experts believe there is little flexibility for the Scottish government to offer more generous subsidies without hitting Scottish customer bills disproportionately.

Scottish Power, as another operator of existing big hydro schemes, responded to the DECC announcement with a plea to the Scottish government not to implement the same 30% cut.

SSE said the new regime will not affect existing plants or those under construction.

"Nevertheless, it means SSE no longer expects to develop any new conventional hydro electric schemes and the scope to increase generation of electricity from biomass at coal-fired power stations is significantly reduced," the firm said.

The statement went on to say the review of onshore wind farm subsidies for projects after March 2014 "introduced a new uncertainty that could potentially restrict the future development of this technology".

Pump storage

Among the hydro projects planned by Scottish Hydro/SSE is one between Achnasheen and Lochcarron in Wester Ross, capable of producing 3.5 megawatts, sufficient for 3,300 homes.

Another, for a 7.5MW capacity, on the Kildermorie Estate near Alness in Easter Ross is in planning. A third, near Alyth in Perthshire, would produce 10MW and is listed by SSE as being in development.

Two much larger SSE projects are for pump storage - pumping water uphill using excess power from other sources when demand is low, and then releasing the water when demand surges.

They are both rated at 600MW, capable of powering 230,000 homes, for short periods at least, and a smaller such development is being planned for an expansion of the existing Sloy station near Loch Lomond.

But as they are not conventional hydro stations, they do not currently get any subsidy. SSE has not put these pump storage projects on hold.

Source: http://www.bbc.co.uk/news/uk-scotland-highlands-islands-19009385#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa

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