Kirsty Macpherson and Hazel Tait of Gillespie Macandrew
The proposed reform of the Electricity Market, allied to the time required to advance developments through the Scottish legal system, means that there is a five year countdown under way for developers to take advantage of the current incentive scheme in one of Europe’s leading locations for renewable energy generation. While many of the largest energy companies are shifting their focus to offshore wind there is a strong argument that by initiating their development now, onshore projects in Scotland – large and small – can take advantage of the ROI offered by the existing incentives.
Starting this year, there will be a move away from the current Rocs system (Renewable Obligation Certificates) to a new support system based on long term contracts known as Feed-in Tariffs (FITs) with Contracts for Difference (CFD). Under the current system electricity retailers are required to source a percentage of their power from Rocs. This will change under FITs and CFDs. Feed in Tariffs are now widely understood and it is proposed that there will be fixed rates for the different energy sectors.
However, CFD is more difficult to understand. In addition to the FIT rate the electricity retailers will either receive a top-up payment or make a repayment. These payments/repayments are contingent on whether or not the wholesale price of electricity is above or below a set price to be known as the strike price. Similar to Rocs the strike price will have different rates for each form of low carbon generation. At present it is unclear as to how the strike price will be set and as we are only at a White Paper stage, clearly, the devil will be in the detail of the new proposals.
So, for developers aiming to get their project established ahead of 31st March 2017, when, with a few exceptions, accreditation under Rocs ends, what are the key elements to be tackled?