IWP&DC interviews Alistair Marsden, Sales & Marketing Director at renewable energy developer and consultancy Dulas about the role of hydropower in the UK.
Has hydropower always been a large part of your portfolio?
Alistair Marsden: Yes, hydropower has always made a significant contribution to Dulas’ portfolio. We have been developing and managing hydro schemes for the past twenty years, long before the boom in installations that began with the introduction of the Feed-in Tariff (FiT) in 2010. To date, we have worked on 35MW of operational hydro schemes, which includes design and build projects, refurbishments and installation of our own bespoke control panels. We currently provide operation and maintenance (O&M) services for 24MW of plant, so we are one of the few companies that takes schemes through the whole development process. We also supply Aquashear Coanda screens all over the world – currently these are installed at more than 700 sites.
How has the industry in the UK changed over the years since Dulas became involved?
Dulas has been developing and promoting renewables for the last thirty years, which means that when we first started developing UK hydropower twenty years ago we were one of only a handful of installers. Even ten years ago, hydro was more of a specialist industry, but over the last seven years many more installers have sprung up. This growth of hydro in the UK has been mainly driven by introduction of the FiT, which was designed to promote the use of renewable energy, and this in turn has made it a more competitive market for companies working in the industry.
Is there still much UK hydro potential?
The first hydro schemes to be developed were those that were the most straightforward and had the lowest risk, and so represented ‘low-hanging fruit’ in terms of ease of development. Now that the market has matured there is less potential for new-build schemes, but there is more opportunity for refurbishment, retro-fit and optimisation work to increase the capacity of existing schemes. This is something we have been doing for many years, and we expect to see this work increasing over the next few years.
Although the development boom under the FiT is drawing to a close, there is still the potential for developing new pumped storage schemes which would contribute significantly to solving intermittent generation problems. We would like to see the UK government work more closely with investors on models to support pumped storage at both large and small scales – currently it is excluded from the FiT and relies on market rates.
What is the feed-in-tariff and how has cuts to this affected the hydro industry?
The Feed-In-Tariff is a scheme run by the UK Government that offers a guaranteed rate for electricity produced through small-scale renewable energy schemes. It was designed to encourage the development and deployment of such schemes in order to create jobs, reduce installation costs and contribute to climate change targets. For example, a household that produces its own electricity through rooftop solar PV, or a farmer that has installed hydro technology on their land, would receive a certain amount of income for the energy that is generated regardless of whether it is fed into the grid or used on site. These rates vary depending on technology, and also on size of installation, and have been adjusted over time as renewable technologies have been adopted more widely and the installation cost has reduced. However, a high initial rate followed by rapid reductions led to a boom-and-bust solar industry, and the hydro industry followed a similar but slower rise and fall – following the latest cuts last year we are now seeing an almost completed drop-off in the consenting of new schemes.
However, it is not just the FiT that is putting a squeeze on the industry but a combination of policy changes by the current government and the uncertainty these have caused. Business rate rises have been significant, and many business owners and developers are being more cautious about investing in new schemes until there is greater clarity on how Brexit will impact the energy industry.
Will optimising existing hydro schemes play a greater part in the UK hydro industry?
There has been a boom in new hydro projects coming online over the last few years, driven by the FiT, but this is now coming to an end with cuts to the rates. During the boom, the expertise of the UK industry was stretched across an unprecedented number of projects, and many schemes were completed in a rush to meet FiT commissioning deadlines. This is likely to mean some will have teething problems or issues in design or construction that need to be addressed before they can reach their maximum potential. We are already seeing clients coming to us looking for operational due diligence, troubleshooting, or other forms of support for schemes that aren’t performing as well as had been hoped, and we expect this work to increase.
Many other owners may not even be aware that their schemes could be performing better. Add to this schemes that have been operating for longer and that can be improved by applying current technology and best practice (e.g. upgrades to control systems or updated intake designs incorporating Coanda screens), and there is a lot of potential to get more generation from existing assets. Schemes accredited under the early FiT rates produce significantly higher revenue than new build projects now will, so investing in upgrades for existing schemes can be very attractive.
Could you more details about the business rates for hydropower in Scotland, and explain why your hydro optimisation services would be of interest to Scottish hydro owners?
Business rates are a tax on non-domestic properties to help pay for local council services, and Scottish business need to factor these, and the recent increases to the rates, into their financial planning. The recent re-valuation of assets, which is used to determine business rates, has been a challenge for the hydro market, with significant increases based on criteria that are not really appropriate for the technology.
Owners of previously developed hydro assets can look to optimise the performance of these schemes as one way to offset the increase in business rates. At one scheme, for instance, Dulas rebuilt the intake and reprogrammed the control system to give improved alarm management and reduce downtime, all of which increased the annual generation by nearly 50%. While this result will obviously not be replicable for all projects, it gives an idea of how enhancing existing hydro facilities can help scheme owners secure returns over and above this increase in business rates.
As refurbishment requirements are highly site-specific, each scheme needs to be assessed to ensure the highest cost-benefit modifications are achieved first; even minor changes to alarm management or simply providing (or improving) remote access can bring about significant benefits in terms of increased generation with minimal capital outlay. Major refurbishment, including intake rebuilds, would always subject to a longer term cost-benefit analysis.
What do you think the future holds for Dulas in the hydropower industry?
Dulas will look to our longstanding experience in the sector and continue to sell ourselves as an industry expert who can work to improve the performance of existing schemes, problem solve and refurbish. We will still work with new developers to bring their schemes to fruition, although we may see the emphasis change to those schemes that can provide power for local loads and therefore increase the value of the power generated. We are already seeing this in the PV industry, where commercial schemes are being installed on the premises of energy users. Equally, we will continue to build on our O&M portfolio, expand our optimisation services, and sell our market-leading Aquashear Coanda intake screens worldwide.
Who are the people behind a company such as Dulas who turn these hydro projects into a reality?
We have a multidisciplinary team of dedicated engineers, designers, site supervisors and project managers, as well as support staff. We pride ourselves on our tenacity, honesty, flexibility, commitment to the industry and passion for renewables.
We are very proud of what we have achieved to date. We have a strong reputation built on solid foundations and a wealth of experience. This puts us in a great position to continue as a market leader in the provision of hydro services both for current asset owners and those looking to develop hydro. We have seen various support mechanisms (including the FiT) come and go over the years, but if we are to have a sustainable future then renewables must play a significant part in the energy mix.
I love my job! It’s great to be making a positive contribution to the clean energy sector, it’s always challenging and all this whilst working in the some of the most dramatic and picturesque settings. We hope that the UK government recognises the contribution of hydro, and works with us going forwards to remove barriers to development of the industry, rather than create additional ones.